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Chris Cruse and
Associates Review Real Estate Broker: Real estate prices too hot? Buyers say no

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Chris Cruse and
Associates Review Real Estate Broker: Real estate prices too hot? Buyers say no

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MERCEDES RUEHL

Homebuyers appear unfazed by warnings from the central bank that Australia’s housing market is too hot, with Sydney recording its strongest September auction weekend on record.

The result points to a bumper spring selling period to rival the record 2013.

The Reserve Bank of Australia last Wednesday warned against soaring house prices and an increasing imbalance between soaring lending to investors and weakening occupier finance.

But if consumers have any concerns, they did not show over the weekend, with the national auction clearance rate above 70 per cent for a fifth week according to preliminary figures from RP Data.

Sydney had a month high 927 auctions of which 78.5 per cent sold according to RP Data. Melbourne had 104 auctions, compared to more than 1000 the week before, as sellers sat out the Grand Final.

Andrew Wilson, senior economist at Fairfax Media’s Domain Group, said that while the housing market remained strong, price growth has slowed.

“I cannot understate how strong the market is but it is not as strong in terms of house price rises,” Mr. Wilson said.

Yet buyers were prepared to pay up with many homes selling above their quoted reserve prices. A two bedroom home in the Sydney suburb of Surry Hills sold under the hammer on Saturday to local investors for $1.41 million, above the reserve of $1.2 million. This was a 47 per cent increase on what the house sold for in 2013, according to selling agent Con Fotaras of Belle Property.

“This is a strong sale price showing how popular the area is, especially with car access and proximity to Central station,” Mr. Fotaras said.

“It was last sold for $960,000 last year and has only had minor cosmetic work and a DA approval for a four bed, three bath property with parking.”

A preliminary weighted average clearance rate of 72 per cent was recorded this week across capital cities compared with 70.8 per cent last week and 73.5 per cent this time last year, according to RP Data.

The most expensive sale reported to Domain Group in Melbourne a $1.6 million block in Glen Waverley. The 1433 square meter block has the potential for a 10-bedroom home. “Most auctions in Melbourne were held in areas strong for Chinese buyers, such as Glen Waverley,” Mr. Wilson said.

The most expensive property reported in Sydney was a $5.7 million city apartment at The Residence Hyde Park. The three bedroom apartment, at 68/14-24 College Street, sold prior to auction through Simon Polito of Laing Real Estate.

Investors remain key buyers, Domain’s Dr. Wilson said. Why not find out more?

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The residential property market remains strong with buyers paying above quoted reserve prices. AFR

by Mercedes Ruehl

Homebuyers appear unfazed by warnings from the central bank that Australia's housing market is too hot, with Sydney recording its strongest September auction weekend on record.

The result points to a bumper spring selling period to rival the record 2013.

The Reserve Bank of Australia last Wednesday warned against soaring house prices and an increasing imbalance between soaring lending to investors and weakening occupier finance.

But if consumers have any concerns, they did not show over the weekend, with the national auction clearance rate above 70 per cent for a fifth week according to preliminary figures from RP Data.

Sydney had a month high 927 auctions of which 78.5 per cent sold according to RP Data. Melbourne had 104 auctions, compared to more than 1000 the week before, as sellers sat out the Grand Final.

Andrew Wilson , senior economist at Fairfax Media 's Domain Group, said that while the housing market remained strong, price growth has slowed.

"I cannot understate how strong the market is but it is not as strong in terms of house price rises," Mr Wilson said.

Yet buyers were prepared to pay up with many homes selling above their quoted reserve prices. A two bedroom home in the Sydney suburb of Surry Hills sold under the hammer on Saturday to local investors for $1.41 million, above the reserve of $1.2 million. This was a 47 per cent increase on what the house sold for in 2013, according to selling agent Con Fotaras of Belle Property.

"This is a strong sale price showing how popular the area is, especially with car access and proximity to Central station,"Mr Fotaras said.

"It was last sold for $960,000 last year and has only had minor cosmetic work and a DA approval for a four bed, three bath property with parking."

A preliminary weighted average clearance rate of 72 per cent was recorded this week across capital cities compared with 70.8 per cent last week and 73.5 per cent this time last year, according to RP Data.

The most expensive sale reported to Domain Group in Melbourne a $1.6 million block in Glen Waverley. The 1433 square metre block has the potential for a 10-bedroom home. "Most auctions in Melbourne were held in areas strong for Chinese buyers, such as Glen Waverley," Mr Wilson said.

The most expensive property reported in Sydney was a $5.7 million city apartment at The Residence Hyde Park. The three bedroom apartment, at 68/14-24 College Street, sold prior to auction through Simon Polito of Laing Real Estate.

Investors remain key buyers, Domain's Dr Wilson said.

At Summer Hill in Sydney's inner west an investor outbid first home buyers and young families for a post-war cottage. The 19 Smith Street house sold for $900,000, $400,000 more than what it sold in 2013 and following an extensive renovation.

The agent, Richardson & Wrench Pyrmont Glebe, Eileen Carroll, said buyers and sellers were undaunted by the RBA's warning that the market was too hot. "I think the market is really strong but most buyers and sellers seem comfortable with where prices are at," Ms Carroll said.

Another Surry Hills property, a one-bedroom apartment at 360 Bourke Street sold for $647,000 at auction - $117,000 over reserve. The buyer was the underbidder on the property when it last sold in 2012 for $478,000, according to selling agent, Belle Property's Mr Fotaras.

The Australian Financial Review

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Real estate prices too hot? Buyers say no

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by Mercedes Ruehl Homebuyers appear unfazed by warnings from the central bank that Australia's housing market is too hot, with Sydney recording its strongest ­September auction weekend on record. The result points to a bumper spring selling period to rival the record 2013.

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2014 Home Trends: A year in Review by Chris Cruse and Associates Review
Real Estate Broker

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2014 Home Trends: A year in Review by Chris Cruse and Associates Review
Real Estate Broker

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When working with a buyer or seller for the first time that isn’t quite sure what they are looking for, one of their first questions is simply, “What’s popular today?” This question, while simple, is much more complex as trends constantly evolve year to year. This year, though not quite over, has shown us a clear picture of home trends. From open plans to a new palette of colors, 2014 provided us with trends we saw coming as well as some we didn’t quite see.

First, new construction, as well as large-scale renovations, prioritize large, open floor plans. Open plans allow for much more diversification of space, from mixed-use living areas to flexible dining layouts. One major advantage to open floor plans is definitely the focus on interactions. With large open spaces, a home feels much more interactive than a layout that silos the home into compartments. For the future, you can definitely count on open floor plans to stick around.

Now, let’s move toward colors. As a rule of thumb for 2014, gray is the new beige. Whereas beige has been much more of a go-to base color for the past several years, several shades of gray are now topping the must have list for primary wall color for living spaces. However, vibrant accents to these grays are now more important than ever. In particular, accents of purple, royal blue, magenta, and other vivid colors are common to give a feel of modern luxury. In the private areas, warm colors such as caramel and cinnamon are popular now for a warm feeling. With beige reining supreme for some years, I think it is safe to say that change is a good thing for now.

In the bathroom, 2014 was about honesty. That is, most of us rarely use the bathtub. And thus, 2014’s construction and renovation was all about removing the tub and installing large luxurious showers complete with benches and multi-head systems. Moreover, let’s not forget the tile finishes, and 2014 has given us so much to choose from with recycled glass, stone tile, and pebble tile popular throughout the year. One of the most noticeable changes to finishes the past year has been the continued increase in the quality of kitchen appliances. In D.C., almost every new construction project provides the buyer with high-end appliances. With stainless steel the reining preference, the price for new appliances will no longer break the budget as in the past. As the market continues to evolve, expect high-end appliances to stick around due to the cheaper costs of production and demand for luxury appliances.

Finally, one final lesson from 2014 is a step back from industrial to contemporary. Taste-specific and modern developments are no longer on the rise; instead, buyers are looking for classic design with all the modern fixings. This jump back will certainly continue through 2015. And so, how does all of this add up? In terms of selling your property, it is important to update your home to the current trends if at all possible. Sure, creating a more open floor plan may be difficult in a home with a much more traditional layout, but a new coat of paint that keeps up with the times is an easy fix when preparing your home for sale. For the buyers just now entering the market, it is important to understand trends in real estate as they will paint a much better picture for expectations when touring properties. Regardless, trends will continue to evolve. Will changes will 2015 bring?

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Housing Trouble Grows
in China by Chris Cruse and Associates Real Estate Broker

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Housing Trouble Grows
in China by Chris Cruse and Associates Real Estate Broker

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Overbuilding by Real-Estate Developers Leaves Smaller Cities with Glut of Apartments

CHANGZHOU, China - Wu Xuesong, a professor in this city on the Yangtze, says he doubled his money on an apartment he bought as an investment some years back and is ahead on a second.

Buy a third? Forget it.

Mr. Wu slides open a dining-room window and points to the dark shadow of a new apartment complex, where only a handful of lights are on. "No one lives there," he says. "That shatters my confidence" in China's long-thriving real-estate market.

Economists have worried for years that China is setting itself up for a housing-market bust. In big international cities like Beijing and Shanghai, prices continue to rise. But evidence is mounting that in dozens of third- and fourth-tier Chinese cities rarely visited by foreigners, overbuilding is out of control and a major property-market slowdown is now under way.

The 200 or so Chinese cities with populations ranging from 500,000 to several million account for 70% of the country's residential-property sales. In many of these cities, developers are slashing prices and offering freebies such as kitchen furnishings and parking spaces as they try to work through vast gluts of unsold property. Protests are breaking out among buyers angry that their investments are losing value.

Data in some of these smaller cities is scarce. But in 100 cities tracked by Nomura Holdings Inc., 8604.TO -0.81%  42% of those classified as Tier 3 and Tier 4 saw housing prices decline in March from February. Home construction in such cities is racing well ahead of population growth, says Beijing research firm Gavekal Dragonomics, as developers continue to build new projects without buyers.

A dramatic housing collapse such as the U.S. suffered a few years ago isn't thought likely here. Chinese families don't borrow as heavily for home buying as Americans, putting at least 30% down. China doesn't have sketchy mortgages like those that infected the U.S. market at its peak, nor home-equity loans that let owners finance shopping sprees on the value of their homes. Chinese financiers haven't put together arcane mortgage-backed securities such as those that blew up in the U.S.

Yet even with market strength holding up in the most prominent cities, the overall value of Chinese housing sold in the first two months of 2014 declined 5% from a year earlier, government statistics show. Private-sector data indicate the decline continued in March.

Price drops might seem a normal market response to oversupply, but when it comes to housing, the phenomenon isn't benign. China increasingly depends on real estate to drive growth.

The construction, sale and outfitting of apartments accounted for 23% of China's gross domestic product in 2013, Moody's MCO -0.65%  Analytics calculates. That is up steeply from 10% in 2006 and is higher than American housing's share of GDP reached during the height of the U.S. housing boom in 2006, Moody's says.

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Surging Loans to China Could Pose a Risk to Hong Kong’s Economy by Chris
Cruse and Associates Real Estate Broker

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Surging Loans to China Could Pose a Risk to Hong Kong’s Economy by Chris
Cruse and Associates Real Estate Broker

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Slowing growth in China’s massive economy has raised concerns that the rest of Asia would suffer if China

continues to lose momentum.

Rapid growth in lending to the mainland would seem to put Hong Kong at particular risk in case China’s economy experiences a “hard landing.”

Of course, few analysts expect Chinese growth to slow sharply:. More likely is a gradual deceleration, after data Wednesday showed China’s gross domestic product growth slowed to 7.4% in the first quarter of the year, from 7.7% in the final quarter of 2014.

Most analyses have focused on how slower Chinese growth would impact Asia through the trade channel. Even by that metric, Hong Kong – which sends 28% of its exports to China – would appear to be among the most exposed.

Other economies with heavy export exposure to China include Singapore, Taiwan, South Korea and Vietnam, according to a recent report from Capital Economics.

But the greatest risk for Hong Kong would appear to be through the financial channel: Lending to mainland businesses by all authorized institutions (“AIs” in the attached chart) has surged from about 5% of total banking sector assets in 2007 to nearly 20% today, according to the Hong Kong Monetary Authority.

“Given the size of Hong Kong’s economy relative to the mainland and how much it’s lending to the mainland, it does look quite worrying,” Capital Economics analyst Julian Evans-Pritchard told The Wall Street Journal. “It has become quite a large percentage of Hong Kong GDP.”

Foreign-currency lending by banks in Hong Kong rose to a record 2.9 trillion Hong Kong dollars (US$368 billion) by the end of 2013, most of that to China, according to the HKMA. That’s up from just HK$486 billion in 2005, when China began loosening restrictions on its currency.

In its latest Monetary and Financial Stability Report, issued last month, the HKMA called banks’ rising exposure to the mainland “a key risk factor to watch for.”

Total mainland-related exposure amounts to 165% of Hong Kong GDP, according to the HKMA — though it noted that 43% of the outstanding loans come from foreign banks operating in Hong Kong, rendering a comparison to the city’s GDP less relevant. In addition, some of those funds end up being used outside the mainland, the HKMA said.

In any case, authorities don’t see an imminent danger. Just ahead of this week’s China GDP release, Arthur Yuen, the HKMA’s deputy chief executive officer, called a news conference to say the authority was on top of any risks from mainland loans.

“Despite the absence of any early signal of credit quality deterioration, the HKMA will continue to closely monitor banks’ asset quality and ensure banks are resilient to credit loss throughout the economic cycle by maintaining strong capital positions and, where necessary and appropriate, regulatory reserves,” Mr. Yuen said in a statement.

Bank of America Merrill Lynch analyst Marcella Chow isn’t quite so sanguine. Though she also considers a hard landing unlikely, if Chinese growth did slow sharply, she said, “we could see a sizeable increase in nonperforming loans from the corporate loan book to mid-market enterprises and Hong Kong corporates, which may have engaged in speculative currency loans to benefit from the USD/CNY carry trade.”

Ms. Chow estimates that about 30% of Hong Kong banks’ loans go to China. Stress tests conducted by Bank of America assume that about 6% of uncollateralized loans could go bad. In that case, “the spillover effect from further deterioration in the quality of Chinese nonfinancial and financial corporations could be substantial,” she said, affecting Hong Kong through trade, tourism, foreign direct investment and financial channels.

But, Ms. Chow noted, Hong Kong banks appear to be proactive about managing the risks of their China exposure, “as they recognize the challenges related to collateral enforcement or the use of judicial procedures in the mainland.”

The real danger, said John Zhu, an economist at HSBC in Hong Kong, would come if China’s real-estate market suddenly collapsed – perhaps due to a combination of falling prices and a supply glut.

Given the fact that so much of Chinese citizens’ wealth is tied up in real estate, a pricking of the real-estate bubble could set in motion a rapid downward spiral for consumption, investment and overall growth.

Still, Mr. Zhu agreed with the HKMA that there’s no immediate risk to Hong Kong’s economy.

“On the whole I think the risks are there, but probably contained for now,” he said.

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