The Burbank Tribune (Grandpa White's newspaper in the 1920's)

Housing prices around the world have been dropping: UK, China, Europe, Australia, Canada…. | February 19, 2012

THE TELEGRAPH UK

Saturday 18 February 2012

House prices continue to fall

House sales increased last month, but house prices continued to drop across   the country.

The number of house sales edged up last month as first-time buyers looked to beat the stamp-duty holiday, but house prices continued to drop across the country, a report said today.

A balance of 12pc of estate agents reported rising sales in January, the Royal Institution of Chartered Surveyors (Rics) said, as the March 24 deadline for the end of the stamp-duty free period for first-time buyers on properties under £250,000 approaches.

However, the improvement in sales has done little to support prices with a balance of 16pc of estate agents across the UK reporting falls rather than increases, Rics added.

Michael Newey, Rics housing spokesman, said: “Many problems with the market still exist and the lack of affordable mortgage finance is still preventing many from getting on to the property ladder.”

The biggest decline in prices came in Wales, closely followed by the West Midlands, East Midlands and Yorkshire and Humberside, Rics said.

However, the strongest level of newly agreed sales in January was in the West Midlands and East Anglia, with only the North West and Yorkshire and Humberside reporting a decline in newly agreed sales.

The improved sales led to a lift in optimism over prospects in the near term as 19pc of surveyors predicted transaction levels to pick up over the coming three months, in the strongest reading since May 2010.

The survey said the supply of homes was relatively steady during January, with 7pc more surveyors reporting increases rather than decreases in new homes coming onto the market.

And despite the improved level of sales, overall new buyer demand dipped slightly in the first month of the year, as new buyer inquiries fell in January.

This demonstrates that the recent lift in activity has been driven by one-off factors, such as the drive to take advantage of the stamp duty holiday.

Despite a relative upturn in interest from some first time buyers prior to the end of the stamp duty holiday, surveyors report that lack of affordable mortgage finance continues to hold back the market, Rics said.

Looking ahead, a net balance of 15pc more surveyors expect prices to continue falling over the coming three months.

The Council of Mortgage Lenders (CML) yesterday said members advanced 18,700 loans worth £2.3 billion to potential new homeowners in December, up 7pc and 10pc respectively on November amid the scramble to get on the property ladder before the end of the duty concession.

China Home Prices Drop to Lowest in a YeYear

                By                    Bloomberg News                 –
Feb 17, 2012 6:46 PM PT

China’s January home prices recorded their worst performance in at least a year, with none of the 70 cities monitored by the government posting gains as Premier Wen Jiabao reiterated his determination to maintain property curbs.

Prices in 47 of the cities fell, while home values in the remaining 23 were unchanged from December, the National Statistics Bureau said in a statement on its website today. New home prices in the nation’s four major cities of Shanghai, Beijing, Shenzhen and Guangzhou declined for a fourth month.

The data reflects a two-year effort by China to battle rising home prices with measures ranging from higher down payments, mortgage rates to home purchase restrictions in 40 cities. None of the cities posted gains in home prices for the first time since the government began releasing at the start of 2011 prices for 70 cities surveyed instead of a national average.

“The falling downtrend of home prices will strengthen in coming months as the government tightening continues,” said Alan Jin, a Hong Kong-based property analyst at Mizuho Securities Asia Ltd. “The figures won’t prompt the central government to release the curbs any time soon, because it probably would like to observe and study the market further.”

China won’t waver on its real-estate controls and efforts to bring home prices down to a reasonable level to ensure fairness and stability, Premier Wen Jiabao said during a meeting with business executives on Feb. 12.

Wenzhou’s Falling Prices

The eastern city of Wenzhou posted the biggest drop for the third month, with home prices declining by 0.6 percent in January, according to the Statistics Bureau. A credit squeeze on smaller businesses in the city prompted a visit and pledge of financial aid from Wen in October.

New home prices in Beijing and Shanghai declined 0.1 percent, the data showed. Housing values in Shenzhen slid 0.2 percent and dropped 0.3 percent in Guangzhou.

Today’s figures came after private data also showed signs of cooling. China’s average home prices fell for a fifth month in December, according to SouFun Holdings Ltd., the country’s biggest real estate website.

Home sales in China’s four key cities declined during the week-long Lunar New Year holiday at the end of January. Transactions in Beijing, Shanghai, Guangzhou and Shenzhen fell 66 percent to 109 units, compared with the same holiday period a year earlier, Centaline Property Agency Ltd., China’s biggest real-estate brokerage, said Jan. 30.

Falling home prices fueled an attempt by China’s smaller cities’ to release tightening on property policies. The eastern city of Wuhu was the first Chinese city this year to ease measures ordered by the central government by waiving a deed tax and subsidizing some home purchases. The move was suspended three days later, following the outcome of a similar attempt in October by Foshan in southern China.

China’s property policies are likely to “phase out” this year as it will hurt real estate investment and local governments’ economic growth, Liu Li-gang, a Hong Kong-based economist at Australia & New Zealand Banking Group Ltd., said ahead of today’s release.

To contact Bloomberg News staff for this story: Bonnie Cao in Shanghai at bcao4@bloomberg.net

House prices set for 2012 fall as euro risk weighs

By Andy Bruce

LONDON | Wed Dec 21, 2011 10:20pm GMT

LONDON (Reuters) – House prices will fall modestly next year, but that could prove optimistic should the euro zonesovereign debt crisis worsen significantly, a Reuters poll of analysts found.

Already meagre economic growth will probably slow further in 2012, sapping average national property prices in the process despite a recent up-tick reported in some housing market surveys over the last two months.

The December Reuters poll of 23 economists showed house prices slipping by a median 1.7 percent next year, compared with a flat outlook from the last poll in September. Forecasts in the latest poll ranged from a 6.4 percent drop to a 4 percent rise.

Since the last poll, the euro zone crisis has choked off affordable funding for some of Europe’s biggest economies like Spain and Italy, spreading fear through money markets and making banks more reluctant to grant mortgages.

With the euro zone most likely already in recession, and a Reuters poll two weeks ago giving a 50-50 chance the UK is as well, it is hard to see what, other than speculation, could drive house prices higher next year.

“The biggest risk to the UK housing market, and more generally to the UK economy, is the escalating crisis in the euro zone,” said Azad Zangana, economist at Schroders.

“If a credit crunch takes place then we could see a return of banks restricting mortgage lending, which would hit house prices.”

The European Central Bank lent banks an unprecedented 489 billion euros (408 billion pounds) in the form of ultra-cheap three-year loans on Wednesday, which may go some way to averting a credit crunch in Europe.

Still, the hope of easier lending will do little to counter a profound economic malaise sweeping through Europe in the near-term.

British homeowners have already seen around a fifth wiped off the value of their property since the height of the boom four years ago, compared with more than a third in the United States.

A TORRID TIME

The housing market – the primary generator of wealth for Britons through a 15-year boom that expired three years ago – could be in for a torrid few months.

Fourteen out of the 23 economists surveyed thought house prices would fall further, perhaps by a median 4 percent from here before stabilising.

Forecasts for the size of the drop saw the widest range since the July 2010 poll, showing just how uncertain the outlook is.

“We currently see house prices falling by around 5 percent by mid-2012,” said Howard Archer, chief UK and European economist at IHS Global Insight.

“Indeed, we believe that there are serious downside risks to this forecast and that house prices could well fall by more than 5 percent given the current deteriorating economic situation and outlook.”

He said a weakening labour market and increasingly squeezed consumers would bear down on house prices, outweighing the benefit of record low UK interest rates, which economists see on hold at 0.5 percent for the foreseeable future.

The government announced a 400 million pound programme to kickstart a stagnant first-time buyers’ market through the use of taxpayer-backed 95-percent mortgages, although it remains to be seen whether this will boost tepid lending figures.

The poll showed monthly mortgage approvals, a good gauge of future housing market activity, at around 50,000 in six months, and nudging up to 54,000 in 12 months.

That was little changed from a poll taken in June, and is less than half the average of 104,000 seen in 2007 before the market crashed.

House prices in London, a property bubble in itself where demand nearly always outstrips supply, should buck the declining trend with growth of 1.5 percent next year, and 2.0 percent in 2013.

Prime central London homes have gained around 1,200 pounds a day in value over the past year, according to property agent Knight Frank taking their average value to 3.2 million pounds in November, thanks to an influx of foreign money.

By contrast, the average house cost 165,798 pounds in November, according to mortgage lender Nationwide.

On a scale of 1-10, where 1 is extremely cheap and 10 extremely overvalued, economists in the poll gave UK houses a rating of 7 – one notch higher compared with the last four polls.

(Polling by Somya Gupta and Sumanta Dey, Analysis by Snehasish Das in Bangalore; Editing by Toby Chopra)

THE CRICKEY (AUSTRALIA)

The house bubble is popping, even the AFR agrees
It seems to be cool to be a bear. For the contrarians among us, that in itself is a concern. However, for once, we will side the majority view, heck, even The Australian Financial Reviewappears to have taken an entirely somber view about the Australian residential property sector.Robert Harley, writing the influential Chanticleer column (Tony Boyd is on leave), yesterday stated “nearly every housing indicator in the country is pointing down. New housing finance is 30% below the first home frenzy of 2009. Housing sales have dropped, with leading Ray White Real Estate recording a 16% decline in the value of houses last month…at the same time, the number of houses and apartments for sale has soared.”Boyd then pointed out the first link in the vicious cycle of a bursting bubble: “Price growth has evaporated. In Brisbane and Perth, prices are in decline. On the Gold Coast, the Sunshine Coast and Cairns, the decline has turned into a rout.”Today, Ben Hurley in the AFR noted “Australia’s wealthiest investors have lost interest in residential property, speaking a sell-down that could keep property markets weak for years to come”.

The problem with a bubble is that the price of an asset class becomes separated from their intrinsic value. The intrinsic value is loosely the value of an asset which gives it a commensurate cash return to compensate for the relative risk of holding that asset. Currently, the net return (after all expenses) on residential property is around 2%. That may be a good return if the “risk free” rate (a good proxy of which is government bonds) is zero. Currently, the risk-free rate is around 5% — more than double net rental yields. Property returns are even worse when you consider the substantial entry and exit fees (often around 10% of the price).

That means, a risky asset like property (which can go down in price as well as rise) is yielding less than an asset which is guaranteed by all taxpayers.

The reason for the low returns on property is due to people (investors and owner occupiers) bidding up the price of property. This is common in a bubble. Be it tulips, or stamps, or technology companies or commodities. There are few things more infuriating than to see someone else get rich (or appear to be rich). This causes people to make decisions based on emotion, rather than logic.

As property prices increased in the late 1990s and early 2000s, people saw their neighbours getting rich. This encouraged them to pay more for property. This caused property prices to rise further (aided by inequitable government policies like negative gearing, CGT discounts and the first home owner’s grant).

As property prices rose, the yield on the asset fell. But that didn’t matter, as people expected the price of the housing to continue to rise, simply because they had known nothing different. It actually began to feel like property prices simply could never fall.

But they can. And in some places, like Noosa, they already have.

The added problem with bubbles is that they are inevitably funded by debt. Debt is a particularly insidious beast — friend during good times, bitter foe during bad. While debt will magnify the returns of equity, it will also quickly wipe out that equity when prices fall. This is what happened to thousands of highly leveraged clients of Storm Financial

Australian home buyers are a very leveraged bunch. And even worse, that leverage is not evenly spread. While the CBA last year blithely attempted to appease investor concerns by noting that the “average” loan-to-valuation ratio (LVR) for its portfolio is 43%, that is grossly misrepresentative. Properties which have been owned for a longer period would tend to have a far lower LVR, as the borrower would have repaid part of their principal. For more recent loans, especially on properties bought during the bubble, the LVRs would be far higher. It is these loans and borrowers who are most at risk, or most “stressed”.

What that means is that a proportion of borrows are under severe risk of not being able to afford repayments should their circumstances change. Ruth Liew, also in yesterday’s especially bearish AFR, noted “one in 10 mortgage holders say they will not be able to make their repayments if interest rates rise by as little as a quarter of a percentage point”. Even worse, according to QBE LMI, the body that is most at risk should house prices fall dramatically, “if rates were to rise half a percentage points, nearly one in four Australians say they would be unable to pay their mortgages”.

If this were to happen, the price of property would quickly fall. And those falls would actually lead to even great falls. Just like a bubble can create a faux positive feedback loop, that bubble popping causes a vicious cycle. In a downturn, rational buyers hold off purchasing a property because (a) there was virtually no hope for a capital gain and it would take a true fool to purchase an asset yielding 2% and not rising in value; and (b) buyers expect lower prices in the future, so it makes sense to hold off purchasing now, because they would get more for their money down the track.

Falling house prices inevitably leads to slower growth and higher unemployment. This then causes struggling borrowers to default on their mortgage payment and forces mortgagees to sell off the collateral, further forcing prices downwards.

The cycle continues until the point where the cash yield is substantially higher than the risk-free rate. When property yields 7% or more, then it again becomes an attractive asset and the hope of capital gains returns.

In a final sign the bubble is popping, more than 80% of first home buyers believe the property market to be overvalued. Just waiting for that last 20%…

Average Home Prices Set To Drop – Except in Alberta!

June 17, 2011 by Stef Lukas  · Leave a Comment

Canadian Home Price Forecasts for 2012 and 2013

More economic forecasts are being released that are painting a bleak picture for housing nationally, at least after 2011, while at the same time talking about the positives for the resource based provinces. TD Economics just released their latest economic forecast and is calling for the average Canadian home price to drop starting in 2012 and continuing this trend through 2013.

Strangely enough, they are also forecasting a solid 7.3% rise nationally for 2011. Then the wind effectively is removed from the housing sales (sails?) and in 2012 and 2013, the values are forecasted to drop back to 2010 pricing levels.  Their predictions are for a 5.5% drop in 2012 followed by a 2.8% decrease for 2013.

British Columbia, Ontario and Quebec are the area’s which will be most affected by this reverse and it will take back much of the growth in values they have recently enjoyed. The area that will be most affected by decreases will be BC.

Currently BC is enjoying some sizeable growth in values and by the time 2011 is over they could see an 11% increase in values. Due to this overzealous growth, they may get hit the hardest when it comes to price declines after 2011. By the time 2014 rolls around, they are expecting the area to have lost all of the gains it had recently enjoyed and be back to 2010 values.

On the other end of the spectrum though, provinces that are heavily dependent on resources such as oil will be outperforming other areas of the country. While this includes areas in the Maritimes, Alberta will be leading the pack with economic growth for 2012 in the low 4% range followed close behind by Saskatchewan. This will slow in 2013, but they will both still lead Canada in the economic growth department.

Due to this strong economic growth the resource economies will continue to see job numbers increasing, unemployment decreasing and with these factors becoming apparent to other parts of Canada the stream of interprovincial migration will increase again. Short term this will affect rental vacancies and increased costs for rents, then overtime this will put more pressure on housing values as ownership becomes more affordable due to higher wages and to higher rents.

By paying attention to trends and forecasts such as these, investors and homeowners can have a much more accurate view to where housing prices will be heading and can make decisions accordingly. It’s much better to be informed, rather than surprised.

If you are looking to find out more about the Calgary market please sign up at the top right of this page to get our updates because then we can help you stay informed.

Filed under Calgary Housing Market · Tagged with , , , , , ,

  • Canadian Home Price Forecasts for 2012 and 2013

More economic forecasts are being released that are painting a bleak picture for housing nationally, at least after 2011, while at the same time talking about the positives for the resource based provinces. TD Economics just released their latest economic forecast and is calling for the average Canadian home price to drop starting in 2012 and continuing this trend through 2013.

Strangely enough, they are also forecasting a solid 7.3% rise nationally for 2011. Then the wind effectively is removed from the housing sales (sails?) and in 2012 and 2013, the values are forecasted to drop back to 2010 pricing levels.  Their predictions are for a 5.5% drop in 2012 followed by a 2.8% decrease for 2013.

British Columbia, Ontario and Quebec are the area’s which will be most affected by this reverse and it will take back much of the growth in values they have recently enjoyed. The area that will be most affected by decreases will be BC.

Currently BC is enjoying some sizeable growth in values and by the time 2011 is over they could see an 11% increase in values. Due to this overzealous growth, they may get hit the hardest when it comes to price declines after 2011. By the time 2014 rolls around, they are expecting the area to have lost all of the gains it had recently enjoyed and be back to 2010 values.

On the other end of the spectrum though, provinces that are heavily dependent on resources such as oil will be outperforming other areas of the country. While this includes areas in the Maritimes, Alberta will be leading the pack with economic growth for 2012 in the low 4% range followed close behind by Saskatchewan. This will slow in 2013, but they will both still lead Canada in the economic growth department.

Due to this strong economic growth the resource economies will continue to see job numbers increasing, unemployment decreasing and with these factors becoming apparent to other parts of Canada the stream of interprovincial migration will increase again. Short term this will affect rental vacancies and increased costs for rents, then overtime this will put more pressure on housing values as ownership becomes more affordable due to higher wages and to higher rents.

By paying attention to trends and forecasts such as these, investors and homeowners can have a much more accurate view to where housing prices will be heading and can make decisions accordingly. It’s much better to be informed, rather than surprised.

If you are looking to find out more about the Calgary market please sign up at the top right of this page to get our updates because then we can help you stay informed.

Filed under Calgary Housing Market · Tagged with , , , , , ,


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