In a move which many Canadians, especially those who have been persistently priced out of the housing market, welcomed with open arms, overnight Finance Minister Bill Morneau unveiled new measures aimed at slowing the flood of foreign money pouring into overheated housing markets like Vancouver and Toronto, a move which some dubbed an unprecedented federal intervention in the sector.
According to the revision, the government will make sure the principal-residence exemption is only available to individuals who reside in Canada in the year the home is purchased, which immediately excludes thousands of “hot money” Chinese tourists who come to Canada simply to park billions in Chinese cash. Continue reading »
“Hillary Clinton Proposes 65% Top Rate for Estate Tax” blared a headline in The Wall Street Journal. Since the current top statutory tax rate on estates is 40 percent, Clinton’s proposal is nothing if not audacious. I can’t recall Barack Obama, our most left-leaning president, ever calling for a 65 percent increase in tax rates for the rich.
Going after inheritances and estates is textbook Marxism. That is not an exaggeration. The third plank in Karl Marx’s 10-point platform for achieving socialism through democratic means — see his 1848 textbook to communism, The Communist Manifesto — was the abolition of inheritances. To repeat: it was point three in Marx’s 10-point plan.
Chinese billionaire Wang Jianlin, whose vast property and entertainment empire reportedly brought in $44 billion in revenue last year, appeared on CNN Wednesday to warn about what lies ahead for the country’s overheated real-estate market.
It’s the biggest bubble in history… I don’t see a good solution to this problem. The government has come up with all sorts of measures — limiting purchase or credit — but none have worked.
Jianlin pointed to the troubling fact that real estate prices just keep rising in the major cities, like Shanghai and Beijing, while falling across the rest of the country, where smaller cities are littered by properties that lie vacant. Continue reading »
Overseas buyers accounted for a paltry 0.7% of the C$6.5 billion of residential real estate purchases in August in Metro Vancouver; this represents a 96% plunge from the seven weeks prior, when foreigners were responsible for 16.5% of transactions by value.
In Palo Alto, a small town of about 67,000 souls, including Facebook CEO Mark Zuckerberg, about an hour south of San Francisco, in the middle of Silicon Valley, and part of the 9 million people in the vast Bay Area, the median home value in July, according to Zillow, fell to $2.486 million.
That’s still up 103% from July 2011. These are not palaces. Median price means 50% cost more, 50% cost less. These are modest homes, in theory where the median household can settle down. Drop to $1 million, and you get the “million dollar shack.” Continue reading »
One month ago, we said that “it is not looking good for the US housing market”, when in the latest red flag for the US luxury real estate market, we reported that sales in the Hamptons plunged by half and home prices fell sharply in the second quarter in the ultra-wealthy enclave, New York’s favorite weekend haunt for the 1%-ers.
Reuters blamed this on “stock market jitters earlier in the year” which damped the appetite to buy, however one can also blame the halt of offshore money laundering, a slowing global economy, the collapse of the petrodollar, and the drastic drop in Wall Street bonuses. In short: a sudden loss of confidence that a greater fool may emerge just around the corner, which in turn has frozen buyer interest.
A beachfront residence is seen in East Hampton, New York, March 16, 2016.
We concluded this is just the beginning, and sure enough, several weeks later a similar collapse in the luxury housing segment was reported in a different part of the country. As the Denver Post reported recently, high-end sales that fuel Aspen’s $2 billion-a-year real estate market are evaporating, pushing Pitkin County’s sales volume down more than 42 percent to $546.45 million for the first half of the year from $939.91 million in the same period of 2015. Continue reading »
Just as the Vancouver housing bubble has burst, the “smart money”, which rode the bubble all the way up, has duly noticed, and wants out. Immediately. As Bloomberg reports, the Ontario Teachers’ Pension Plan is quietly seeking buyers for a minority stake in its C$4 billion real-estate portfolio in Vancouver, including office towers and shopping malls.
The City of Vancouver currently has an average home price of $1.1 million, down 20.7% over the last 28 days and down 24.5% over the last three months. The average detached home is $2.6 million, down 7% compared to three months ago. There were only three home sales in West Vancouver between Aug. 1 and 14 this year, compared to 52 during the same period last year. That’s a decrease of 94%.
That’s right — the two companies that were taken over by the government and that sucked $187 billion from the treasury could be entitled to more taxpayer money. The toxic home loans bought during the last crisis coupled with a lack of liquidity have suddenly become serious risk factors. The so-called “recovery” that has been trumpeted for years by countless politicians and economists is falling apart in plain view. The media will do just about anything to assure the public that this is all isolated and overblown, but the canary in the coal mine has just dropped dead. Continue reading »
When a week ago we reported that in a long-overdue decision, the British Columbia government finally cracked down on Vancouver’s unprecedented “Chinese hot money” driven housing bubble by implementing a 15% property tax (which we had advocated for one month earlier), we said that “with today’s tax, Vancouver’s real estate nightmare in which local housing had become the “new normal” anonymous Swiss bank account, and also made real estate virtually unaffordable to local, hard working Canadians, is finally set to end.”
However, not even we were confident that a 15% tax would be “prove to be a sufficient deterrent to future Chinese buyers.” Now thanks to the Financial Post we now know that not only was the tax sufficient, but it has led to the prompt, much anticipated, and generally welcome bursting of the Vancouver housing bubble. Continue reading »
In a shocking example of the fallout from low oil prices coupled with years of easy-money-enabled malinvestment, the collapse of Canada’s non-conventional oil production has forced a northern Alberta oil-boom-town to be put up for auction, including 1200 person accomodation work-camp, hospital, gym, running track, and waste-water treatment plant.
The percentage of Americans that own a home has fallen to the lowest level ever recorded. During the second quarter of 2016, the non-seasonally adjusted homeownership rate fell to just 62.9 percent, which was exactly where it was at when the U.S. Census began publishing this measurement back in 1965. This is not what a “recovery” looks like. All throughout the Obama years, the percentage of Americans that own a home has gotten smaller and smaller and smaller. The reason for this, of course, is that the middle class in America is dying. Last year, we learned that middle class Americans now make up a minority of the population for the first time ever. In order to have a high rate of homeownership, you need a thriving middle class, and you can’t have a thriving middle class without good paying middle class jobs. This is why I write about the evisceration of the middle class so extensively, because the U.S. economy is systematically being hollowed out and most Americans don’t understand what is happening. Continue reading »
The pending Brexit has, not surprisingly, caused a shake-up in the investment world, particularly in the UK. Of particular note is that, recently, asset management firms in Britain began refusing their clients the right to cash out of their mutual funds. Of the £35 billion invested in such funds, just under £20 billion has been affected. Continue reading »
Q: If 2006/07 was the peak of the largest housing bubble in history with affordability never better vis a’ vis exotic loans; easy availability of credit; unemployment in the 4%’s; the total workforce at record highs; and growing wages, then what do you call “now” with house prices at or above 2006 levels; worse affordability; tighter credit; higher unemployment; a weakening total workforce; and shrinking wages?
A: Whatever you call it, it’s a greater thing than the Bubble 1.0 peak.
1) Funny (and Demented) Seattle area Realtor anecdote regarding the potential for another housing Bubble: “House prices can’t be in a bubble because they are only 10% greater than the 2006 peak, meaning growth of only 1% per year since 2006. And 1% per year is not the Bubble type gains we saw back in the mid-2000’s”.Continue reading »
As we reported yesterday in the latest twist of the post-Brexit “falling dominoes” where UK property funds have frozen assets and suspended redemptions, which has so far seen over half of the the £25bn in UK property sector suspend trading including such names as M&G Investments, Standard Life and Threadneedle, UK’s asset management giant Aberdeen not only halted redemption requests, but triggered a 17% cut to its asset values for anyone who wants to withdraw their money.Continue reading »
Real Vision TV’s Grant Williams offers a true look into what is known as an absurd debt level and unimaginable central bank manipulation. Less than a week ago we highlighted Grant’s comments on commodities. Although the information contained in the video below is nothing new to Zero Hedge, we do enjoy the way the information is presented. Set aside some time to listen as Grant tells a story about debt and the current investment landscape.
Grant sees people “with more power than you can possibly imagine” as the ones responsible for experimental economics that led the world down a path of self destruction.
“I don’t think there is any argument about whether or not the central bankers of the world should have done something in 2008. The question is ‘should they still be doing it 8 years later‘?”
“When a country embarks on deficit financing (Obamanomics) and inflationism (Quantitative easing) you wipe out the middle class and wealth is transferred from the middle class and the poor to the rich.” – Ron Paul
“Deficits mean future tax increases, pure and simple. Deficit spending should be viewed as a tax on future generations, and politicians who create deficits should be exposed as tax hikers.” – Ron Paul
“By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.” – John Maynard Keynes
“In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. … This is the shabby secret of the welfare statists’ tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists’ antagonism toward the gold standard.”
– Alan Greenspan
“Capital must protect itself in every way… Debts must be collected and loans and mortgages foreclosed as soon as possible. When through a process of law the common people have lost their homes, they will be more tractable and more easily governed by the strong arm of the law applied by the central power of leading financiers. People without homes will not quarrel with their leaders. This is well known among our principle men now engaged in forming an imperialism of capitalism to govern the world. By dividing the people we can get them to expend their energies in fighting over questions of no importance to us except as teachers of the common herd.” – J. P. Morgan
“We have in this country one of the most corrupt institutions the world has ever known. I refer to the Federal Reserve Board and the Federal Reserve Banks, hereinafter called the FED. They are not government institutions. They are private monopolies which prey upon the people of these United States for the benefit of themselves and their foreign customers.” – Louis McFadden
“It was not accidental [the 1929 stock-market “crash”]. It was a carefully contrived occurrence. … The international bankers sought to bring about a condition of despair here so that they might emerge as rulers of us all.” – Louis McFadden
“What good fortune for governments that the people do not think.” – Adolf Hitler
Instead of suspending trading and implicitly disallowing redemptions, giant fund manager Aberdeen, also known as Domino #7 if the UK ok commercial real estate collapse, has forced investors in its UK Property fund to take a 17% haircut wiping hundreds of millions of dollars off its value. The fund stated that shareholders wishing to redeem will do so at a reduced price in order to reflect the current market environment and the fact that short term trading in the property market has “relatively penal consequences.”Continue reading »
Does ‘4’ make a trend? First Standard Life, then Aviva, followed by M&G and now this morning, due to “exceptional liquidity pressures” Henderson has suspended trading in its $5bn UK property fund and all of its feeders. Is it time to panic yet?
Domino #1: *STANDARD LIFE INV PROPERTY DROPS 15%; TRADING IN FUND SUSPENDED
In a stark flashback to the catalytic event that ultimately brought down Bear Stearns in 2008, and subsequently unleashed the greatest financial crisis in history, last night we reported that Standard Life, has been forced to stop retail investors selling out of one of the UK’s largest property funds for at least 28 days after rapid cash outflows were sparked by fears over falling real estate values.Continue reading »
As first reported last night, and following up this morning, in an episode painfully reminiscent of the Bear hedge fund “freezes” that preceded the bank’s 2008 collapse and the great financial crisis, first the UK’s Standard Life halted trading in its property fund, followed hours later by both Aviva and M&G which likewise announced they are suspending trading in their own portfolio funds. And, as Bloomberg summarizes, three of the U.K.’s largest real estate funds have frozen almost 9.1 billion pounds ($12 billion) of assets after Britain’s shock vote to leave the European Union sparked a flurry of redemptions.
These were the first major dominoes to fall as a result of the confusion resulting from the Brexit vote. M&G Investments, Aviva Investors and Standard Life Investments halted withdrawals because they don’t have enough cash to immediately repay investors. About 24.5 billion pounds is allocated to U.K. real estate funds, according to the Investment Association. Continue reading »