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OTUS (Other Than U.S.)


By HARM   Follow   Wed, 18 Jan 2006, 3:30pm PST   1,498 views   28 comments   Watch (0)   Share   Quote   Permalink   Like   Dislike  

Naturally, given the name of the site that started everything ("SF Bay Area Housing Crash Continues"), Patrick.net bloggers tend to be rather America-centric in general, and Bay Area-centric in particular. Even so, we have many fine contributors living in other parts of the world. And lets face it, this thing is pretty much a GLOBAL credit bubble at this point, given American hegemony and the petro-dollar's pre-eminence in world financial markets. Some RE markets (Denmark, Britain, Oz, etc.) have even seen bigger run-ups over the past few years than we have in the U.S.

So here's the topic: You're an OTUS blogger. Tell me about real estate in your country.

  • Is your country experiencing a credit/RE bubble right now? If so, are prices still appreciating?
  • If so, did it start BEFORE or AFTER the American housing bubble? How do you think it got started in the first place?
  • How are mortgage interest rates determined in your country, and what are the typical qualifying standards, minimum down-payments, etc.?
  • Do you have interest-only, neg-am, stated-income or 100% LTV ("exotic") mortgages, and if so, are they popular right now?
  • Do you have a central bank like the Federal Reserve (Fed) that sets or influences interest rates, or otherwise regulates lending?
  • Do you have GSE or REIT-like entities that can issue Mortgage-Backed Securities? If so, are they public (government) or private entities?
  • Discuss, enjoy...
    HARM

    Comments 1-28 of 28     Last »

    Peter P   befriend   ignore   Wed, 18 Jan 2006, 3:45pm PST   Share   Quote   Like   Dislike     Comment 1

    Anyone from China, Australia, New Zealond, England, Spain, France, Canada?

    HARM   befriend   ignore   Wed, 18 Jan 2006, 4:09pm PST   Share   Quote   Like   Dislike     Comment 2

    Peter P Says:

    Anyone from China, Australia, New Zealond, England, Spain, France, Canada?

    Hey, dude, I thought you were "retired". Whatcha doin' posting? ;-)

    HARM   befriend   ignore   Wed, 18 Jan 2006, 4:14pm PST   Share   Quote   Like   Dislike     Comment 3

    more bent than a 3 bob note Says:

    "...I’m not sure but I think this contributed to the rise and subsequent fall in London real estate. It was the government getting involved in what should have been a free market. "

    "bob", I'm intrigued --please elaborate. How did this program subsidize the purchase of the house? Grants/loans/tax credits, other? Is this the only way the government intervened over there?

    praetorian   befriend   ignore   Wed, 18 Jan 2006, 4:15pm PST   Share   Quote   Like   Dislike     Comment 4

    Hey, dude, I thought you were “retired”. Whatcha doin’ posting?

    He thought he would go for a walk.

    _engage lurk shield_

    Cheers,
    prat

    OO   befriend   ignore   Wed, 18 Jan 2006, 4:59pm PST   Share   Quote   Like   Dislike     Comment 5

    Nope, the Japanese 3-generation mortgage went into retirement. I was just back from a business trip there, they are now back to the good ole 20-year and 30-year mortgage (floating rate). 20 is more of a norm. Also, it is extremely difficult for non-Japanese to get a loan, only a working Japanese PR or citizen with proper tax slip can get a mortgage loan, unlike us, anyone who is breathing can get a loan.

    I heard that we are actually bringing out 40-year mortgage?

    losstotheworld   befriend   ignore   Wed, 18 Jan 2006, 11:08pm PST   Share   Quote   Like   Dislike     Comment 6

    In argentina, specifically buenosaires, one of the argentinian doctor told me that this is not th etime to buy here. he said the best time was in 2001.
    The prices have gone back up to the precrissis levels. and a little bit more. he said that any body with dollars could buy the whole of buenosaires at that time.

    this doctor told me that argentina has seen 4 crisis so far 1982,1989, 1970?
    and 2001. He did not know what was happening with the first one,so he told me he lost 2-3 houses and was totally broke. He told me when one losses his house that he also looses his freinds and social circle. When he had already gone thru 3 ofd the crises , he could smell something was up in 2001, so he had all his money stored in his house. i ask him how hewas not worried about a theif. He says he kept a {low profile. and drove a beatup car.

    Argentina is a beautiful country. This is a sacred place for me now. Currently am travelling in city of laplata. The cathedral here is marvelous. got to go to the childrens city,

    Oh , BSAS expat whatis 1050 rule? thanks

    losstotheworld   befriend   ignore   Wed, 18 Jan 2006, 11:14pm PST   Share   Quote   Like   Dislike     Comment 7

    Ps
    In argentina i met a doctor residents , they told me that they cannot affo0rd a condo-house now. However it seems like it is hard to get a loan here.

    In the hospital, people get drugs free too. any body can come to this country and theycan get free medical care. Patients come from neighbouring countries such as uraguay, paraguay, bolivia etc. These doctors are very good human beings as far as i can tell. However there is a certain wait time.

    DinOR   befriend   ignore   Thu, 19 Jan 2006, 12:54am PST   Share   Quote   Like   Dislike     Comment 8

    Since the early 1980's my wife and I have been building a modest portfolio of rentals, a beach house and farm land in the P.I (Philippine Islands). The only property that has a "view" has no road. You take a jeep, bus, motorized tricycle and finally "hoof" the last few hundred yards. We have been through more political unrest and currency devaluation than you can shake a stick it. We've seen typhoons, labor strikes and at least one revolution. It's been fun, it's also been alot of work. EVERYONE has to pitch in for there to be plenty of mangoes to go around! We enjoy our "working vacations" there and have fun planning their our next aquisition. All of this has been done "on the cheap" through land swaps and short term credit. In the Islands short term means (this coming payday). Will any of it ever be worth anything? Don't know, don't care. It has been a great adventure and I wouldn't trade any of it. BUT NOW with wheel barrows brimming with "bubble bucks" people with no prior connection to the Islands (let alone family) are descending upon us! Setting up "golf communities" and beach resorts for foreign nationals has taken the place of farming and fishing. There are web sites that show "peso palaces" with prices that are so ridiculous no local could ever afford them. They're paid a paultry sum for their ancestoral land then down comes the traditional house and they slap up houses that look like they'd be more at home in Las Vegas. It's sad really, and based on this I guess we're now millionaires (in pesos anyway).

    Girgl   befriend   ignore   Thu, 19 Jan 2006, 3:12am PST   Share   Quote   Like   Dislike     Comment 9

    There was a (very moderate) housing bubble in Germany up to 1994. It was most pronounced in "hot" housing markets like Munich. There were prolonged good economic times due to reunification - the rest of the world went into recession in 89/90, while the party in Germany just went on for a little while. These things seem to make people take more risks, and pay more for assets.
    All the usual signs were there: "Get in before it's to late", people could move up because of appreciation, etc. etc.

    It burst in late 94 IIRC with a 30% drop in the area I know, and never recovered. Housing prices have been declining in nominal and real terms up to this day, and at least in the markets I know, it is now substantially cheaper to buy than to rent.
    However, almost no one can come up with the downpayment (20% is absolute minimum, and people don't save because money's tight). Folks folks who could come up with a downpayment don't buy either because investing into real estate has been a great strategy for losing money for almost 12 years now. Or in other words: taking risks has not paid off for a long time now.

    Here are my theories for why it happened:
    - Gemany's housing was always much higher priced relative to incomes than housing in other European countries. The fall of the borders in Europe enabled some rebalancing and directed much of the German housing money to places like Italy and Spain because it was relatively cheap back then, appreciated nicely, and the sun shines more often there, too. That happened just as the German economy recovered around '98.
    - Lots of new houses came on the market over the last 10 years, but population in Germany is not growing all that much.
    - I talked to a real estate agent in Munich in '02. He said that much of the real estate investor money has evaporated in the Internet stock market bubble.
    - the German economy never received a boost from housing appreciation and is almost a deflationary environment these days. Nominal wage increases have been on the order of 0-1% per year. This, and heavy outsourcing within the EU, has caused the level of gloom-and-doom to ever increase up to this day. Young folks in Germany today don't believe that the economy will ever recover.

    AFAIK, there are no exotic mortgages in Germany. However, I have not lived there in 10 years.
    When I naively bought my condo in Munich in '94 at ~8x my annual gross income (yes, at the peak of the bubble in the hottest market of the country - hey, it was just "before it was too late!" :-) ), I had to come up with 33% down. There are no 30-year mortgages in Germany. You can get 5yr and 10yr balloon loans, usually with 1% starting principal payment, which comes out to approximately a 30yr amortization schedule. You can negotiate higher principal payments when you get the loan (and you typically would for your second and third 10 year term), however, random extra payments toward the principal are not possible, and there there are heavy fees for early termination. That makes refinancing very expensive and usually not worth it.

    If I sold the condo today, I would have to write a check to the bank. That means I've lost my entire downpayment of 33%, plus the accumulated "equity" of the last 12 years, plus the money I paid to maintain the place, and then some.
    I have offered my tenant to buy the condo from me to cut my losses, and even though his PITI would be about 10% less than his rent, he's not interested (or he doesn't have the downpayment - not sure).

    I am convinced that there will be a similar situation in the U.S. in the next couple of years if Bernanke is not successful to inflate the country out of the problem.

    Peter P   befriend   ignore   Thu, 19 Jan 2006, 4:01am PST   Share   Quote   Like   Dislike     Comment 10

    “Indicators of market distress are still largely absent. Foreclosure rates are low, but are expected to rise this year. Down payment sizes are stable and there have been no significant shifts in market mix, DataQuick reported. ”

    News, this is there template, if not their motto.

    Peter P   befriend   ignore   Thu, 19 Jan 2006, 4:04am PST   Share   Quote   Like   Dislike     Comment 11

    SQT, can your parents be convinced to downsize? After 20 years, it can get emotional. Golf membership is mostly a liability though.

    Peter P   befriend   ignore   Thu, 19 Jan 2006, 4:06am PST   Share   Quote   Like   Dislike     Comment 12

    Oh, and to top it all off, the wife refuses to go back to work because she doesn’t want to look bad in front of her friends. These people deserve eachother.

    Vanity. We should make bankrupted debtors wear special red caps. Perhaps this will finally solve the problem.

    Peter P   befriend   ignore   Thu, 19 Jan 2006, 4:21am PST   Share   Quote   Like   Dislike     Comment 13

    I don't think retail is getting any better. Rounds of layoffs are now hitting the silly valley.

    HARM   befriend   ignore   Thu, 19 Jan 2006, 4:25am PST   Share   Quote   Like   Dislike     Comment 14

    Anyone else being hampered by massive (but necessary) educational debt?

    East Coast BubbleBoy,

    If you had met me 12 years ago, the insane cost housing would not have been my greatest concern --my student loan debt (and the lack of jobs) would have been. While my nominal debt load was not quite as high as yours ($55K with interest --though in 1990s dollars), when the only jobs you could get paid $5-7/hr, this was a very scary, f@cked situation to be in. I had no "rich uncles", so I spent many a sleepless night sweating over how I was going to pull myself out of my seemingly bottomless debt-hole.

    As you know, unlike all those fortunate mortgage McDebtors, a student loan is non-dischargeable under virtually ANY circumstances, so pleading poverty gets you nowhere. Nor were the banks particularly inclined to "help" unless it meant consolidating my loans on very favorable terms --for THEM. Nonetheless, as dismal as my prospects seemed at the time (middle of the recession), I finally managed to find decent paying work and slowly started repaying the loans.

    Wasn't easy, but I finally managed to pay off the last one 11 years after I left college. It meant living well below my means, driving an old beater I shared with the wife and not buying anything that wasn't absolutely necessary for many, many years. I even went without medical insurance for 7 years (which I don't recommend). A type of lifestyle that virtually no fortunate boomer could even begin to comprehend --though the WWII/Depression generation would certainly relate.

    All in all, it sucked hard, but it also gave me an "education" in the cold hard economic realities of the world. It also permanently innoculated me against the rampant "affluenza" that's taken hold of the American sheeple. I know it may seem like you'll never be able to pay it off now, but if you're willing to sacrifice and stick with it, eventually you'll make it.

    surfer-x   befriend   ignore   Thu, 19 Jan 2006, 4:25am PST   Share   Quote   Like   Dislike     Comment 15

    Rounds of layoffs are now hitting the silly valley.

    I find this very hard to believe, if it's true maybe these folks could find work as gold brick layers, I hear that some of the gold paved Valley streets are getting in ill repair.

    HARM   befriend   ignore   Thu, 19 Jan 2006, 4:58am PST   Share   Quote   Like   Dislike     Comment 16

    @DinOR,

    LOL - you should write for Comedy Central.

    jeffolie   befriend   ignore   Thu, 19 Jan 2006, 5:33am PST   Share   Quote   Like   Dislike     Comment 17

    Second German fund freezes investors’ assets
    By Patrick Jenkins in Frankfurt
    Published: January 17 2006 22:04 | Last updated: January 17 2006 22:04

    FT.com
    Further evidence emerged on Tuesday of the spiralling crisis in Germany’s open-ended property funds sector, as a second fund in as many months froze the assets of investors to prevent insolvency KanAm, a privately owned asset manager in Munich, froze its US-Grundinvest Fonds, just five weeks after Deutsche Bank became the first company in the sector’s 40-year history to take such a step.
    Germany’s open-ended funds have €88bn of assets under management, most of it private investor money. But concerns about overvaluations of German assets and poor performance have prompted a run of withdrawals from some domestically focused funds. Deutsche Bank’s Grundbesitz-Invest fund remains closed pending a revaluation of its assets and an attempt to sell €1bn worth of property.
    KanAm’s case is atypical, however. The fund in question, worth $579m (€479m) according to the company, has been highly successful and is invested in US, not German, real estate.
    The company said on Tuesday that “strong redemption demand” on the fund meant that today it would have breached its 5 per cent minimum liquidity threshold, further highlighting the shortcomings of the open-ended structure and the mismatch between short-term cash flows and bulky assets.
    The fund’s problems have been triggered by its association with Mills, a US real estate investment trust that it founded, still co-owns and with which it shares two directors. Mills, based in Arlington, Virginia and which invests mainly in US shopping malls, has twice had to restate its accounts and is being informally investigated by the Securities and Exchange Commission. In consequence, Scope, a German ratings agency, has cut its recommendation on the KanAm fund to “sell”.
    The news came as AtisReal, a property intermediary owned by BNP Paribas, the French bank, published figures showing record transaction volumes in German real estate last year, partly the result of heavy sales by open-ended funds trying to liquidate their assets.
    AtisReal said transactions last year totalled €51.4bn. Property experts estimate the previous year’s tally at €30bn-€35bn.

    jeffolie   befriend   ignore   Thu, 19 Jan 2006, 5:37am PST   Share   Quote   Like   Dislike     Comment 18

    Asian housing boom lures U.S. immigrant investors
    By K. Oanh Ha
    Mercury News

    BEIJING - They rushed through the glass doors of the sleek Zhubang 2000 high-rise and pointed excitedly at a lobby directory. The Bay Area visitors snapped photos of a wall of metal plates engraved with tenants' names and office numbers.
    ``That's mine!'' Jen Corsa shouted, pointing to a Japanese semiconductor company. Giddy as a teenager on a shopping spree, the middle-aged Taiwanese-American exclaimed to no one in particular: ``This is so exciting!''
    Corsa doesn't own stock in the Japanese firm. But before the end of the day, the Benicia resident would become its landlord and an investor in the 23-story building at the edge of Beijing's central business district. Her excitement was shared by 18 other Bay Area Chinese-American investors who came to investigate Zhubang's investment potential.
    Investments by Asian-Americans are helping fuel sizzling real estate markets thousands of miles away. Stymied by nosebleed California property prices, many immigrants turn to their homelands for cheaper investments -- and a chance to ride the Asian boom. Foreign developers are accelerating that trend by marketing directly to eager buyers through California mortgage brokers.
    Once the domain of deep-pocket institutional investors, international real estate markets have opened to small investors as globalization creates porous borders for people and money. The potential for profits is huge, experts say, but so are the risks.
    ``In the '90s we only found investors from Hong Kong, Macao or Taiwan . . . a few overseas Chinese,'' said Philip Wu, an executive at Beijing real estate consulting firm DTZ Debenham Tie Leung. But in the past two years, he said, large numbers of Chinese immigrants from the United States have invested in China.
    Bay Area ethnic newspapers and radio stations now advertise real estate projects in China, the Philippines and Vietnam. Developers and area brokers hold weekend seminars here to sell properties across the Pacific.
    • In Manila, Robinson Land Co., one of the Philippines' largest developers, is building a residential and retail community modeled after San Jose's Santana Row. Forty percent of buyers are Filipinos living abroad -- half in the United States.
    • Indian banks and land developers attract expatriate home buyers on the Internet with drawings for free scooters, refrigerators and flat-screen TVs. Land and new homes in Bangalore are especially popular with Silicon Valley investors because the city is a major technology hub.
    • Vietnamese developers lure Vietnamese-American buyers with California-style abodes tucked into secluded communities. One development in Ho Chi Minh City is named ``Lang Viet Kieu,'' or Overseas Vietnamese Village.
    In Beijing, the Bay Area visitors were greeted by a Zhubang executive on the high-rise's top floor.
    Silver bowls filled with tangerines, pears and grapes beckoned from white-cloth-covered tables. In the corner room where the deals were signed, floor-to-ceiling windows revealed dozens of office towers under construction.
    Zhubang began marketing to Chinese-American immigrants in 2005 as a test run for a larger, $8 billion project encompassing a hotel, service apartments and office buildings to be built in Shanghai this year, said Zhubang board director Liao Quanjun.
    Privately held Zhubang teamed up with Infohome and issued the San Jose company 84 office units -- 15 percent of the building -- to sell. Infohome's brokers, who hold weekend sales pitches, receive a 1 percent sales commission from the developer.
    Demand is brisk -- and most buyers pay the full amount, in cash, averaging $210,000 for a 1,300-square-foot unit.
    ``It's a huge, untapped market,'' said Liao from his top-floor office. ``There's a huge demand by overseas Chinese to take part in the country's boom.''
    Shanghai-based Shimao Group saw the trend three years ago, and partnered with ReMax, an American household name, to help sales in California and New York. In October, Bay Area agents received deposits for 230 condos near Shanghai -- averaging $80,000 each -- in just three weeks, said agent Linda Wei.
    Prospective buyers have concerns, particularly those eyeing property in communist China and Vietnam, where all land is state-owned and leased to buyers. Investors are gambling that the government will renew the leases without piling on new fees and taxes.
    Many have flocked to Shanghai, despite warnings from analysts who say a housing bubble may be bursting.
    One million homes are now under construction in the city of 20 million residents, said Andy Xie, Morgan Stanley's Hong Kong-based chief Asia economist. By comparison, 2 million homes were under construction in the entire United States last year -- for a population of 296 million -- according to the National Association of Home Builders.
    Chinese officials have warned of an overheated market, but they do not appear to have been widely heeded.
    ``Investing overseas is not for the faint of heart,'' said Delores Conway, director of the Casden Forecast at the University of Southern California's Lusk Center for Real Estate. ``You have to be willing to move with changes.''
    Overseas investors can easily be duped or cheated in Asia's hot economies, and often have few remedies. In China, for example, even if a wronged investor spends the time and money to take a developer to court and wins, collecting on the judgment is unlikely, according to Youguo Liang, managing director of research at Prudential Real Estate Investors.
    ``The assets aren't there,'' he said. ``Most Chinese developers are small-scale operators.''
    But those risks don't stop investors, many of whom are attracted to Asia because of family ties. Clark Li of Fremont was on the Zhubang trip with Corsa. Though he left Shanghai 20 years ago, he and his wife consider retiring in China, where they have family.
    Asian cultural practices also figure prominently. Many Asians are inclined to invest in real estate first, rather than in stocks or other commodities.
    ``There's a Chinese saying: `Land never rots,' '' said Corsa, a dental assistant who also owns properties in California. ``You can always live in it. You can't say the same for other investments.''
    Corsa and Li once looked to California for investments, but skyrocketing prices statewide make China more affordable, where $80,000 can buy a luxury condo in Beijing or Shanghai.
    Talk of a real estate bubble in Shanghai doesn't faze Li.
    ``If you think about risks, the Bay Area is more risky than China,'' said Li, a financial planner. ``China has real growth and development behind its boom.''
    Li ended up not buying into the Zhubang high-rise. Instead, he and his wife bought a $500,000 office unit in Shanghai.
    Li was the only one of 19 Bay Area investors on that trip who didn't buy a Zhubang unit, said Jeffrey Yang, who runs Infohome's Chinese sales operation. Though Zhubang's executive offered a session to answer questions, half the group marched straight to the signing table.
    Corsa was among them. She has traveled often to China -- and wanted in on the action of the rising Middle Kingdom. Less than 24 hours after her arrival, she purchased a $200,000 unit.
    ``I feel good,'' she said, beaming. ``It's a once-in-a-lifetime opportunity.''

    jeffolie   befriend   ignore   Thu, 19 Jan 2006, 5:57am PST   Share   Quote   Like   Dislike     Comment 19

    January 8 2006

    Shanghai Housing Bubble Pops

    The LA Times is reporting A Home Boom Busts in Shanghai.

    Shanghai's hot housing market has fizzled after a run-up fed by speculators, threatening a significant part of China's economy.

    American homeowners wondering what follows a housing bubble can look to China's largest city.

    Once one of the hottest markets in the world, sales of homes have virtually halted in some areas of Shanghai, prompting developers to slash prices and real estate brokerages to shutter thousands of offices.

    For the first time, homeowners here are learning what it means to have an upside-down mortgage — when the value of a home falls below the amount of debt on the property. Recent home buyers are suing to get their money back. Banks are fretting about a wave of default loans.

    "The entire industry is scaling back," said Mu Wijie, a regional manager at Century 21 China, who estimated that 3,000 brokerage offices had closed since spring. Real estate agents, whose phones wouldn't stop ringing a year ago, say their incomes have plunged by two-thirds.

    Shanghai's housing slump is only going to worsen and imperil a significant part of the Chinese economy, says Andy Xie, Morgan Stanley's chief Asia economist in Hong Kong.

    Although the city's 20 million residents represent less than 2% of China's population of 1.3 billion, Xie says, Shanghai accounts for an astounding 20% of the country's property value. About 1 million homes in Shanghai alone — about half the number of housing starts for the entire United States in 2004 — are under construction.

    "They'll remain empty for years," Xie said, adding that a jolting comedown also was in store for other Chinese cities with building booms — including Beijing, Chongqing and Chengdu — though other analysts say the problem is largely confined to Shanghai.

    Shanghai's housing bust comes after a doubling of prices in the previous three years, a run-up fueled by massive speculation. With China's economy booming and Shanghai at the center of worldwide attention, investors from Hong Kong, Taiwan and elsewhere were buying as fast as buildings were going up. At least 30% to 40% of homes sold were bought by speculators, says Zhang Zhijie, a real estate analyst at Soufun.com Academy, a research group in Shanghai.

    "Ordinary people had no option but to follow the trend," Zhang said. "Worrying that prices would be even more unaffordable tomorrow, many of them borrowed from relatives and banks to buy as soon as possible."

    The Shanghai government only pushed the market higher, he added. "Many of the officials said Shanghai's property market was healthy and wouldn't drop before the World Expo" in 2010.

    Internet chat rooms recently were abuzz with a story that a Taiwanese man had jumped from the 33rd floor of an apartment tower about 15 miles northeast of downtown. Many people suspect that he killed himself because he was drowning in debt after his home investments went sour.

    Managers at the complex refused to comment, but brokers indicated that the price of some units there have plummeted by more than 50% since March, when a home fetched as much as $250 a square foot, similar to housing prices in some Southern California communities.

    Zhang Wei, an editor at Imagine China, a photography agency in Shanghai, was close to buying an apartment in the new Pudong development area last year.

    The 25-year-old planned to use his $1,250 in savings, and his parents — a policeman and a doctor — agreed to contribute about $30,000. The family of three currently lives in a 550-square-foot apartment in an industrial district that was provided by his father's employer, the Police Bureau.

    Zhang walked away from the deal after the central government stepped up its campaign to cool Shanghai's market. He noticed prices beginning to drop. "When two of the four real estate agencies near our home finally closed, I decided not to buy for at least two years," he said. "Even a 1% drop in prices is a lot of money for us."

    For Shanghai, prolonged weakness in the housing market could be very painful. Like Los Angeles, Shanghai relies heavily on real estate to drive its economy. Morgan Stanley's Xie calculates that property sales directly accounted for about half of $31 billion of the growth in Shanghai's annual economic output from 2001 to 2004. "Real estate agents, whose phones wouldn't stop ringing a year ago, say their incomes have plunged by two-thirds.

    Shanghai's housing slump is only going to worsen and imperil a significant part of the Chinese economy, says Andy Xie, Morgan Stanley's chief Asia economist in Hong Kong.

    Those that thought the Boom in China would last forever, or even to the next Chinese Olympics lost that bet. Those that think housing prices in the US are a one way ticket up are also in for a rude awakening. Let's see what a housing collapse in Shanghai does to the price of copper and other basic materials. In the meantime look for enormous bubble popping events to happen in the US as well. For a preview of what is to come, simply substitute your favorite US bubble city for Shanghai, and "Chinese economy" with "US economy" in the sentences in italics above.

    OO   befriend   ignore   Thu, 19 Jan 2006, 12:43pm PST   Share   Quote   Like   Dislike     Comment 20

    I have family and pals in Sydney and Melbourne. Sydney was hit pretty hard, but not hard enough in the 2005 slowdown, just like London. Sydney is grossly overpriced, the P/E (Price rental ratio) got so out of whack. However, Sydney's bubble was more like that of the Central Valley, many rich Brits and Americans take their profit / got priced out of their homeland and dropped the dough on Sydney, because Aussies just cannot afford that kind of price tag.

    The worst thing about Melbourne was (listen up America), it has a huge supply of condos (sounds familiar?), high rise condos that are investor stocks sitting unoccpuied especially around the Southbank area. 2 years ago when I was down there visiting, I saw it on the TV that a RE agent couple bought a million-dollar condo on the high floor (150 sqft) proclaiming that such view is "different" and Melbourne prime never goes down. They obviously didn't study local history because Melbourne did have a spectacular RE bust just before the turn of the century. So I checked back their comps on the internet, it is down 40% with no takers.

    Also, there are lots of lawsuits going on. Even one of the most prestigious developer, Mirvac, got into lawsuit tangles with disgruntled investors who want out. It will get even more interesting as the fall deepens.

    jeffolie   befriend   ignore   Thu, 19 Jan 2006, 4:00pm PST   Share   Quote   Like   Dislike     Comment 21

    More German Property funds frozen....

    Fund companies and financial advisers on Thursday warned of an atmosphere of panic and hysteria as a third German open-ended property fund was closed following a run of withdrawals. KanAm, a Munich-based asset manager which on Tuesday froze its US fund after heavy outflows, said on Thursday it had been forced to close its core EU3.2bn global Grundinvest fund after EU700m of withdrawals in 24 hours.

    jeffolie   befriend   ignore   Thu, 19 Jan 2006, 4:11pm PST   Share   Quote   Like   Dislike     Comment 22

    S.F. Bay Area real estate sales dive

    Median home price falls $16K from previous month

    Thursday, January 19, 2006

    Inman News

    Home sales in the nine-county San Francisco Bay Area declined on a year-over-year basis for the ninth month in a row in December as prices eased from a November peak, according to DataQuick Information Systems, a real estate information service.

    A total of 9,347 new and resale houses and condos were sold in the region last month, down 3.8 percent from 9,717 for November and down 15.5 percent from 11,068 for December last year, DataQuick reported.
    The month-to-month decline is unusual – sales normally increase from November to December, the company reported. Last month's sales count was the lowest for any December since 8,987 were sold in December 2002. The 15.5 percent year-over-year decline was the steepest since sales fell 27.2 percent in November 2001.

    "Demand still seems to be there, but the sense of urgency seems to be a thing of the past. We don't expect the market to tumble, but we do expect price increases to level off between now and spring," said Marshall Prentice, DataQuick president, in a statement. The median price paid for a Bay Area home was $609,000 last month. That was down 2.6 percent from November's record high of $625,000, and up 14.3 percent from $533,000 for December a year ago.

    The annual price increase was the lowest since prices rose 13.1 percent to $474,000 in March 2004.

    The typical monthly mortgage payment that Bay Area buyers committed themselves to paying was $2,867 in December. That was down from $2,921 in November, and up from $2,350 for December a year ago.
    Adjusted for inflation, mortgage payments are 16 percent higher than they were at the peak of the prior cycle 16 years ago.
    Foreclosure rates are low, but are expected to rise this year. Down payment sizes are stable and there have been no significant shifts in market mix, DataQuick reported.

    Sales dropped 30.4 percent in Napa County, 28.4 percent in Marin County, 26.6 percent in Solano County, 18.3 percent in Sonoma County, 16.9 percent in Alameda County, 13.1 percent in Contra Costa County, 12.4 percent in Santa Clara County, 7.9 percent in San Mateo County, and 5.3 percent in San Francisco County from December 2004 to December 2005.
    Meanwhile, prices increased 19.4 percent in Contra Costa County, 17.1 percent in Solano County, 15.7 percent in Alameda County, 15.3 percent in Sonoma County, 12.8 percent in Santa Clara County, 10.6 percent in San Mateo County, 6.4 percent in San Francisco County, 5.3 percent in Marin County, and 4 percent in Napa County from December 2004 to December 2005.

    A subsidiary of Vancouver-based MacDonald Dettwiler and Associates, DataQuick monitors real estate activity nationwide and provides information to consumers, educational institutions, public agencies, lending institutions, title companies and industry analysts.

    TOLurker   befriend   ignore   Fri, 20 Jan 2006, 2:07am PST   Share   Quote   Like   Dislike     Comment 23

    Writing from Toronto, Canada. Toronto real estate last peaked in 1989, then went on the early 1990s slide bottoming between the years of 1994 and 1996. Then it slowly started to inch back up until 2000 or 2001, when all of a sudden it just took off. Folks like to claim that real estate in inflation adjusted terms is still not as high as in the 1989 and that there is no speculator activity--however, I disagree to a certain point.

    The median home price is at the same or barely above the 1989 price, however this new median is in my opinion distorted by the vast quantities of new condos, stacked townhouses, and rowhouses that have been built in the last ten years. Since they don't cost as much as a detached house, they drag the average down. If you do an apples-to-apples comparison of the same street or house, many neighbourhoods in the "hot" areas of town such as the one I live in now cost about 50% to 100% more in nominal terms than in 1989. Other non-hot districts like Scarborough have reached their 1989 nominal price (in my opinion the most affordable, best-value place to live in the 416 area code since much of it is safe yet close to downtown with good, clean housing stock and decent schools. It's just maligned by the media thanks to the few bad pockets).

    I was convinced we were in a bubble until I visited Washington D.C. area, saw all the 3 bedroom townhouses in fairfax county about 30 miles outside of the city core going for $800K USD. then I was convinced that Toronto wasn't quite the bubble but just really really hot. I mean, who the heck has money for a $500K house, which now isn't even getting you much in the popular districts? Lots of the bidding wars are for owner-occupiers, not speculators. (they tend to buy into the more plentiful condos anyway). But there is a lot of money sloshing around, and many real estate agents continue to push the first timers to hurry in while interest rates are low.

    I haven't seen negative amortization loans but we have had 5% down payment loans, insured by the Canada Mortgage and Housing Corporation (sorta like Fannie Mae?) for a long time. Then, two of the banks came in with 0% down payment mortgages about 2 years ago. Not sure how popular they are, though I'm sure there are folks who are using it.

    There are no 15 or 30 year fixed mortgages in Canada -- I guess the banking system shares the risk of changing mortgages with the borrower by offering 25 year amortizations, but you have to readjust the terms every 1, 2, 4, 5, 6, 7, or 10 years. (that is, you can lock in your interest rate for those periods of time, but after that you must refinance at the new prevailing rates for another set period of time). We also have variable rate mortgages (equivalent to ARMs) but you can choose to lock in at any time to a higher fixed rate term mortgage as above without penalty... on the whole I'd say the banking system here is much more conservative and much less fragmented than in the U.S., which makes me hopeful that when a correction comes (10% even 20% would not surprise me), it should be comparatively mild. I think we've peaked and expect for 2006, sales volume may go down a bit while prices stay steady. Economy here is better than the U.S. thanks to surging Toronto stock market, commodities, oil (bigger benefit to Alberta than Ontario though). For the sake of my parents, who sold the family home in 2005 and are renting while they look without pressure, it would be nice if condos went down 5% or 10% in 2006.

    On our end we bought in early 2005 with a hefty 30% down payment and the parents hold the mortgage. Parents were getting crappy 1%, 2% returns on short term paper (since they too anticipate poor stock market returns and in any case they are retired) so they figured, better to benefit the kids than the bankers who would charge us 5% or 6% for a five year term. Husband just paid all his debts, I was pissed (a little at hime) for having to wait 2 or 3 years more to buy, and not knowing when things would top out here, we bought. Mortgage+utilities+taxes are affordable at about 1/5th of our take-home income (1/7th gross), leaving lots of room for us to return my parents' money faster than they'd like! So we should be OK though it might suck psychologically if not financially should we outgrow the current house at a time when prices are down.

    Hope these comments are helpful. I rarely post but amuse myself reading all your other comments. Things are really screwed down there and I couldn't convince a friend to sell his bachelor home (now rented to friends at a mild loss) to reduce risk and the mortgage on his marital home.

    KurtS   befriend   ignore   Fri, 27 Jan 2006, 1:32am PST   Share   Quote   Like   Dislike     Comment 24

    test

    Different Sean   befriend   ignore   Thu, 2 Feb 2006, 11:19am PST   Share   Quote   Like   Dislike     Comment 25

    Have a look at my blogspot at http://www.housingaffordability.blogspot.com, which is about the Australian condition in particular.

    Interestingly, real estate agent lies and tricks seem pretty universal.

    There were a couple of special cons here where a lot of houses go to auction as a standard practice, because it suits the RE agents - in other countries, auctions are normally only conducted as a 'fire sale' at foreclosure time. However, RE agents were taking false bids and 'dummy bids' (vendor bids) to inflate the price at auction time, which eventually was legislated against - but practices like that still go on. (Plus auctions allow for no 'cooling off' period, you need to write a forfeitable deposit cheque for 10% right there and then, and so on.) I went to one auction where a hot girl was employed to go round begging all the guys who were bidding (and it is usually guys) to bid a little more...

    A recent OECD report found Australian RE was overpriced by about 50% against income and rents, and, unfortunately, the options to live in the regions here are much fewer, most people live in about 6 capital cities, whereas in North America housing prices are still relatively benign in many areas. e.g. compare Baltimore with Adelaide, with similar sized populations -- places are > $250 K in Adelaide, and

    Different Sean   befriend   ignore   Thu, 2 Feb 2006, 11:21am PST   Share   Quote   Like   Dislike     Comment 26

    hmm, the comment submission program is broken >: (

    Different Sean   befriend   ignore   Thu, 2 Feb 2006, 11:21am PST   Share   Quote   Like   Dislike     Comment 27

    less than $100 K in Baltimore for a similar property... (but contingent on desirability of suburb, etc)

    Elsewhere, London prices are extremely high, whereas prices are better controlled in France, and Germany is extremely stagnant at present. Hence, you get Londoners buying apartments in Paris as a strategy, or, they were buying cottages way out in the English countryside to 'squat' on them in the hope of appreciation so they could then scrape together a deposit for an apartment in London...

    Housing prices seem to depend somewhat on govt policy, and the orientation to real estate as an investment class in the respective countries. Apart from low interest rates (thanks Alan Greenspan), liberalised credit products from lenders, activities of spruikers and salesmen, and so on and so forth.

    I disagree that govt 'interferes' with the operation of the market, govt or central bank regulation of interest rates is a given, for a start (as a way of avoiding major Depressions caused by operation of an unfettered market), so it is automatically intertwined. Beyond that, the role of government is to act as a 'governor' or 'regulator' of market forces that otherwise punish people - otherwise, let's just go back to the Satanic mills of the 19th century and low-paid minimum wage junk jobs in the service sector - oops, too late...

    Government is here to enforce a decent social contract, and they are failing to do that - they have always conveniently left pricing of RE market in the open market, whereas they have regulated and managed other markets more closely. That is their error, as far as I'm concerned.

    If anyone wants to dispute that govts should actually be doing a lot more, rather than a lot less, and that 'the market is God' (despite a complete lack of evidence of this, and numerous severe capitalist crashes over time and a huge amount of unecessary suffering and social injustice to many), and have never bothered studying the worldwide economic history of the last two centuries, or know anything about political science and the role of governmentality, and have never heard of John Keynes, or thought about anything in much detail, we can still have a chat. OK?

    HARM   befriend   ignore   Wed, 8 Feb 2006, 2:30pm PST   Share   Quote   Like   Dislike     Comment 28

    @Jeff Oliver,

    Glad to be of service! I also heartily recommend the following sites for more Bubble & macroeconomic research:

    http://thehousingbubbleblog.com/
    http://piggington.com/
    http://www.housingbubblecasualty.com/
    http://calculatedrisk.blogspot.com/

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