Not Just the U.S. Real Estate Market

Check the graph in the last article and the U.S. ain’t half bad.

Real Estate Agents: Dubai Boom Is Ending – The Wall Street Journal -Stefania Bianchi, Mirna Sleiman and Stefania Bianchi report from Dubai for Zawya Dow Jones – 27 October 08

A six-year real estate boom in Dubai that spurred a $475 billion building frenzy has ended, according to agents who say sales are collapsing amid fears that the global economic downturn will hit the sheikdom.

“Last month was a real disaster and worse is coming I guess,” Mehdi Zoghbi, an agent at Middle East Real Estate Consultants, told Zawya Dow Jones Sunday.

Zoghbi says that desperate sellers are now offering off-plan properties on the secondary market for a zero premium, effectively accepting a loss on their investment in order to offload quickly. Dubai, the first Gulf sheikdom to allow foreigners rights to buy homes, may also be the first to see a crash in property prices…

But the city’s biggest developers like Emaar Properties PJSC and Nakheel are adamant that sales remain robust. Mohammed Alabbar, Emaar’s chairman and one of the architects of Dubai’s real estate boom, said in the company’s third-quarter statement that “we are very confident of our company’s fundamentals and future growth.”

That hasn’t stopped investors dropping the company’s shares. Emaar’s stock has fallen 62% since the beginning of the year, that’s more than the 48% fall in the Dubai Financial Market’s main index over the same period, according to Zawya.com data. Earlier this month, Colliers International said the growth of property prices in Dubai slowed to 16% in the second quarter of 2008 from 42% in the first quarter. Morgan Stanley warned in August that property hotspot Dubai could see a 10% fall in prices by 2010….

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UK house repossessions surge by 71 percent – AP viaCNN World Business – 28 October 08

Britain’s financial services regulator says home repossessions in Britain rose 71 percent in the second quarter from a year earlier to 11,054, in another token of the financial crisis and the country’s collapsing housing market.

The Financial Services Authority report reflects the strain British homeowners are under as the credit crisis has resulted in mortgage rates increasing rapidly over the last year, leaving many unable to pay their mortgages.

The simultaneous housing market crash — which has seen average house prices fall by more than 10 percent in the last year — means many homeowners now owe more on their homes than they are worth, so they can’t sell their homes to cancel their mortgage debts.

England and Wales house prices fall 7% in October – MarketWatch – Steve Goldstein – 26 October 08

House prices in England and Wales fell 7.3% from year-ago levels and 1.3% from September’s levels, Hometrack said on Monday.

Prices have dropped in particular in London, the country’s capital, which saw an 8.6% retreat, and in the southwestern part of the country, where prices dropped 8.1%.

October’s decline of 7.3% was steeper than the 6.2% drop in September and the 5.3% fall in August…

“Weak consumer confidence continues to undermine demand for housing with a 35% fall in the number of applicants registering with agents over the last 6 months. The supply of homes for sale has started to shrink in recent months as some homeowners take their properties off the market but the scale of the decline in demand means prices remain under constant downward pressure,” said Richard Donnell, director of research at Hometrack…

One good sign, he said, is that vendors are becoming more realistic on pricing. “Unlike more liquid markets, the re-pricing of housing market tends to be a drawn out process that can take three to four years. However, the sheer scale of the fall in transactions over the last year means that agents will want to engineer an improvement in volumes in the market. The only way this can be achieved is to encourage vendors to be more realistic on pricing,” Donnell said.

Think USA Had a Real Estate Bubble, Check Out India – The Real Estate Bloggers - 26 October 08

We are worried about the state of real estate and banking stocks traded on our exchanges, but our concerns are nothing compared to what happened Friday in India.

In one day the BSE Realty stock index fell 24%. One of the main stocks, Unitech dropped over 50%. The concerns in India are not that there is just underlying weakness in the market but that they have not been honest with shareholders and regulators.

So while we have worries, India has a meltdown on their hands.

Real estate stocks fell like nine pins on Friday as investors panicked and jettisoned their stocks at whatever price the markets gave them. Amidst free fall in the markets, stock prices of Unitech halved and settled at Rs 30.10 with a loss of 51.29%, unforeseen for a Nifty stock in a single day earlier.

The stock lost around 91% of its value from its peak price of Rs 547 that was seen during January 2008. Among realty stocks, Puravankara Projects, DLF, Orbit Corporation, Parsvnath Developers and Phoenix Mills had taken larger beating and these stocks were down more than 20%. Even the BSE realty index fell by 24% in a day. The markets on Friday disappointed after the Reserve Bank of India kept its key rates unchanged in its credit policy. via The Times of India

London’s collapsing house of cards – The National - 25 October 08

It used to be the place to live, with prices to match. But during the past three months, London’s residential property scene has resembled a house of cards on the verge of collapse.

Last week, a Rightmove survey revealed that house prices across Britain had posted the biggest annual decline since records began in 2002, as the UK economy stared “into the abyss”.

The average “asking price” plunged 4.9 per cent from a year earlier to £229,691 (Dh1.34 million), according to the property website. In London, prices have fallen by two per cent from a year ago.

“Certainly from an economic point of view, we’ve stared into the abyss,” said Miles Shipside, the commercial director at Rightmove. “With unemployment growing, we can see a lot of repossessions about to happen. The situation is going to get more severe.”

It already has in parts of London. Trendy Docklands has been particularly hard-hit, according to anecdotal evidence. The Daily Mail reported that 82 out of the 84 apartments in one Canary Wharf riverside block had been repossessed.

“I think repossession needs to be a lot rarer,” said Yvette Cooper, the UK Treasury secretary. “We need to get everything that we can to keep people in their homes.”

Ms Cooper’s remarks came after figures by The Royal Institution of Chartered Surveyors (RICS) showed that an average of just 11.5 homes were sold by agents during the three months to the end of September, which was the lowest level since the survey began in 1978. The situation was even worse in London, where estate agents have made an average of just eight sales during the same period.

As the global credit crunch squeezes the UK economy, London home prices have tumbled by 20 per cent in certain areas. Skynews reported that one five-bedroom house in Herne Hill had been reduced by 37 per cent, from £1,275,000 to £795,000. “We’re 20 per cent down. There are some very, very keen sellers out there,” one estate agent told the UK television cable channel.

The trouble is that most buyers are sitting tight as banks rein in lending. For the past four years, Oliver Fisk and his girlfriend have been hunting for a one-bedroom apartment in London and they are now further away than ever from getting on to the property ladder.

“We’re definitely holding out for a bit longer, especially with the things that are going on with the banks,” said the 28-year-old IT specialist.

While he waits, Mr Fisk has decided to move in with his girlfriend’s parents as he saves for the 21 per cent deposit. Similar stories are common across London.

With home prices in the capital suffering the steepest drop in 16 years, prospective buyers are refusing to rush in. Higher mortgage rates mean that a first-time buyer of a two-bedroom home will spend 12 per cent more per week than a year ago, according to Richard Donnell, the director of research at the property data company Hometrack. And that does not take into account higher downpayments.

The number of loans granted to first-time buyers has fallen 55 per cent to 15,600 from a year ago. A report by the Council of Mortgage Lenders (CML), whose members provide about 98 per cent of all UK mortgages, said that was the lowest since the CML began compiling data in 2000.

The property slump has also been exacerbated by the worst banking crisis since the Great Depression. Residential property prices in London are predicted to fall about 14 per cent this year. And the main casualties will be houses and apartments that cost £1m or more, according to Knight Frank figures.

To add to the pain, next year the housing sector in the capital could plunge another 11 per cent, Europe’s biggest property broker by revenue revealed.

“It is futile at the moment to try and forecast the scale of house price declines,” said Michael Coogan, the director general of the CML. “Some of our members are forecasting up to 25 per cent falls from peak to trough.”

Earlier this month, the RICS reported that the rising cost of financing had caused UK residential property sales to fall to the lowest in at least three decades. “We’re just ducking and diving,” said Guive Emami, an estate agent at Savills in East London. “I had a client, a lawyer on £50,000 a year and with an £80,000 deposit saved up, who struggled to find a mortgage.”

Mr Fisk has been in that scenario. While living in Clapham, he looked at apartments across London and was prepared to spend as much as £150,000. He gave up the search at the end of last year and is in no rush to start house hunting again. “Things are only going to get worse,” he said.

He could be right. The Nationwide Building Society reported on Oct 2 that prices for apartments and houses across London had dropped 9.4 per cent in the third quarter from a year earlier. That was the biggest fall since 1992, with Hammersmith and Fulham in West London suffering steep declines.

Tumbling property prices have seen Monaco overtake London as the world’s most expensive location for luxury homes. Knight Frank reported recently that average prices in the city’s nine most expensive areas fell for the first time in five years. And they could continue to drop in the months ahead as a wave of redundancies sweeps over the financial sector.

Banks are likely to cut 62,000 jobs in London by the end of next year, reducing employment in the industry to the lowest level in more than a decade as the credit crisis deepens. The Centre for Economics and Business Research also said in a report this month that bonuses for this year would probably fall by 60 per cent to £3.6bn.

Even the major players are cutting back. HSBC, which is Europe’s largest bank by market value, is trimming 550 UK jobs, while the Zurich-based UBS will eliminate 2,000 staff from its European investment division.

Banking and financial services in London account for about one fifth of the city’s economy and employ seven per cent of the workforce. According to the research firm Oxford Economics, the sector contributed more than four per cent to the UK’s £1.3 trillion economy.

“The industry drives a lot of the general economic well-being of London,” said John Forbes, the head of UK property at PricewaterhouseCoopers. “If business volumes are substantially down and firms are reducing their head count, that has a knock-on effect right across the board.”

Tighter credit controls have squeezed the market even further. Lenders are now refusing to issue mortgages of more than 79 per cent, compared with 90 per cent a year ago, according to the personal finance website Moneyfacts. The number of available mortgages has plummeted to 3,123 from 15,599 at the peak of the market in July last year.

Fears that the situation could deteriorate in London’s “hot spots” could even spark panic selling. “People are going to start distress sales, but we’re not there yet,” said Simon Albertini, the managing director of the estate agents Friend & Falcke.

But pressure is already mounting as owners rent out their homes while holding out for a better price. “Maybe it will take four, five or six years for the market to bounce back,” said George Franks, the area director for Douglas & Gordon in Battersea. “Are the people who say they’re going to rent out their homes prepared to be a landlord for that long?”

Yes, is Jeff Doble’s answer. “As ever, London is first to fall and first to recover,” said the managing director of Dexters, an estate agent specialising in Putney, Chiswick and Richmond. “Demand for property in London’s suburbs is relentless and, regardless of the financial sector’s woes, by 2012 prices will have recovered lost ground.”

If the British government’s £500bn package fails to revive mortgage lending in time, Mr Fisk and his partner may find themselves back where they were a year ago. “It got to the point we thought we had to get on the ladder and buy a pokey flat for a ridiculous multiple so we can start thinking about starting a family,” he said.