Tuesday, 31 July 2018

U.S.A.Housing’s Headwinds Are Getting Stiffer

Plans to buy a home in the next six months have tumbled 
to the lowest level since June 2016.
By Danielle DiMartino BoothAugust 1, 2018, 1:00 AM GMT+8


Best Asia Real Estate Editors Comments:

The news just get keeps on coming out that's telling me that perhaps the United States real estate market has topped off for the first time since 2009 when I issued a buy signal following my sell signal in 2006.

I wouldn't be surprised if I issue a sell signal for American real estate including Canada in the coming 6 to 12 months. It's a time to stand aside and wait for the markets to show that they can handle  increases in interest rates and lower demand.

There are much greener pastures such as Bali which has already had a 30% to 50% correction where a three-bedroom home can be had for as little as  $158,000 with a private swimming pool.
A three-bedroom home  for as little  $158,000

 Bali's cost of living is also 50 to 70% cheaper than the Western world.

Contact me for  more details lbptbali@gmail.com or simply check our website www.bestasiarealestate.com

American Housing is becoming even less affordable. 

Danielle DiMartino Booth, a former adviser to the president of the Dallas Fed, is the author of "Fed Up: An Insider's Take on Why the Federal Reserve Is Bad for America," and founder of Quill Intelligence.
Approaching ebullience heading into this spring’s U.S. home-selling season. The National Association of Realtors entered the year expecting home sales to grow by 3.7 percent in 2018 after last year’s lackluster 1.1 percent increase. But now, the NAR’s chief economist has tempered his call with existing homes changing hands at the slowest pace since September and new home sales having fallen to the lowest level since October 2017.

With home prices at or near record highs, it takes more than a small boost to income to call potential buyers to action. The average household has to save for almost six and a half years to cover a 20 percent down payment on a home at current prices, according to a recent study by Zillow HotPads. That’s based on the steep assumption that workers can sock away 20 percent of their monthly take-home pay. Saving money is especially tough for renters. Zillow calculated last year that just 42 percent of rentals were affordable, defined as requiring 30 percent or less of one’s median monthly income to cover rent payments.

Perhaps reflecting the affordability obstacles, the Conference Board’s consumer confidence data for July released Tuesday showed that plans to buy a home in the next six months tumbled to the lowest level since June 2016.

The cost to rent and buy has become particularly acute in major markets, especially if you prefer a home to an apartment. Renting a three-bedroom house is more expensive than buying a median-priced home in 54 percent of major markets, according to ATTOM Data Solutions. The average three-bedroom runs renters 38.8 percent of their annual income.

There are other factors that have hamstrung the housing market in 2018 besides record-high home prices. Mortgage rates for 30-year fixed loans are up by more than 0.8 percentage point on average. Separately, the new tax law limits all state and local income taxes and property taxes that can be deducted to $10,000.

Affordability is even more elusive among middle-tier income earners, who tend to be in the market for move-up homes after they’ve outgrown their starter home. And that’s in second-tier markets. In the nation’s costliest cities, median home prices often exceed the wherewithal of most regardless of how much they make. In San Francisco, average home prices exceed $1.6 million.

Let’s take the example of moving from what Zillow classifies as the middle third of homes nationwide, which is the median price we always hear quoted of $217,300, up to what Zillow categorizes as the top third of homes by price nationwide, the median price of which is $380,100. Those are what many realtors would call “move-up” homes.

For the sake of simple illustration, let’s compare the rate two years ago to what it is today for a 30-year fixed mortgage. Back then, the rate was (assuming no points) 3.63 percent compared with 4.75 percent today. The monthly payment for a couple who has just had a second child and wants to upsize would double from about $792 to $1,585. Had mortgage rates stayed where they were two years back, that same payment to move up today would be $1,386. It’s no wonder that according to the University of Michigan, buying conditions among middle-tier income earners has fallen out of bed of late. If you have designs on living in a better school district that doesn’t require private school tuition for the tykes, be prepared to pay a hefty premium.

The Bottom of the Housing Market Falls out of the Middle


The protracted decline in top-tier home-buying conditions could be a mere starting point that trickles down through the lower tiers. The top third of income earners account for 60 percent of the dollar value of “owned dwellings,” as per the Bureau of Labor Statistics Consumer Expenditure Survey. This group, albeit small, has more incentive than ever to stay put or move to a lower-tax state.

Consider a homeowner who bought a home a few years back who locked in a low rate on a $700,000 mortgage. That home has appreciated to $1 million, but interest payments remain about $24,500 a year, or $15,500 when adjusted to a top 37 percent tax rate and principal paid down. If this homeowner upgrades to a $1.2 million abode with a $975,000 mortgage, which takes into account transaction costs, mortgage interest would jump to $45,500. Adjusted for taxes, the marginal cost would be $32,500.

The alternative to the $17,000 budgetary upcharge is a facelift. For the same homeowner, a maximum of $50,000 would be deductible on a home equity line of credit given they would bump up against the new $750,000 limit. Even so, if the homeowner plunked $100,000 into an upgrade, the tax-adjusted, bottom-line interest increase would only be $4,000.

It would seem mobility will no longer be a hinderance unique to the millennials. The economy has always keyed off residential real estate. Investors would be well-advised to keep housing at the top of their watch lists.

Monday, 30 July 2018

Are you earning a living through rental properties? What lessons have you learned?

Best Asia Real Estate Editor's Comments: 

As can be seen below in this article  the most important thing about investing in real estate that you want to earn rental income on is "The first challenge was to buy something that is profitable after mortgage and expenses".

Many markets in the world such as Hong Kong, Singapore, Australia, New Zealand , U.S.A  and my home country Canada are now are at the point where there's no way you can buy something and achieve positive cash flow. 

That is usually the first acid test that indicates a long-term downturn in real estate is looming.

Bali after the first major correction in modern history now has great investment properties.

This villa only $158,000 positive cash flow of $1000-$2000 per month
For example you can buy this Three Bedroom, 4 bth, 500 m2  luxury villa with private 9 mtr. pool for only $158,000. 
If you spend another $120,000 for another 25 years your total cost would only be $660.00 per mth plus expenses of $600.00 per mth equals cost of #1,220 per mth for a villa that you can easily rent for $2,500 per mth. long term or $3,500 per mth for tourist rentals. That is a 100 % to 150 % per yr return on your investment.

Contact me directly for more information on this and many more positive cash flow investment opportunities in Bali.

Check out our website at www.bestasiarealestate.com to see a huge selection of income properties.
____________________________________


Kerry McAvoy, Psychologist (1991-present)
Answered Nov 5, 2016

Yes, I do earn an income from my rental properties.

There have been several lessons learned along the way.

The first challenge was to buy something that is profitable after mortgage and expenses. That often depended whether the real estate at the time of purchase was a good value due to it being a buyers vs sellers market. Of course it's best to buy a multifamily unit in a desirable geographical location and at a reasonable or low cost. I was fortunate to purchase my rentals during the most recent downturn.

I have found single family homes don't provide a good return on my investment. Instead I stick to duplex or larger unit homes. In fact more units the better since some costs are fixed regardless of how many units are in the building, such as lawn care and exterior maintenance.

The another big challenge to having a profitable rental business is tenant selection. I have learned this lesson the hard way—through trial and error. I thought my interviewing skills as a psychologist would have benefited me, but I think it may have hurt me. I tended to want to help others out by giving them a chance rather than seeing tenant selection as a business decision. Through the course of some painful experiences, I have learned the importance of not renting to friends or family, do a credit check on every candidate, and always go with the strongest candidate—not the neediest one.

Finally it is very worthwhile to join your local rental owners association. They provide excellent legal advice, aids for landlords, and on-going educational resources and classes.

Best of luck with this endeavor!

Sunday, 29 July 2018

Red Flags That Indicate A Possible American Real Estate Market Crash

Best Asia real








Best Asia Real Estate editor's comments: My predictions on most major real estate markets for the world have virtually been almost 100% for the past 30 years.
Editor Lawrence, speaking at international property conference in Hong Kong many years ago

In 1982 that I advised Americans to get out of Hawaii real estate. They scoffed at me until a few years later when Hawaii real estate dropped 30% to 40%.

In 2017 I told everybody that now that American housewives are having house selling parties instead of Tupperware parties the end was near and they should sell their American real estate. Prices dropped as much sense as 70% in the two following years.

In 2019 I  recommended that everybody start buying the heavily discounted real estate in America and since then prices have returned 30% to 50%.

Now it appears it is a time to be cautious on American real estate. Although there may still be room for another few months or even a year or so of movements upwards we are at a stage where it's extremely risky.





Frankly there many better real estate markets around the world such as Bali which has already had a 40% - 50% correction. Check out great real estate bargains in Bali at www.bestasiarealestate.com


Jordan LulichContributori
Jul 28, 2018, 04:09pm 135,987 views#RealEstate

The housing market is hot. Prices are up, inventory is down, and the market is active. Many people are starting to become cautious of a “real estate bubble.” The past has revealed many red flags which would indicate a real estate market may very well crash.

The Great 18 Year Real Estate Market Crash



FRED E. FOLDVARY. THE DEPRESSION OF 2008

Professor Fred Foldvary wrote in 1997 that “the next major bust, 18 years after the 1990 downturn, will be around 2008, if there is no major interruption such as a global war.” He successfully predicted the crash would occur and based his prediction on the past.

With the exception of World War II, there has been a consistent peak in land values since the beginning of the 1800’s. Professor Mason Gaffney characterized the cycle perfectly by commenting that “Bank credit swells and shrinks in synch with the land cycle… buyers need more credit to purchase land; the appreciated land than serves as collateral for more bank loans.”

Rising Interest Rates

Currently, interest rates are at a four year high. Mortgage rates have not reached 5% since 2011. Interest rates also have some correlation with the real estate markets. History shows that real estate interest rates tend to hit their highest after land values peak.

Interests reached their peak at 6.70% in July of 2007, just after land value peaked in 2006 according to FreddieMac. Additionally, after land value peaked in 1979, interest rates hit their highest point at 18.16%.

MORE FROM FORBES

Default Rates Increase

An additional indicator that a real estate crash is on the horizon are an increase in default rates. 861,664 families had their home foreclosed in 2008. Additionally, between 1980 and 1985 foreclosures spiked by almost 300%.

US Foreclosure dropped to a 12 year low in 2017, according to Attom Data Solutions. There has been a continuous drop since 2010 in the amount of foreclosures. Although nationwide foreclosures are down, a closer look shows that New York Foreclosure Actions have reached an 11 year high.

Legislation can also be a factor

Legislation may also weigh in on the real estate market. In fact, many critics of the Trump Plan has predicted that the real estate market will be negatively effected. Proponents claim a real estate boom will be the outcome of the legislation. The recently enacted Trump Tax Bill includes many benefits for Real Estate investors.

Time will tell whether the trump tax plan has had a negative or a positive impact on the housing market. It takes time for a law to go into effect, be implemented, and effect the current market. However, it’s important to always pay attention to the current legislation and the potential consequences it may have on the real estate market.

Watch Local Markets

While many assess real estate markets as a national standard, it’s important to note that the local markets also can explain the current conditions. For instance, total condo sales showed a decline of 12% in the final quarter of last year. With a decrease in condo sales and an increase in foreclosures, this market is not a good example of the climate of the national real estate market.


My passion for real estate sparked around five years ago as I started to consider real estate investments and financing. I started to self study real estate and devoted my personal time to learning how I can invest in real estate. During law school, my passion further develo... Sea Shepherd's Alex Cornelissen Wants To Stop Illegal Poaching


National house prices in Australia declined over the quarter this is the first annual fall in six years.

Best Asia real estate editor's comments :

Over a year ago I started advising my readers to get out of Australian real estate especially in Melbourne, Sydney. And Brisbane.
Editor Lawrence editing newsletter in Macau, China
Everybody scorned me at the time.

I can confirm with this article and a recent visit to Sydney that the market is heading down and will head down faster and faster in the coming months. 

Don't be surprised to see 20% to 50% corrections in many markets.

Better you sell now take your profit and buy Bali which has already had his correction and is starting back up.


Positive cash flow villas can be had for as little as $198,000 with incomes of 10% to 20% per annum.

Check out our properties available@www.bestasiarealestate.com

Domain House Price Report: June Quarter 2018

ANALYSIS"
Australia’s propertyprice correction still has some way to go
CHRIS KOHLER JUL 26, 2018
The spectacular boom in Australian property prices has finally and officially buckled – national prices have recorded their first negative year since 2012.

Rather than dwell on who was right about calling the top of the property market, economists have turned their attention to predicting the size of the correction. And while forecasts vary considerably, the experts agree the slide is only just getting underway.

With prices now about 2 per cent below their December 2017 peak, according to Domain Group data, the downturn could be as little as one-sixth of the way through or as much as halfway, depending on which economist you ask. But all say a house-price bounce won’t be seen until noticeably more cash is wiped off Sydney and Melbourne’s median prices.

The report also confirms that negative gearing and the capital gains tax discount incentive's housing investors to take on debt. Photo: Peter Braig

The economists each touch on a number of headwinds for the market, with the key concern being tighter lending rules and the possibility of further changes to come following the royal commission into banks. Out-of-cycle mortgage rate hikes and possible changes to property tax setting are also noted as contributing to weakening prices.

Capital city house prices dropped 1 per cent in the most recent quarter, according to Domain’s second-quarter data, which takes the annual drop to 1 per cent. Since peaking in December 2017, national house prices have given up 2 per cent and units are down 2.2 per cent.

Sydney leads the fall, with the city once at the core of Australia’s house price boom now giving up 4.5 per cent over the year – it’s worst result since the GFC. Sydney’s median house price now sits at $1.14 million.

Unit prices across the capital cities, meanwhile, gave up 0.4 per cent in the quarter and have now lost 2.2 per cent over the year.

The “correction we had to have” is rolling… Where and when will it stop?

No two predictions are exactly alike but economists from UBS, NAB, AMP Capital, ANZ, Capital Economics and CBA all predict weakness to persist for at least another 18 months.

Related: Biggest Sydney annual drop since GFC
Related: Brisbane outperforms Sydney, Melbourne
Related: Melbourne house price median falls

The most bearish of those six economic groups is Capital Economics, with chief Australia and New Zealand economist Paul Dales predicting a 12 per cent peak-to-trough fall in property prices across the nation by the end of 2021, based off CoreLogic’s hedonic house price data, which differ slightly to Domain’s stratified numbers.

On the more upbeat end of the spectrum, NAB chief economist Alan Oster sees a national peak-to-trough fall of roughly 3-4 per cent, with Sydney to give up 6 per cent and Melbourne to drop 4 per cent overall.

AMP Capital chief economist Shane Oliver, meanwhile, expects a sharp 15 per cent peak-to-trough fall in both Sydney and Melbourne, but only 5 per cent to be lost nationally as other cities show potential.

All six economists noted “downside” risks to their forecasts, meaning the falls could be bigger than they expect.

(Source: ANZ Research)
Context is key: “Correction, not a crash”

Several economists are quick to remind readers of their gloomy predictions that the seemingly steep fall in house prices comes after a long and epic boom in property prices.

With some broader perspective, the market is really travelling sideways, according to NAB’s Alan Oster.

“People say ‘well it could fall 10 per cent’… Well, yes but it’s still 30 per cent above where it was two years ago,” Mr Oster said.

CBA senior economist Gareth Aird, who forecasts a slightly deeper peak-to-trough fall than NAB, offers a similar view on the bigger picture.

“A fall in prices in Sydney of 10 per cent from peak to trough would take them back to their September 2016 level. And a fall of around 7.5 per cent in Melbourne from peak to trough would take prices back to their December 2016 level,” Mr Aird said.

“We don’t see prices softening much in the other jurisdictions as they simply didn’t experience the same growth in prices in the prior five-year period.”

A window for first-home buyers

First home buyers may see a window appearing after annual double-digit percentage price growth in Sydney and Melbourne had them sidelined for several years.

The now falling prices in those cities provides an opportunity, according to UBS economist Carlos Cacho.

“It’s certainly a good opportunity, but I’d say it’s probably going to get better,” Mr Cacho said.

With changes to bank lending standards putting pressure on investors and interest-only borrowers, the possibility of distress selling could prove a first-home buyer hunting ground.

“There are going to be good opportunities that come up, and that may be a seller who has an interest-only mortgage and is switching to principal and interest, and can’t afford the repayments, and so has to sell by a certain date. A case like that could provide an opportunity,” Mr Cacho said.

“But, overall, the market still has a fair bit further to go before we find the bottom.”

Saturday, 28 July 2018

US-China Trade War: Chinese companies selling US real estate assets

Best Asia real estate editors comments;
Lawrence, this blog editor publishing newsletter in Macau, China several years ago

Warning to American real estate owners.

If China begins  to sell off a large portion of its American real estate expect a major drop in prices . You can thank Trump for most of this.
______________________________________________________________


Beijing is reportedly pressuring Chinese companies to divest their US based assets, a strategy reflecting China's efforts to deleverage debt and stabilize the yuan ahead of potential market shocks
2472

By Duncan DeAeth,Taiwan News, Staff Writer
2018/07/25 16:57



(By Associated Press)

TAIPEI (Taiwan News) – In response to the mounting tensions and ongoing trade war with the U.S., Beijing has reportedly begun restricting private Chinese investment into overseas real estate, in a move that is ostensibly being made to stabilize the exchange rate of the yuan, which is reportedly facing increased risk of depreciation.

Liberty Times reports that there may also be a large sell-off of U.S. property owned by Chinese companies on the horizon, which would be in tune with the widespread deleveraging being witnessed among Chinese financial institutions over the past few weeks.

According to the Wall Street Journal, the Real Capital Analytics firm has noted that 2018 is the first time in 10 years that Chinese companies have sold more real estate assets in a single quarter (US$1.29 billion) than they have purchased (US$126.2 million).

Some see this as a strategy to at once deleverage assets and potentially cause trouble for the U.S. real estate market. The Wall Street Journal suggests that the Chinese government is currently pressuring companies reduce their debt levels in order to lower potential risks in the event of a credit shock, which some are speculating may be approaching.

In late June a document intended for circulation among a financial think tank in China was leaked to the press that said China was “very likely to see financial panic” and that the government should be prepared to shore up banks, industries, and be prepared for possible social unrest.

Some observers suggest that China’s financial difficulties have been mounting for some time because the government has been engaged in servicing a “shadow debt” whose dimensions are mostly unknown, potentially even to the Chinese government.

The U.S.-China trade war is considered by some to simply be an exacerbating factor for Beijing. However government spokespersons continue to speak in optimistic language with regards to the ongoing trade conflict.

The spokesman for China’s Ministry of Industry and Information Technology, Huang Libin (黃利斌) on July 24 made a statement that despite some U.S. client companies canceling orders with Chinese manufacturers, the total manufacturing output of China’s economy from U.S. invested or joint venture companies only accounts for about 10 percent of the total industrial output.

Therefore losing orders from U.S. partners will not cause a huge disruption for projections of China’s overall industrial development, said Huang, as quoted by Liberty Times.

However, Huang did suggest that as the conflict continues China’s coastal provinces that are heavily invested in machinery and the electronics industry are likely to suffer from possible exclusion for the U.S. market, however at the current time there has not been any extreme impact for most industries.

He expressed optimism that the tariffs would ultimately do little to offset China’s industrial growth in the long term regardless if the tariffs are increased to target “US$50 billion or “US$200 billion” worth of Chinese products.

However, other economists doubt that China can actually maintain its pace of industrial growth with increasing pressure from Washington and, if some reports are correct, a financial “panic” that may be brewing. They advise that a quick surrender and early concessions from Beijing will provide the most beneficial outcome for all parties involved.

AIRBNB HOME SAFETY: BEST PRACTICE TIPS FOR AIRBNB HOSTS


Vacation Rental Owners


Jess Ashworth
on July 25th


Blog /
Vacation Rental Owners / Airbnb Home Safety: Best Practice Tips for Hosts


You’ve bought a property, spent hours perfecting a beautiful interior design and taken professional high-quality photos to advertise it online.

So, you’re all set to go – right?

Our very successful air B and B exchange in Sonora starting at $99 per night


Not so quick!

As well as the legal stuff – such as a vacation rental agreement – there are other practical things owners need to do to ensure home safety for guests in rental properties.

Besides making your property marketable, it’s also vital you have procedures in place which promote guest welfare and keep them out of danger. Here’s what you can do to promote Airbnb home safety at your vacation rental.


4 bedm

1. ENSURE WORKING SMOKE AND CARBON MONOXIDE DETECTORS

As fire is one of the biggest risks in any home, it’s essential that your property has working smoke and carbon monoxide detectors throughout. The National Fire Protection Association recommends placing carbon monoxide detectors in several locations such as: outside any sleeping areas; on each floor of the home; plus anywhere else local law requires.

Airbnb is actively encouraging hosts to install working detectors in their properties and to check them regularly. In fact, they are giving away 36,000 detectors before the end of 2018 and pushing owners to update listings to include this amenity.

As a host, you can help prevent accidental fires by making sure that any home appliances and their plugs are in good working order (i.e. no fraying wires). You should also provide at least one fire extinguisher and fire blanket at your property in case of incidents. Be sure to store them in an obvious, accessible location (such as the kitchen).

In addition to this, you can educate your guests on how to prevent fires in your house rules. Ensure they never leave lit candles unattended, near windows or blankets and out of reach of any small children. Encourage them to unplug small appliances such as toasters and kettles while not in use.


2. TAKE MEASURES TO PREVENT SLIPS, TRIPS AND FALLS

According to the Center of Disease Control and Prevention, one out of five older adults who fall will incur a broken bone or head injury. Injuries from falls are another common safety hazard in the home. Anything from slippery floors to children’s toys can provoke an accident in your rental.

You can minimize the possibility of these types of injuries in a number of ways. First, ensure all staircases are stable with solid handrails and sufficient lighting. If you often host families at your vacation rental, parents will breathe a sigh of relief when they see you supply an approved safety gate for small children.

Slips can occur in the bathroom when the floor is wet, so provide bath mats with a non-slip backing or secure them with grip tape. You could also think about installing safety rails which are beneficial for senior travelers and simultaneously help to make your property more accessible for disabled travelers.

Finally, offer a space for children’s toys to live during their stay. Whether that’s a big plastic box in the corner of the living room, or a more creative idea which will intercept any trip risks at home.
3. STORE CLEANING PRODUCTS SAFELY

US poison control centers report providing guidance for over 2.1 million incidents in 2016. There are many ordinary household items which can be a poison hazard for your guests – including cleaning and home maintenance products, or over-the-counter medicines.

The right knowledge can shrink the chance of your guests falling victim to this potential hazard. You can help to minimize the dangers of poisoning at your property by ensuring all detergent and cleaning products are kept well out of reach of children. It’s advisable to store them in a high up, locked cupboard to not make them vulnerable to accidental discovery.

Provide sufficient storage for guests’ to put away their own personal cosmetics like makeup or hair products. Using safety latches on bathroom cabinets, for example, can be a good way to deter kids from getting their hands on these items.
4. LEAVE SAFETY INSTRUCTIONS FOR USING APPLIANCES

You may think that the most obvious burn guests can suffer at your property is sunburn. However, burns are also caused by household appliances like stoves, ovens, dishwashers and barbecues. To reduce the risk of any guests ending up in A&E with burns, there are some simple actions you can carry out at your vacation rental.

You can add a dishwasher latch so that children can’t accidentally open it before it’s cooled down completely after the cycle has finished. Plus, advise guests to use the back burners of the stove when cooking as this will make it difficult for small children to reach and touch the hot stovetop. Additionally, you could invest in some stove knob covers which prevent little hands from turning the gas on, or from adults accidentally knocking them into the “on” position.

Moreover, leave clear and detailed instructions for safely using outdoor barbecues to discourage any mishaps or injuries from taking place.

Keeping guests safe and sound during their vacation is a huge priority for rental property owners. Airbnb home safety isn’t something that should scare you as an owner. By providing rules on the proper use of equipment and offering risk-minimizing solutions at your property, you will easily avoid property damage and any traveler accidents.

Tuesday, 24 July 2018

Short the Aussie as Worst Is Yet to Come, Top Forecaster Says

Best Asia Real Estate editor's comments.

It appears that there is some bad news in the future for Australian investors in real estate and Ozzy dollars.

I just returned from Sydney and things are pretty gloomy there and most real estate markets are heading down

Now the Australian dollar is getting a lot of attention on the downside. 
All this is not good for Aussie investors and retirees.

A wise Aussie investor would move into other currencies such as Canadian dollar and other real estate markets such as Bali where we've already had a 40% to 50% correction on many properties.

Check out our last latest listings at www.bestasiarealestate.com or contact me direct.

We are  going to focus the next several years on providing low cost Bali Luxury Retirement homes consisting of two bedroom with private pool starting at $200,000 Australian. 

Two bedroom with private pool starting at $200,000 Australian
Contact me for more information on this exciting opportunity. lbptabli@gmail.com or 62-8123814014


By Ruth Carson and
Y-Sing Liau
July 25, 2018, 4:00 AM GMT+8

Aussie will slide to 76.50 yen if trade war worsens, CIMB says

Speculative bets against Aussie climb to highest since 2016

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In this article
AUD
Australian Dollar Spot
0.7424
AUD
+0.0001+0.0135%

JPY
Japanese Yen Spot
111.2000
JPY
+0.0000+0.0000%

8301
BANK OF JAPAN
43,000.00
JPY
+1,200.00+2.87%


The Australian dollar’s top forecaster has a warning: the worst is yet to come.



Investors should short the Aussie versus the yen as increasing global-trade tensions weigh on the nation’s exports, according to CIMB Bank Bhd. The currency is also poised to decline versus the U.S. dollar, says CIMB, which had the most accurate estimates for the Aussie in Bloomberg’s second-quarter rankings.



“On all fronts, the U.S.-China trade war is Aussie-negative,” said Marcus Wong, a treasury strategist at CIMB in Singapore. “Retaliatory action that inadvertently impacts the upstream or downstream of China’s value chain, or leads to a keen deterioration in global risk sentiment, would see a further deterioration in the Aussie.”




Investors should sell the Aussie against the yen with a short-term target of 80.50, CIMB’s Wong said. If the U.S.-China dispute intensifies, Australia’s currency may slide to 76.50 yen, which would be the lowest since September 2016, he said. The Aussie was at 82.08 yen on Tuesday.



The Aussie has dropped against all its Group-of-10 peers this year except Sweden’s krona amid concern the U.S.-China trade dispute will cause China to reduce demand for Australian raw materials. The Reserve Bank of Australia kept its benchmark interest rate at a record low this month, saying the U.S. trade policy was causing uncertainties.

Just as the Aussie is weakening, speculation the Bank of Japan may unwind its ultra-loose monetary policy is boosting the yen. Japan’s currency jumped 0.5 percent against the Aussie on Monday following reports the BOJ may discuss ways of reducing adverse effects of its stimulus when it meets next week.

Leveraged funds this month boosted bets to the highest in more than two years that the Australian dollar will weaken against the greenback. A net 22,126 contracts are wagering the currency will fall, compared with a net bullish position as recently as May.

Australia’s currency has slumped 5.5 percent against the U.S. dollar this year and this month dropped to 73.11 U.S. cents, the lowest since January 2017. CIMB sees it sliding below 70 cents if the U.S.-China trade war escalates.

— With assistance by Michael G Wilson

Friday, 20 July 2018

Demand for banking and real estate workers in Australia is plummeting




DAVID SCUTT
JUL 19, 2018, 8:59 AM
Chris Hondros/Getty Images
Growth in Australian job advertisements continues to slow.
Ads placed on Seek’s platform grew by 8.3% in the year to June, down from the average of 13.9% seen in 2017.
Demand for banking and real estate workers has tumbled over the year, fitting with the downturn in the housing market.

While Australian companies are reporting record levels of job vacancies, growth in job advertisements continues to weaken, pointing to a slowdown in hiring in the months ahead.

And in the real estate and finance industry, advertisements are declining sharply, fitting with the downturn underway in Australia’s housing market.

According to Seek’s latest employment report, total advertisements placed on its platform grew by 8.3% in the year to June, continuing to decelerate from the levels seen throughout most of last year.

“While yearly national job ad figures remain positive, it is significantly lower than the national average for the preceding year at 13.9%, marking the first month of non-double-digit year-on-year growth since May 2017,” said Kendra Banks, Managing Director of Seek Australia and New Zealand.

As seen in the chart below from Seek, while a majority of industries have recorded growth in advertisements over the past year — led by mining and those dominated by the public sector — an increasing number are now recording negative annual growth, led by weakening demand for banking and real estate workers.
Seek.com.au

Advertisements for banking and financial services positions tumbled 16% over the year, while those in real estate fell by 13%.

That’s a clear sign the downturn in Australia’s housing market is having impact on demand for workers, something that appears unlikely to change anytime soon given widespread expectations that housing market conditions are likely to remain soft for the foreseeable future.

Ads for designs and architecture workers also slid by 10% over the year.


At the other end of the spectrum, firmer commodity prices are clearly helping to lift demand for workers, albeit off a low base.

Many industries either within or closely linked to the public sector are also recording strong growth in advertisements.

The data from Seek includes duplicate job advertisements and refreshed job ads, meaning it does not always match the movement in new advertisements placed during a given month.

Australia’s June jobs report will be released later today. In line with the moderation in job advertisements, economists expect a solid 16,500 increase in employment, leaving the unemployment rate steady at 5.4%.

Australian Housing Costs Rival New York’s, but Boom May Be Ending



A view of Dover Heights and neighboring areas of central Sydney, Australia. Housing prices have slipped slightly this year in the city after a steep run-up in recent years.CreditCameron Spencer/Getty Images


By Isabella Kwai and Adam Baidawi NEY — The home wasn’t perfect. The two-bedroom townhouse lacked parking and a backyard. Its proximity to a major road and a train station made for noisy evenings.

But like many young Australians, Georgia Blackie felt she needed to buy it or rent for the rest of her life.

She lives in Melbourne, one of the world’s wildest and most expensive real estate markets. The values of dwellings there have risen by more than 50 percent in the last six years alone. In Sydney, Australia’s other big real estate capital, the increase has been even higher. The two cities are among the world’s least affordable for housing, according to one survey, worse than famously pricey places like New York and London. Mortgage debt puts Australian households among the world’s biggest borrowers.

Lately it has cooled off, though, and people like Ms. Blackie may pay the price.

She and her partner closed on the townhouse last August for 720,000 Australian dollars, or about $533,000. But since the market’s peak in November, neighborhood home values have slipped about 6 percent.

“If property prices do go backward,” said Ms. Blackie, a 31-year-old lawyer, “where does that leave you?”

A real estate bacchanalia in recent years in Sydney and Melbourne turned some homeowners into millionaires and left many millennials believing they would never be able to afford homes, sometimes leading to riftsbetween the two groups. Now the market’s party is taking a pause.

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Nobody is predicting an American-style housing crisis just yet. In fact, many economists predict that housing prices will soon rebound.
Construction in Melbourne, one of the world’s wildest and most expensive real estate markets.CreditMick Tsikas/Reuters


But a sustained slump could crimp consumer spending and pressure homeowners who borrowed too much under generous mortgage terms at a time of stagnant wage growth. Global interest rates are rising too, which means many Australians could be facing higher interest payments, thanks to the popularity of adjustable-rate mortgages.

If many households are forced to sell, “to me that’s the biggest match that could ignite things,” said Richard Holden, a professor of economics at the University of New South Wales.

While price increases elsewhere in recent years have been more modest, Sydney and Melbourne account for the lion’s share of Australian real estate. They make up about 40 percent of the population and a majority of the property market value. Home values in both cities dropped last year, in some places in Sydney by more than 10 percent, according to Corelogic, a property data provider. So far this year they have dropped more than 2 percent in Sydney and almost 2 percent in Melbourne.

The decline has a number of causes, including new restrictions on foreign buyers, which hindered wealthy émigrés and investors from China. But a major factor is that Australians probably could not take much more. Prices, many experts say, simply rose too high too quickly.

“We are on the edge of a precipice,” said Martin North, principal analyst for Digital Finance Analytics, an independent research and advisory firm. “All of the forces that have driven the home sector and the debt sector higher in the last 20 years are all coming to a critical inflection point.”

All of this has taken some air out of what some experts describe as a bubble, as a recent Saturday-morning auction in the Sydney suburb of Ryde showed.

The owners of a three-bedroom villa there were hoping it would fetch A$1.25 million. In June 2017, as many as 90 percent of homes put up for auction each week were sold. These days, less than half are selling.

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A roundabout in southern Sydney. The city, along with Melbourne, has long been a center of fevered real estate buying and selling.CreditCameron Spencer/Getty Images

When the auctioneer asked for an opening bid, he received only tight-lipped smiles and an awkward silence. A kookaburra cackled. No sale was made that day.
“It’s a bit nerve-racking,” said Chris Jabbour, a young real estate agent who welcomed people through the door before the auction. “You don’t really know what’ll happen next.”

So far, the economic damage has been minimal. Mortgage delinquency rates were largely stable last year, according to S & P Global, a ratings firm, though they are expected to rise this year. Moody Analytics, a financial intelligence firm, forecasts that home prices will resume rising by year’s end.

Still, signs of stress are showing. Mr. North, the analyst from Digital Financial Analytics, estimates that of 3.5 million mortgages where the owner lives in the home, almost a third of the households have incomes close to or less than their expenditures. He predicts that at least 50,000 homeowners may default in the next 12 months.

The long run-up in housing prices mirrors Australia’s boomtime economy, which has not seen a recession in more than a quarter-century. Demographics helped Sydney and Melbourne in particular, as the cities attracted both Australians and immigrants.

The run-up has put local home buyers under pressure. After Switzerland, Australia has the highest ratio of household debt to economic output among a group of nations that includes the United States, Europe, China and other Asian countries, according to the Bank for International Settlements, an organization that links up central banks. About one-quarter of Australian households have less than one month’s extra put aside in savings to make the next mortgage payment, the country’s central bank said in February.

Domain, an Australian real estate website, found in June that the average Sydney couple would take nearly nine years to save for a 20 percent deposit on an entry-level home near the city’s central districts.

Foreign nationals and the practice of real estate service


July 18, 2018 | 9:45 pm
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Taxwise Or Otherwise

By Al Whilan A. Baljon

The real estate industry is rapidly changing. Shared workspaces and serviced offices are sprouting to meet demand for mobility, connectivity, and flexibility. Townships and mixed-use developments are sprawling inside and outside Metro Manila. Aggressive government infrastructure projects and road network expansions advance real estate development.

This growth must ideally be complemented by skilled real estate service practitioners. Currently, aspiring real estate service practitioners (i.e., brokers, appraisers, and consultants) must graduate from a four-year degree program and pass the related licensure examination. Unlicensed real estate service practitioners may suffer a penalty of not less than P200,000 or imprisonment of not less than four years, or both, upon the discretion of the court.

Real estate services may be performed through a corporation. However, authorized persons acting for the corporation must be composed of duly registered and licensed real estate brokers, appraisers, or consultants, as the case may be.

Foreign citizens may also practice real estate services in the Philippines, subject to conditions imposed by the Professional Regulations Commission (PRC) and foreign treaties on reciprocity. A special/temporary permit may be issued to foreign citizens whose services are urgently needed in the absence or unavailability of local real estate service practitioners.

Given the advent of international real estate brokerage and consulting corporations in the Philippines, can foreigners invest in corporations engaged in the business of real estate services?

According to an opinion by the Securities and Exchange Commission (SEC), no foreign participation is allowed in this industry. Hence, corporations engaged in the practice of real estate service should be 100% owned by Filipinos based on the provisions of the 1987 Constitution, earlier versions of the Foreign Investment Negative Lists (FINL), and previous decisions of the SEC.

While the SEC took note of the 10th FINL which expressly allows foreigners to participate in real estate services, it did not adopt the shift to a liberal policy; instead, the SEC sought clarification from the National Economic and Development Authority (NEDA), the lead agency tasked to endorse the amendments to the FINL. Incidentally, the issue may be settled in the forthcoming 11thFINL, which is currently under review by the Office of the President.

At present, the Senate is also planning to review Republic Act 7042, or the Foreign Investments Act of 1991 — the law which requires the formulation of the FINL. The Senate wants to determine whether the 27-year-old law is still “appropriate to the present times” and whether the Philippines is reaping the rewards envisioned by our lawmakers when it was drafted.

The penalty for violating the Foreign Investments Act is steep. Any person who participates, aids, or abets any violation of the law shall be subjected to a fine not exceeding P100,000. If the offense is committed by a juridical entity, the fine will be assessed as a fraction of 1% of total paid-in capital but not more than P5,000,000. The president and/or officials responsible for the violation shall also be subjected to a fine not exceeding P200,000.

In reviewing the Foreign Investments Act, the Senate must also look at Commonwealth Act No. 108, or the Anti-Dummy Law, which prohibits foreigners from being appointed or elected to management positions in wholly or partially nationalized industries. The Senate should review whether foreign practitioners can be allowed to hold management positions in corporations practicing professions.

Historically, government intervention tends to increase given the passage of time. However, the current administration’s policy towards liberalization of foreign investment is obvious in how it is openly encouraged. Perhaps this is its way of attracting foreign investors to activities which significantly contribute to the economy. The shift in policy may also be an implied admission that a prohibitory nationalistic policy is a handicap in the current global marketplace.

In fact, the Office of the President issued Memorandum Order No. 16, directing NEDA and its member agencies to exert utmost efforts to lift or ease foreign equity restrictions in various areas. This includes the “practice of professions where allowing foreign equity participation will redound to the benefit of the public.”

Understandably, local professionals are concerned about the influx of foreign practitioners — being competitors in their area of expertise. But lest we forget, competition is necessary for a healthy and vibrant economy. After all, they can bring their skill, knowledge, and experience to complement the local work force.

Ultimately, we have to accept that foreign real estate brokers, appraisers, and consultants are drivers of foreign investment, as well as real estate innovators who can introduce foreign practices and trends in the local market. However, most of them will not be coming to hand out flyers on the street — but participate in large real estate service corporations in the country.

The views or opinions expressed in this article are solely those of the author and do not necessarily represent those of Isla Lipana & Co. The content is for general information purposes only, and should not be used as a substitute for specific advice.



Al Whilan A. Baljon is a Senior Consultant at the Tax Services Department of Isla Lipana & Co., the Philippine member firm of the PwC network.

First sign of relief as analysts forecast Hong Kong’s residential property fever to break in second half

Property analysts warn of rising headwinds that will spur a wave of deflation for the city’s property market in the second half

PUBLISHED : Wednesday, 18 July, 2018, 9:03am
UPDATED : Wednesday, 18 July, 2018, 4:28pm

COMMENTS: 34




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Hong Kong’s runaway home prices may finally see some cooling in the second half, according to analysts.

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Residential home prices are likely to drop 7 per cent in the July to December period, as new supply launches and a downbeat stock market weigh on confidence, according to Citibank, the first major financial institution to call for the onset of a correction this year.

However, it is not clear whether prices will end up in negative territory for the year, as home prices rocketed 13 per cent in the first half, outpacing Citi’s expectation for a 10 per cent rise.

“Any major Hong Kong stock market correction could also kick-off a home price correction in the second half,” said Ken Yeung, a property analyst for Citi, in a report released early this week. “The summer holidays mark the start of a traditionally low season for transaction volumes. With home prices up 47 per cent since their low in March 2016 and more new launches expected in the second half of 2018, homeowners could be increasingly tempted to lock in the huge gains clocked over the past few years.”

Hong Kong’s proposed vacancy tax could have this one unintended consequence



Prudential Brokerage associate director Alvin Cheung Chi-wai also cautioned of a trend change in real estate.

“There could be room for a small adjustment, a 5 per cent drop at the most in the second half, taking into account the interest rate increase and the fact that fewer and fewer people can afford to buy and thus cannot enter the market,” he said.

Recent measures announced by the government, including a vacancy tax on property developers who hoard empty, unsold flats, will also help to ease supply bottlenecks.







“The vacancy tax and new housing policies will affect the sales and pricing strategy of new launches going forward,” said Denis Ma, head of research at consultancy JLL, in a report on Tuesday.

Developers have sped up product launches ahead of the vacancy tax, which could be equivalent to 4 per cent to 5 per cent of the value of the property. The proposal has yet to be approved by lawmakers in the Legislative Council.

Meanwhile, Wheelock Properties offered flexible mortgage options to help drum up sales at The Savannah development in Tseung Kwan O, in a move designed to entice buyers for homes unlocked by the tax.



Mortgages of up to 70 per cent of the value of a home are available for luxury units at The Savannah, under the special loan scheme supported by the developer.


Villas in the development are expected to fetch about HK$60 million (US$7.64 million) each, or about HK$30,000 per square foot. In this case, buyers could borrow up to HK$42 million, or about HK$12 million more than the standard loan available under rules set by the Hong Kong Monetary Authority.

Opinion: Hong Kong’s stamp duties have worked to stabilise the housing market

“Banks can only provide mortgages with a loan-to-value ratio of 50 per cent for flats worth more than HK$10 million, according to the Monetary Authority,” said Sharmaine Lau Yuen-yuen, chief vice-president of mReferral Mortgage Brokerage Services.



“If the buyers already own other properties, the ratio will be further reduced by 10 per cent. Then you need at least HK$6 million in cash to buy homes worth more than HK$10 million.”

Cheung said highly leveraged buyers would “face a higher risk of having difference in the flat value collected [by lenders] should home prices reverse the rising trend amid a potential rise in interest rates.”

Hong Kong’s secondary property market has risen for 26 consecutive months, according to government data.

“Hong Kong’s home price is not just high, it is insanely expensive,” said Nicole Wong, regional head of property research, CLSA. “We could only hope that some accidents happen which suddenly reverse the growth. For example the trade war between US and China continues to worsen and impact the city’s economy or the increase of interest rates is bigger than expected.”

Perth's four-year housing bust is nothing like what Sydney and Melbourne's property markets face

Best Asia Real Estate Editor's comments: Editor Lawrence with wife Azizah and son Darius  on Bondi Beach Sydney July 2018 Perth...