Luxury Real Estate News 11/09

Following on from the Hong Kong government’s decision to cap mortgages on luxury real estate in Hong Kong at 60% LTV, Singapore’s central bank warned that more measures may be introduced to slow down the level of speculation in the property market. One side effect of the massive amount of capital injected by the Chinese government into the markets is that both the stock market and the property market are dangerously outpacing the fundamentals – especially in the financial centers.

“As Singapore emerges from recession and with the market expecting low interest rates to persist for some time, the risk of a renewed escalation of speculative momentum cannot be discounted,” the Monetary Authority of Singapore (MAS) said in an annual Financial Stability Review. “More measures might then be necessary. Reuters

It seems that pouring billions of pounds of taxpayer money into the upper echelons of the banking system is finally having the desired effect in London. At least that is what Savills would have us believe. They are predicting luxury real estate prices in London to rise 7% in 2011 after claiming rises of 6% in the last six months. For some strange reason – they are also predicting prices to fall next year. So – up this year – down next year – and then a massive boost in 2011. This does clash rather harshly with the Royal Bank of Scotland and Lloyds (both government owned) claiming that they will not be paying cash bonuses for 2009. So where is this renewed demand  coming from? According to Savills it is all domestic.  It all depends how much tax payer money will be given to the banking elite in cash rather than stocks. We shall see.

It is certainly worth bearing in mind that sales volumes are near all time lows, although up from a few months ago. Sadly, this “good news” contrasts sharply with the unemployment figures – especially of young people in the UK. Unemployment reached a 14 year high of 2.47 million – almost a million of whom are between the ages of 16-24. It is my fervent hope that the government Inc does not reach for The Traditional Way of dealing with this issue of the rich getting richer and the young being out of work. Still – not to worry – the government Inc managed to add another 13,000 to the government payroll last quarter. I hope some of them were between the ages of 16-24.

In New York, it appears the Tishman Group may be close to “restructuring,” the $3 billion debt they were close to defaulting on before selling the properties at Stuyvesant Town. I use the term “restructuring,” loosely as this seems to be a strange new meaning of the word. A spokesman seemed very proud that the loan was not actually in default, but it appears the only recourse is – you guessed it – another taxpayer bailout- seeing as the biggest holders of the mortgage are Freddie Mac and Fannie Mae. Private investors are likely to lose their shirts though and I suspect we shall see some squabbling over the luxury carcass that is now worth an estimated $1.8 billion – somewhat depressed from the $5.4 billion purchase price. Bloomberg has more details.

Business Week has an explanation as to “Why This Real Estate Bust Is Different” and the figures they have for the upcoming commercial real estate defaults do not look pretty.  Business Week