Tag Archives: Chinese buyers

MAYBE IF I KEEP TALKING

Maybe if I keep talking about a major imbalance in the market that is, and has been for a long time, overdue for a correction to reality, people will start to listen.  I’m OUT of residential real estate, and have been for a few years now.  The downside risk is just too high.

And today, Thursday 26 March 2015, the Reserve Bank has issued a warning that cheap credit has and will continue to fuel a housing bubble.  Hello!!!

Just Google  RBA cheap credit housing bubble.  There are many links to the various articles in today’s news.

Once again, I rest my case.

 

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THE ELEPHANT IN THE ROOM

Sydney Morning Herald today – all credit to them for this article – thanks ladies and gentlemen….

I continue to argue to all who’ll listen, that this rate cut is just fuel to a fire that will burn a lot of people when it finally rages out of control.  What is not reported is the high number of people who are diving into this super heated market who are not sophisticated investors. I recently chatted with a young couple at a Cafe who I overheard talking about buying a house.  Their SOLE source of advice – their blue collar, working class parents who owned precisely ONE HOUSE between them, bought 20 years ago!  And of course their “friendly” Broker who had given some really awful advice, far outside his legal ability to do so.  I left them pretty sure they were going to buy a nasty house in a nasty street and a nasty suburb for a “top of the market” price and rue the day they did.  This scenario is repeated hundreds of times a day all over the country.

Let us not forget the dodgy companies who still prey on people’s fear and greed to “stitch them up” into overpriced negatively geared properties with “rent guarantees” and other incentives paid for out of their overpriced purchase.

And, of course, our crazy overseas buyers who, in many cases, just want their money out of their “old” country and into the supposedly “safe haven” of Australia.  These people are losing all sense of propriety and in certain sectors of the market are causing chaos.  This chaos filters down and sideways into other sectors, fuelling speculation, rumour and fear that others may miss out on an endless bull run, and greed for the capital gain that, in my not-so-humble opinion, will never eventuate – or if it f does, will be short lived….

Sydney Morning Herald, today —- A deteriorating economic outlook sparked the latest interest rate cut, but the Reserve Bank remains concerned about the continued strength of house prices and investor activity in some pockets of the housing market.

The minutes of the RBA’s February meeting, released on Tuesday, show the board decided to cut Australia’s cash rate to a new record low of 2.25 per cent after new figures revealed the economy wasn’t doing as well as was previously expected.

But the bank also remained concerned about the continued strength of the Sydney and Melbourne housing markets.

“Housing price inflation had moderated from the rapid rates seen in late 2013, but remained high and in Sydney and Melbourne had been well above the growth rate of household income,” the RBA said.

The RBA said growth of investor credit had continued to increase “at a noticeably faster rate” than owner-occupier housing credit.

And a range of indicators suggested further growth of dwelling investment in the near term, the bank said.

The RBA said it would keep a close eye on developments in the housing market, as well as the impact of moves late last year by the Australian Prudential Regulation Authority, designed to temper investor activity.

“Given the large increases in housing prices in some cities and ongoing strength in lending to investors in housing assets, members also agreed that developments in the housing market would bear careful monitoring,” the RBA said.

“They noted that it would be important to assess the effects of the measures designed to reinforce sound residential mortgage lending practices announced by APRA in December.”

Despite the housing concerns, the RBA said it decided to cut the cash rate after indicators of economic growth began to look weaker than it previously expected them to be.

Economic growth was expected to pick up later than the RBA expected, while unemployment looked set to peak higher than originally forecast.

The central bank also took another swipe at the Australian dollar, repeating its familiar line that “a lower exchange rate was likely to be needed to achieve balanced growth in the economy”.

The RBA said it had considered acting at the March meeting instead but decided to cut in February, giving the opportunity for more detailed communication of its decision in the quarterly Statement on Monetary Policy, released three days after the February 3 meeting.

“On the basis of their assessment of current conditions and taking into account the revised forecasts, the board judged that a further reduction in the cash rate would be appropriate to provide additional support to demand,” the minutes said.

END OF ARTICLE

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‘Rich Dad’ author Robert Kiyosaki warns investors to avoid real estate in Australia

Yes, even Robert says this place is overheated and he is warning all who’ll listen to give our real estate market a wide berth.  The reasons he gives are sound, and echo my sentiments expressed over the last few years.

Kiyosaki said that foreign investment was spiking domestic prices and forcing local buyers to pay well above the true market price.

“Foreign investors are queuing up to buy anything they can get their hands on. This is causing average Australian punters to think they need to start buying now. It has created a bubble,” Kiyosaki told Fairfax Media.

Again – do not go there.  Its just ridiculous and whilst commentators here are saying its all good, there are still people near where I live suffering huge capital losses on sale.

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PERFECT STORM BREWING – 03 APRIL 2014

It’s all adding up….well, for me anyway, so let’s see how this pans out.

Retail stores are closing at an alarming rate in the USA and Europe, and yes, here in Australia.  My local large shopping centre has just had 5% of tenancies “walk” at the end of their leases, with strong suggestions from people I know who are “in business” but only just, in the same centre, that up to 10% of the tenancies could walk in coming months.  Unlike 2005 for instance, there aren’t 40 people waiting in the wings to get into this centre.  There is no-one.  No registers of interest, no active list, reserve list or any kind of list.

Large shopping centres are dinosaurs and some people just won’t admit it.  Ridiculous rents forcing retailers to charge equally ridiculous prices and therefore having no chance against online retailers with cheap-as-chips warehouse rent in the middle-of-nowhere.

There are otherwise intelligent people (I think) spending nearly AUD$700 million on rebuilding and revitalising another massive local shopping/destination centre.  The reasons they cite to try and justify their decision are plain ridiculous – the place will be an albino pachydermata.

If shopping centre owners drop their rents to a level where traditional retailers can once again run a half decent business, capital values will plummet.  Flow on to smaller commercial and industrial properties is sure. Lack of return, loss of jobs and its not hard to see residential housing taking a dive as well.  Don’t think so?

Massive interest rate cuts have failed to stem the drop in residential values.  The butchering of statistics continues.  I was recently challenged as to why my view differed from the those reported in the news and delivered startling “real results” to back up my view.  Yet again a number of properties in a suburb were quoted as delivering massive price rises that contributed to the percentage rises being quoted in the news.  Shallow analysis of each of these properties showed that there were, in each and every case, factors that impinged on the price rise and therefore those properties should have been excluded from the ‘results’ for that suburb.  Trouble is, you take those properties out, and the price FALL is dramatic.

Factors that made for selling prices being reported as UP from previous acquisition prices were as I’ve reported before in my blog.  Reconfiguring a home to cater for two families. Significant and costly renovations not taken into account. Rezoning of land adding to it’s base value.  And so on.  And… no IN and OUT costs taken into account to arrive at a nett gain (if any).

Make no mistake that fiscal policy makers are all out of ideas for getting our economy going.  The USA think-tank  has screwed up and nothing is working over there.  I know many people in the USA in business and they tell me it’s rubbish that side of the Pacific, more than a little scary and they’ve little to no confidence.

The USA 30 year mortgage rate when I was there in 2013, was about 3.4%.  A year later and its nudging 4.5%.  If the same rate of rise occurs here (and it will) our rates will jump 30%!  Imagine mortgage repayments for all those silly sods who dived in with their 90% plus loans on minimal deposit using their Mum n Dads place as extra collateral…  Most are paying over $500 a week – that could easily jump to $650 a week – and wipe out their ability to EAT!

An interest rate jump of that magnitude will cause a REAL and long overdue drop in house prices.

CHINA – for a start you can’t believe most of the numbers that come out of ‘Official’ China however the word from people I know who travel regularly to that mysterious land is that things are crap. I’ve heard it said that China is at about 2004/2005 on the Western GFC Clock.  When their house-of-cards comes down it will not be pretty and the flow on will be nasty.

Its all coming to  ahead.  If you have property, sell it NOW and take advantage of the pseudo reports and spin to get some sucker to cough up.  RENT, or take a long holiday.  And buy back in when the dust settles.  Go back in this blog to see just HOW CHEAP housing is in so many desirable areas of the USA – not the ghettos of Detroit but NICE PLACES TO LIVE.

We are waaay to expensive and need a correction… It’s coming…

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MARKET UPDATE – 25 MARCH 2014

I receive a fair bit of ‘junk mail’ from local real estate agents squawking about their ‘successes’ in the market. Today I once again did the exercise of digging into their claims about speedy sales, plenty of buyers and wanting more listings.

One would think that if, as an agent, you’d sold and settled a property sale in December 2013, you wouldn’t still be proclaiming it as a “Recent Sale” in late March the following year…or would you you?  Well, YES!  That is really sad, and by any measure, false and misleading.

The newspapers are full of “leading agents” saying they can’t get enough listings, the market is white hot right now, you’re surely gonna miss out…and so on.

So now to the “analysis” of the listings, sales and other nonsense contained within one piece of junk mail today. Just Listed for Sale at $480,000.00.  This place was sold to the current owners in mid 201 for $485,000.00.  Gonna be a great outcome for them by the looks.  Snap this up at offers over $550,000.00 – it was bought by the current owners for $570,000.00 in January 2009 – another success!  And lastly, Offers over $825,000.00 please, so you know its going to sell for mid to high 700’s. It fetched $1,040,000.00 in early 2007 (at the near height of the madness), changed hands at $875,000.00 18 months ago and now the new owners want out.  That’s just nasty.

I cannot find anywhere, a real story of anyone making a real, tangible profit.  Sure there are buys 4 years ago at $500,000.00 with a recent sale at $535,000.00 but that doesn’t take into account buying and selling costs, nor, in most cases, the tens of thousands of dollars spent on repairs or additions.

I’m still looking for this “golden era” but alas, unless a Chinese buyer has their hooks in the deal, it’s all smoke and mirrors.

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CHINA’s INFLUENCE ALL PERVASIVE

As I write about China’s insatiable appetite for real estate resources across the Globe, I’m sent the following article from the BBC UK.

http://www.bbc.com/news/world-europe-26639991

There are some serious problems for the countries mentioned therein as they seek short-term gain without analysing and planning for the long-term pain associated with their respective agendas.

I’ll leave you to reach your own conclusions on this.

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CHINA UPDATE – CANADA

My 100th post stirred up some emotions.  Thanks for the feedback, good and derisory.  Appreciated.

Apparently we aren’t the only ones being affected by the tsunami of Chinese money pouring into our real estate markets.

Just Google something like Chinese Buyers and Vancouver to see what comes up.  There’s a real problem there too.

I’ll leave you to do your own research.  

I wonder what other markets are being similarly invaded?

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CHINA’S INFLUENCE

I’ve been banging on for nearly a year about the high level of Chinese buying in the market, especially in Sydney and Melbourne.  I’ve also said that their buying sprees are based on “get anything desirable at any price – just beat everyone to the property”.

I’ve been criticised for over stating the facts.  Thanks to all you who’ve “had a crack”.  Well now you are going to look rather foolish, and those of you who emailed me can now say “Sorry GW, you were right after all”.

Below, from the Sydney Morning Herald of 06 March 2014 by Reporter Max Mason….thanks Max!

Close to one-fifth of new properties in Sydney are being bought by wealthy Chinese investors and the flood of money is set to continue.

Using data from the Australian Bureau of Statistics and the Foreign Investment Review Board, Credit Suisse estimates that Chinese buyers account for 18 per cent of new property purchases in Sydney, and 14 per cent of the supply in Melbourne. This does not include second-hand homes.

”A generation of Australians are being priced out of the property market. Many face a lifetime of renting,” analysts Hasan Tevfik and Damien Boey said.

There are currently 1.1 million millionaires in China who could easily afford properties in Australia’s two most expensive markets, Credit Suisse said.

Wealthy Chinese buyers have purchased $24 billion of Australian housing in the past seven years, and over the next seven years an additional $44 billion will be spent on residential property, Credit Suisse estimates.

There was $17.2 billion worth of approved residential property investment coming in from overseas in the year June 30 2013, down from $19.7 billion in the previous period, according to the FIRB. Foreigners must seek approval to buy established real estate and rural land, but can buy up to 50 per cent of a new building ”off the plan”.

Of the 2013 total, $5.6 billion was approved for residential properties in New South Wales.

Read the rest of the article here – http://www.smh.com.au/national/locals-priced-out-by-24-billion-chinese-property-splurge-20140305-347oq.html

What this DOES NOT tell you, because its all Foreign Investment Review Board figures, is the number of properties being bought by Chinese Australian citizens and permanent residents, with money (not theirs by the way!) repatriated from China via Hong Kong.  Now that is a whole other story!

More as it comes to hand.

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I LIKE CHINESE

I like Chinese food, almost as much as I like the many Chinese people I’ve met and had stay in my house as a part of the “couch surfing” movement. Chinese people are no different to anyone else.  They have the same basic needs and wants as any of us on the planet, so individually they are not to be thought of any differently.

The only thing is that there are so many of them.  Lots.  Billions in fact.

When you gets “billions” of anything and that “anything” decides to shift its weight around, well, things can happen.  Its kinda like trying to turn a huge aircraft carrier around in a small harbour.  If it misses by even a little, a lot of damage can happen – and you just cannot stop it, because its so big and has so much force behind it.

Billions of anything can distort the environment in which it moves.  Billions of tonnes of ice dumped into Sydney harbour would probably make it too cold to swim in the summer…maybe.  I don’t really know – just saying…

So, you have to be careful where you put billions of anything and you have to mindful of the short term gains vs the long term pain, which is why I’m reproducing an article in full today from the pages of NEWS.COM.AU ….

CHINESE investors are driving up property prices in hot spot Sydney suburbs by as much as three times the city average.

Carl and Marie Mascarello sold their four-bedroom house in Strathfield for $230,000 more than they expected to an investor who had just stepped off a plane from Hong Kong.

“The house sold for $2.28 million. Far out, I was cheering when I heard. It was really unexpected,” said Mr Mascarello, who is downsizing because his two children have left home. “He was a Chinese investor who got off the plane from Hong Kong the day before. He had missed out at two earlier auctions and clearly did not want to miss out on this one.”

Strathfield is one of at least 10 hot spot Sydney suburbs that have been targeted by Chinese investors who are estimated to have spent $5 billion on Australian residential property last year. The average house price here has risen by up to 27.1 per cent — almost three times the Sydney average of 9.2 per cent.

Brian White, chairman of Ray White Real Estate, said that the Chinese property investment boom “is an absolute fact”.

Together with a number of leading estate agents, including McGrath’s, he has opened a China desk to improve liaison with buyers from the booming new market.

China had the second-highest number of immigrants settling in Australia last year with 27,334 people moving here.

Mr White said he is also opening offices in Beijing and Singapore, which funnels large sums of Chinese investment to Australia.

“A lot of Chinese are very keen to balance their investment portfolios with overseas investments because the Chinese government is restricting people buying in China to try and cool the market,” he said. “In many cases they are buying off the plan to provide homes for their children, who they are sending to Australia to be educated.”

Non-resident foreigners are only allowed to invest in brand new properties under Australian law. The rules have led to a boom in investment in units bought off the plan.

Peter Gray, manager of the 750-apartment Billbergia development at Rhodes, said more than 85 per cent of the development had been sold to Chinese investors. “The first block sold off the plan within a couple of months,” he said.

But it is not all good news. Marketing executive Lara Germane, 28, has been trying to buy her first unit with partner Olaf Wright but has been beaten out of the market.

“We have been looking seriously between Randwick and Maroubra for the last six months but the prices are up $100,000 on where they were last year. It seems to me that it is Chinese buyers who are moving into the area because that is the vast majority of people we see at inspections.”

TROPHY HOMES ARE MUST-HAVES Matthew Benns

CHINESE investors are also looking for trophy properties with Harbour views on the lower north shore and in the eastern suburbs.

Richard Simeon from Simeon Manners real estate agents sold a five-bedroom waterfront home in Pearl Bay Ave, Mosman, last week to a Chinese buyer for more than
$7 million.

“It is bigger than Ben Hur. In recent years I have sold more than $100 million worth of property to Chinese buyers,” he said.

“They are looking for trophy properties with the classic Opera House, Harbour Bridge view.”

“The highest price for a property in Mosman last year, 34 Julian St, Middle Harbour, was $13.88 million and that also went to a Chinese buyer,” said Mr Simeon.

He is now working with cashed up investors from the recent luxury property expo in Shanghai and also developing new, off-the-plan, apartment buildings in Burwood and Terrey Hills specifically for the Chinese market.

“The money from China is just extraordinary,” he said.

“It is a brave new world.”

Stupid, short sighted fools these agents.  The residential real estate market here in Australia needs to cool off and correct to where it’s historically been.  Some sectors of the market are cooling off and some are crashing back to pre 2001 prices (I’m not just saying this, I know and can quote hundreds of real life, real time examples) but to actively encourage this stupidity will do nothing but make the inevitable correction much more fierce, damaging and will embarrass us internationally.  Capital will flow out of here like a broken dam and the correction will bankrupt tens of thousands of Australians…

Just sayin’

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CHINA AGAIN AND A QUICK NUMBER CHECK

Sotheby’s Real Estate is opening an Office here on the Gold Coast.  Mmmmm.  The Chinese are coming here in droves and buying up.  It looks like the Japanese rush all over again.  Dr Boldy, Sotheby’s main man in our region, is quoted as saying, “Our Sydney Office under Michael Pallier just posted $300 million turnover in its first year and recorded nine sales worth more than $10 million…. half of those sales were to Chinese buyers but others came from all over the globe.”

It’s an interesting but also ambiguous statement.  Does he mean 4.5 sales more than $10 million per property went to Chinese buyers or that $150 million of their total sales went to Chinese buyers?  In any case it’s a lot of Chinese buyers!

People are emailing and calling freaking out that they should “get in now whilst prices are low and interest rates are low” and that I’m just a scare monger.  Well let’s have a look at a statistic that pertains to this RISING CAPITAL CITY MARKET that everyone is quoting to me as a reason to GET IN NOW!  Australia’s capital cities’ property values actually FELL 7.4 per cent from October 2010 to May 2012, and ROSE 8.7 per cent from June 2012 to September 2013 .  Simple maths – say at October 2010 we give the values a value of 100.00. Take off 7.4% and you’re left with 92.6.  Take the new lower value of 92.6 and add 8.7% and you get 100.65.

WOW!  Back to SQUARE ONE plus a little for Grandma. No surge, no value increase, no need to panic and as I keep saying….watch for the steep and sudden correction when it comes.

Take out the Chinese action and its all downhill baby!

Our hearts go out to the thousands of Aussies who’ve lost their homes, possessions and in one case so far, their life, around Sydney this past week.

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