Some Australian Luxury Property Areas Down 20% Just Since January

Wide spread, Sydney holding steady, more or less, the West showing a real correction.

Luxury property price falls dragging down Oz real estate market

According to Tim Lawless, RP Data’s research director, expensive suburbs have helped drag the overall market down. Over the year to the end of April, properties in the most expensive capital city suburbs recorded a 5.4% loss. In contrast, property values in the middle suburbs were down by only 0.9% while those in the cheapest suburbs were the best performers, hardly moving at -0.5 per cent.

At the other end of the spectrum are Perth and Brisbane where home values continue to experience a more significant correction. Perth values have recorded the largest fall of any capital city over the 12 months to April, down 7.1% and down 6.8% in Brisbane.

Canada's Cassandra Gets Press Time

It's like going to sleep in one world and waking up in another. These kinds of warnings (like this one from BMO) are not new. The narrative-driven news world can sure be frustrating.

Vancouver's real estate prices set to drop

In the early 2000s, Vancouver prices were slightly higher than in Toronto but are now 71 per cent higher.

Ouch. And which of these two cities has all the industry? Double Ouch.

Four corrections in the past three decades saw declines averaging 21 per cent.

Yes, house prices can and have fallen in the past. Imagine that.

Vancouver housing "priced for perfection," poised for correction

OTTAWA — Vancouver's housing market is poised for a correction, with prices nearly triple what they were a decade ago and the average home now running "an astounding" 11.2 times family income, says a report Tuesday from BMO Capital Markets.
. . .
"Prices are 5.1 times median family income and housing costs an extra two years of gross income compared to 2001, when the boom began and valuations were closer to historic norms."

Mortgage rates were then near 14 per cent compared with today's sub-four-per-cent rates. However, while today's valuations may be sustainable thanks to those low rates, they could be hurt in a more normal rate environment, he adds.

This is the problem in a shiny-hard nutshell. Carrying costs do not represent the true cost of housing. And this is the bank talking. No wonder we as a society get repeatedly screwed by credit bubbles.

And another . . .
Vancouver primed for housing correction: BMO

Vancouver’s housing market looks primed for a correction, according to a report from BMO Nesbitt Burns, with the average house now costing “an astounding” 11.2 times a family’s average income -- more than double the national average.

And another . . .
Vancouver home prices could fall 21 per cent: report

"Riding a wave of wealthy immigrants, Vancouver's house prices have nearly tripled in the past decade, spiralling beyond the reach of most first-time buyers or non-lottery winners," Guatieri [of BMO] said.

Past housing corrections have seen Vancouver home values fall an average of 21 per cent. But prices in the city are even higher today, averaging $815,000 in April, pushing the market further toward the brink of a housing bubble.

Here's the other half of the problem. Apparently, it's not a bubble until it bursts. Right. And also: In your dreams, Global TV BC.

Looks like the narrative has finally shifted, but it's a day late and a unusually strong Canadian dollar short.

China's Wealthy Are Leaving with the Loot

Chang confuses bureaucrats with entrepreneurs, although in the communist party, the distinction might be grayer. Let's go with the term "opportunists".
Chinese Entrepreneurs Are Leaving China

According to a new study, almost 60% of China’s “high net worth individuals,” defined as those possessing more than 10 million yuan in investable assets, are either considering emigration through investment programs or are completing the emigration process.

Beijing’s plan [the economic stimulus], however, was good for private entrepreneurs who, although shut out of many portions of the economy by state enterprises, rode the resulting asset bubbles to even greater wealth. The number of the country’s high net worth individuals according to the China Merchants-Bain study will reach 585,000 this year, almost double the figure for 2008.

Funny how the run on the state coffers by the well connected started just as the bubbles reappeared in Vancouver and Australia, November/December 2008.

Hedge Funds Shorting Australian Banks

Australia has cut down its reliance on offshore wholesale funding, so it's hard to blame the uncertainty in Europe for this shift in mood, as some analysts are claiming.

US hedge funds dump Australian bank shares

A New York hedge fund manager, who did not want to be named, said sentiment towards the Australian banks had soured because of doubts that the strength in the national property market would be sustained.

"There's a lot of scepticism in the US regarding the Australian property market," the hedge fund manager said.

Westpac is thought to have been targeted most heavily by hedge funds because of its large residential mortgage book, which has grown rapidly over the past two years.

CBA is understood to be least exposed to hedge fund investors compared with its three major rivals, primarily because of its large retail investor base.

Related: Will Fitch pull the trigger? --- and downgrade Australia's banks.

Vancouver House Price Change Chart for May 2011

Vancouver lofty year on year gains return with Single Family Homes pulling away on speculative frenzy. Take a gander at the increasing spread between the overall number and the single family home (SFH) number. The gains in attached year on year is a "mere" 3.5% and apartment is 2.2%, a world apart at rates comparable to or below inflation. (3.3% in April 2011)

What interesting times. Foreign money and those chasing the dream of gains from foreign money continue to pile into the SFH segment of the Vancouver market. According to the weekly numbers, sales are just beginning to falter--the increasing minimum bet at the table is thinning the number of players.

To demonstrate how the market is bifurcating along type of sale, here is the last half year of year on year price changes plotted out.

The condo townhouse bubble is in trouble. Bubbles need accelerating growth to survive.

China Pumps in Cash to Wipe out Bad Debts

Re-capitalization begins in China.

China to clean up billions worth of local debt

China’s regulators plan to shift two to three trillion yuan ($308-$463-billion U.S.) of debt off local governments, sources said, reducing the risk of a wave of defaults that would threaten the stability of the world’s second-biggest economy.

Sounds like a straight-up bank bail out on the face of it given the counterparty risks. Local governments cannot issue bonds (although that may change, according to the article).

As part of Beijing’s overhaul of the finances of heavily-indebted local governments, the central government will pay off some of their loans and state banks including some of the “Big Four” will be forced to take some losses on the bad debt . . .

If true, perhaps not a pure bank bailout. Or perhaps they just can't handle a straight bailout this round. It's a little harder to bail out bad behavior with profits from exports when the loans are reaching Western levels.

With sterilization becoming increasingly expensive, China may feel a pinch as bailouts continue.

Canadian Regulator Looks into Bank Loan Portfolios and Foreign Influence on Bank Risk

OSFI (Office of the Superintendent of Financial Institutions) of Canada is waking up to the risks posed by the bubbling real estate market.

Housing rush scrutinized

OSFI is taking a broad look at bank exposure to household debt and how the financial in-stitutions are monitoring loan portfolios amid growing concerns over the ability of Canadians to handle their debt load.

In the case of the housing market, sources point to global trends that could affect investment in Canada -like China's recent policies to curb speculative real estate investment in that country -as evidence that Canada is operating in a fastchanging market that could be adversely affected by decisions made in other countries.

They suggest OSFI wants to know how big a factor foreign investment in Canada's housing market is, and how big it is likely to become, so the regula-tor can measure the potential impact on banks if demand were to dry up.

If CMHC is not used as a bailout mechanism. If unwisely issued loans are kicked back or cost-shared with the banks, the picture changes radically.

"I wouldn't be surprised, given what [the Canadian Real Estate Association] has been saying about foreign investment having such a big impact, that it would elicit an investigation," said Mr. Alexander, adding that he knows of no existing measure of foreign investment in housing.

Given that this has happened before in Vancouver before the changeover in Hong Kong, and given that the Canadian dollar is a small currency, I find this blind-eye sort of alarming.

Australian Real Estate Agents Leaving Profession (one way or the other)

Real estate agents mass exodus: report

Real Estate Institute of Australia president David Airey estimates that the number of agents in the industry has dropped from 60,000 to 50,000 in last year.

Or just getting kicked out . . .
Masters of the universe come crashing back to Earth

The eastern suburbs agents have been disqualified from running a real estate business for 15 and 12 years, respectively.

Their estate agent licences were cancelled after an investigation into the company's activities found irregularities in managing trust funds for clients and strata corporations.

China House Prices Continue to Defy Controls

China Property Prices Rise in May

Chinese residential property rose 0.53% in May from April, faster than April's 0.40% on-month increase, China Real Estate Index System said Wednesday.

China Real Estate Index System said property prices in 76 cities grew in May compared with the previous month, while 21 cities posted a decline in property prices over the same period. The remaining three cities posted no change.

Prices are now $1361/m^2
That's $126/ft^2 (or roughly what it costs to build a nice house in the u.s. outside the major urban centers)

Vancouver Market: Sales Slowing While Inventory Builds

Signs of a classic market top in the weekly numbers.

Vancouver House Sales and Listings Chart (X-scale: week beginning)

The peak at the week beginning March 27 was the transactions pulled ahead by the change in mortgage rules. The week beginning April 17 also shows a discontinuity; that was the week the CMHC dropped insurance for HELOCs.

*Numbers from Agent Will's Weekly Stats