luxury bubble

Another Real Estate Market Bites the Dust – Hong Kong Prices Plunge, Transactions Hit 25-Year Low

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A stunning reversal across various global real estate hubs which have served as focal points for both international investors and criminal oligarchs, has made itself clear over the past several months. I’ve highlighted plunging sales and prices in high-end London, a multi-month slowdown in Manhattan’s luxury market, as well as a burst bubble in mansion prices in various articles over the last several months. We now have another region to add to the list: Hong Kong.

Bloomberg reports:

In a city that saw demand propel property prices to a record last year, the estimate that transactions reached a 25 year-low in Hong Kong shows how quickly sentiment has turned.

Home prices have slumped almost 10 percent since September and monthly sales in January fell to the lowest since at least 1991, according to Centaline Property Agency Ltd. Amid a spike in flexible mortgage rates this month and anemic demand for new developments, the low transactions volume for January is the latest evidence that prices have further to fall.

Talk about a reversal.

Developers are showing caution too, which could further weaken the outlook for the property market. According to Bloomberg Intelligence, two out of three government attempts to sell residential land sites through tenders since November failed after bids failed to match the minimum price.

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The Luxury Housing Bubble Pops – Overseas Investors Struggle to Sell Overpriced Mansions

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It appears the music may have finally stopped for one of the world’s largest luxury real estate bubbles: London.

It’s well known that foreign oligarchs love London real estate as a means to launder funds, typically “earned” by soaking their host countries dry via corruption and fraud. This has caused absurd and irrational spikes in high-end residential real estate in the English capital, as well as a flood of new construction.

With emerging markets now completely collapsing, the seemingly endless flood of foreign money is drying up, and with it, London real estate.

So has the London real estate bubble popped? Probably.

– From the September 9, 2015 article: Luxury London Home Sales Plunge 26% – Has this Mega Real Estate Bubble Finally Burst?

The first real signs that the global luxury home price bubble had popped emerged last fall in the world’s capital of oligarch money laundering: London.

Since then, we have seen weakness in high end Manhattan real estate, but the trend has now spread and is starting to make itself apparent all over the place.

Yesterday’s Bloomberg article titled,The Surge in U.S. Mansion Prices Is Now Over, is really interesting. Here are a few choice excerpts:

The six-bedroom mansion in the shadow of Southern California’s Sierra Madre Mountains has lime trees and a swimming pool, tennis courts and a sauna — the kind of place that would have sold quickly just a year ago, according to real estate agent Kanney Zhang.

Not now.

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A Warning to New York City – How Singapore’s Luxury Boom in Sentosa Cove Went Bust

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Screen Shot 2015-02-17 at 2.22.14 PMAcross Singapore, the property market was booming. Interest rates were low, prompting buyers to take on more debt. Confidence was high. Banks built regional headquarters in Singapore and jobs were created. Singapore’s skyline changed drastically. A new financial district rose and Marina Bay Sands, a three-tower building housing a casino with a boatlike structure on top, was built for a reported $5.4 billion.

With the government unable to contain the heated market, the growing presence of foreigners and the rising cost of housing became a flash point for discontent. And Sentosa, with its new villas, yachts and luxury condominium towers, became a particular symbol of the rising inequality for many citizens.

Faced with simmering discontent over rising living and housing costs, the government executed a succession of cooling measures that have hit the high-end market especially hard…

On Sentosa Cove, few people are buying. Most of the unsold units from recent developments have been taken off the market and are being leased instead.

The few recent sales paint a grim picture. Most sellers have taken sizable losses.

– From the New York Times article: A High-End Property Collapse in Singapore 

My hometown of New York City is currently ground zero for a luxury apartment building boom driven primarily by oligarchs using the units as savings accounts, and foreign criminals looking to launder wealth accumulated via corruption, fraud or worse. This isn’t a new story, I’ve been writing about it for several years (links at the end), but a recent New York Times piece titled, Stream of Foreign Wealth Flows to Elite New York Real Estate, has put the issue front and center.

Naturally, New York City isn’t the first, and certainly won’t be the last place to encourage hot foreign money to flow into its real estate sector in a haphazard and harmful manner that could have severe long-term repercussions once the boom turns to bust — which it invariably always does.

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