Why housing is not coming back and the next bubble

Business Money
21

[quote=“Mother Theresa”]
After all, as the old saying goes: they’re not making more land. [/quote]

Yeah, but that’s what the Japanese said about Tokyo, the Americans said about New York, Londoners said about London, Chinese said about Hong Kong, Shanhai etc, etc.

Land has nothing to do with value when you live in a vertical building. It also has even less to do with it when there is a huge number of empty properties sitting around.

Lets not forget that if Taiwan keeps devaluing its currency at the same rate then either it will buy nothing in a few years or they will be forced to raise interest rates and put them up to lets say 15%. That should see a few more people jump out of their windows!

22

Taiwan is not devaluing its currency. It has been rising these past two months (to my chagrin as I am paid in US).

Speaking of interest rates, are they going to jump:

english.cw.com.tw/article.do?act … w&id=10989

[quote]The Specter of Soaring Interest Rates

It would not be the first time that interest rates bounced back with a vengeance after a period of extremely loose money policy.

In its history Taiwan has repeatedly seen massive interest rate hikes within a short period due to inflationary pressure. In just twelve months between September 1973 and August1974, for instance, the central bank raised the rediscount rate by a total of 4.5 percentage points.

Between April 1979 and September 1981, the central bank pushed up the rediscount rate by a total of 5 percentage points from 8.25 percent to 13.25 percent to dry up excess capital. During another period of surplus cash between March 1989 and June 1991, the rediscount rate was also markedly raised by 3.25 percentage points.

“If interest rates are going to bounce back, they will do so rapidly and fiercely. In Taiwan interest rate hikes will start with a 0.5 percentage point rise, but I’m afraid that countries like Australia will go up by a whole percentage point,” predicts SinoPac’s Huang.

It’s Raining Money, but Banking Business is Bad

With its loose monetary policy, the central bank has injected the banking system with a lot of liquidity, while the man in the street puts his money into safe bank deposits for fear that investments might fail. But due to the economic downturn, banks do less business in the areas of corporate finance and personal loans. As a result, as much as NT$130 billion is sitting idle in the banking system with nowhere to go, and bankers keep complaining about bad business prospects.[/quote]

23

What’s the current rate?

24

Less than 1% I think:
bot.com.tw/edplnrate/dplnrate.asp

25

Sorry, I meant the current home loan rate at any of the big banks. I’m just wondering what one could get a fixed rate loan for.

26

Not sure. Pretty low. I believe the gov just rolled out another super low mortgage rate for first time buyers. Check the papers.

27

I’m seriously thinking about buying a house later this year or early next year now.

Thanks for that. I’ll get my girlfriend to have a look.

28

You get part of the mortgage ($2m in our case) at the special government rate and the rest is at the bank rate. So we are paying about 1.3% on the $2m and 1.7% on the rest. Even with crap savings rates I still have enough money saved at 2.something% to offset the mortage interest.

29

Taiwan is not devaluing its currency. It has been rising these past two months (to my chagrin as I am paid in US).

Speaking of interest rates, are they going to jump: [/quote]

Well that’s just it, isn’t it? You can’t very well have interest rates so low and not be systematically debasing your currency, at the same time giving out coupons which businesses will redeem for Taiwan dollars. Its the same story as the U.S.D. Helicopter money for all!

Fiat currency is based on nothing but speculation as to its worth. When people and businesses realize the quantity of dollars out there then prices will rise. Property will not however as it is again massively speculated upon. It’s not like the price of food and fuel for example that is necessary for life. Properties in Taipei are not necessary, especially when coupled with growing unemployment rates, growing building construction, more retirees who will move out of the city, fewer young people who will not need as much housing. Smaller families who will not need as large an apartment, lower incomes, introduction of standardized pensions, the reasons go on. Whether or not people will see the Taipei property cycle coming around is another thing, but its coming!

People only submit that Taipei doesn’t suffer property busts because it hasn’t had a significant break in its growth in 20 years, but that just happens to be the same length of time of an average property cycle, which brings it to about now.

I haven’t even mentioned the gold price in NT over the past few years. And why did they stop producing this I wonder:

30

It looks like the next wave of foreclosures will be hitting soon in CA and it doesn’t look pretty.

Foreclosures: ‘April was a shocker’

[quote]NEW YORK (CNNMoney.com) – Foreclosures in April exceeded even March’s blistering pace with a record 342,000 homes receiving notices of default, auction notices or undergoing bank repossessions, according to a regular industry report.

One of every 374 U.S. homes received a filing during the month, the highest monthly rate that RealtyTrac, an online marketer of foreclosed properties, has recorded in four-plus years of record keeping.

[…]

The increasing foreclosures will force RealtyTrac to rethink its forecasts, according to Sharga. “We had been predicting 3.4 million filings for the year,” he said, “but we’ll blow those numbers out of the water.”

The lion’s share of April’s filings were in the early stages of the process, such as notices of default, according to James Saccacio, RealtyTrac’s CEO.

Bank repossessions actually fell 11% for the month, compared with March. That’s due, according to Saccacio, to the many legislative and company moratoriums that have prevented the foreclosure process from starting on delinquent loans. [/quote]

This is going to get bad when the banks are allowed to initiate foreclosure actions against the delinquent homeowners. The moratoriums just delayed the inevitable and allowed homeowners to get hit harder. I imagine the stock market will take another huge tumble as the primary holders of the loans (Countrywide, Wamu and Wells Fargo) have to write down more losses. That means the mutual funds will have to sell good stocks to cover the losses on the banks (again). Throw in high interest rates due to inflation, a softening market, high unemployment and tightening loan standards and you get a real shitty year.

31

I used to think so many people , who said just wait until the Chinese buy property in Taiwan, were mad. Just maybe it may happen .