A million dollars won't get you anywhere in NY

[reporter2]

http://www.businesstimes.com.sg/archive/tuesday/specials/property/million-dollars-wont-get-you-anywhere-ny-20130808

Published August 08, 2013

A million dollars won't get you anywhere in NY

The median price for a two-bedroom apartment hits US$1.35m as inventory of homes in Manhanttan shrinks


WITH US$1 million to spend and no need for a mortgage, Laiyan Wong expected to be able to easily buy a two-bedroom apartment on Manhattan's Upper West Side. What she did not anticipate was how much competition she would have.

Ms Wong viewed more than 10 apartments in two months, gradually increasing her budget to US$1.5 million as it became clear that others were looking for similar properties amid a plummeting supply of homes in her price range.

"I made four bids and was outbid each time," said Ms Wong, a trader at an investment bank, who eventually got a mortgage and paid US$1.6 million for a condo that was about to go under contract to someone else. "You have to be willing to make a decision in a few minutes and overpay the asking price."

Manhattanites with budgets that would buy mansions in most of America are discovering that it is tough to find even a two-bedroom apartment in New York as the inventory of homes shrinks. The number of available units for less than US$3 million - those generally considered non-luxury - has plunged by the most on record, creating a shortage that is unlikely to be alleviated any time soon as developers focus on ultra high-end condos that have set price records by wealthy investors.

Listings for non-luxury apartments, encompassing about 90 per cent of the Manhattan market, have fallen by more than 36 per cent year-over-year in each of the last three quarters, the biggest declines in 12 years of record-keeping, according to data from New York appraiser Miller Samuel Inc. By contrast, inventory in the top 10 per cent of the market by price fell only 3.9 per cent in the second quarter from a year earlier.

"For the bulk of the market, the 90 per cent, it's probably the most challenging period for a buyer in the 25-plus years that I've been observing the market," Jonathan Miller, president of Miller Samuel, said in an interview.

In the second quarter, 3,638 units priced at less than US$3 million were listed for sale, the smallest non-luxury inventory in nine years, according to Mr Miller. The absorption rate, or the amount of time that it would take to sell all those properties at the current pace of deals, was 3.9 months, the fastest in records dating back to 2004.

In Manhattan, where the median price for a two-bedroom apartment is US$1.35 million and a three-bedroom unit costs US$2.63 million, the non-luxury category encompasses many first-time and move-up buyers, Mr Miller said. Nationally, the median price for a single-family home in June was US$214,200, according to the National Association of Realtors.

Narrowing gap

Listings for the whole market, from studios to four bedrooms, are falling, Mr Miller said. But the price of a non-luxury apartment is outpacing that of the most expensive properties.

The average price of a non-luxury Manhattan apartment climbed 7.8 per cent in the second quarter from a year earlier to US$1 million, according to Miller Samuel. The average price for a unit in the top 10 per cent of the market declined 8.4 per cent to US$5.25 million.

"Relatively speaking, it's gotten more expensive to buy a non-luxury property," Mr Miller said.

The pool of available homes at the lower end of the market is shrinking as owners who bought during the boom and then saw values plummet wait to list their properties until their equity climbs high enough to justify a sale, according to Mr Miller. New supply is not growing fast enough because developers who have revived projects after the credit crisis are almost exclusively building luxury units, he said.

"Everything that's built has to be considered luxury to succeed," said Rachel Gilbert Solomon, a principal at Atalanta Advisors LLC, a New York-based firm that helps developers get equity and debt financing for their projects. "Land is trading at a really high price so you have to make it very high-end."

Developers are paying about US$750 per square foot (psf) for development sites, and construction costs push up the price of building new projects to as much as US$1,700 psf, Ms Gilbert Solomon estimated. In the last boom, the rate for development sites was US$400-450 psf, she said.

At the current prices, builders are counting on selling units for an average of about US$2,400 psf to make the returns worth the risk, she said.

"Every project south of 96th Street is assuming sellouts in excess of US$2,000 a square foot, and that really creates a problem" for buyers, said Robert Knakal, chairman of brokerage Massey Knakal Realty Services.

A building on West 77th Street that he was planning on marketing for about US$40 million sold last month for US$55.5 million, or about US$725 psf, according to Mr Knakal and public records. The buyer, developer Naftali Group, has already gotten calls from people interested in an apartment at the site, which still houses a Hertz parking garage, the firm's chief executive officer, Miki Naftali, said in an interview.

At 150 Charles Street, a West Village condominium development by the Witkoff Group where apartments are available for as much as US$35 million, a 541 sq ft studio was last listed for sale at US$1.1 million, according to StreetEasy. The unit, which is in contract, was initially priced at US$850,000 when sales began earlier this year according to documents filed with New York State Attorney General Eric Schneiderman's office.

At Walker Tower, a former Verizon Communications Inc building at 18th Street near Seventh Avenue in Chelsea, a 1,730 sq ft two-bedroom unit on the ninth floor was listed for US$4.2 million, as of a January price filing.

In new condo developments, there were 539 listings for US$1.5 million or less at the end of June, down from 1,792 in the second quarter of 2008, the pricing peak of the last Manhattan construction boom, according to data compiled by property- listings website StreetEasy.com. For buyers with a budget of US$1 million or less, there were 364 newly built units to choose from in the second quarter, compared with 1,102 in 2008.

"The people looking to buy now are the people who were waiting for the last boom cycle to burst, and then were kind of watching the market and hoping that this might finally be the time," said Sofia Song, vice-president of research for StreetEasy.

The lack of supply is spurring bidding wars that particularly hurt those dependent on a mortgage, according to Jacky Teplitzky, a broker at Douglas Elliman Real Estate. Fast-rising home values mean that the appraisals that lenders rely on to finance a deal are always out of date, she said.

Waive contingencies

Some purchasers are agreeing to complete a deal even if they cannot get financing. When she represents sellers, Ms Teplitzky requires buyers who waive a mortgage contingency to prove that they can handle the full cost in cash.

If that apartment doesn't appraise for the full value of the bid, "I have to make absolutely sure that the buyer has enough money in the bank to make up the difference," she said. "We request full financial disclosure." - Bloomberg

[radha08]

same in singapore:D:D:D

[phantom_opera]

In Manhattan, where the median price for a two-bedroom apartment is US$1.35 million and a three-bedroom unit costs US$2.63 million, the non-luxury category encompasses many first-time and move-up buyers, Mr Miller said. Nationally, the median price for a single-family home in June was US$214,200, according to the National Association of Realtors.

Developers are paying about US$750 per square foot (psf) for development sites, and construction costs push up the price of building new projects to as much as US$1,700 psf, Ms Gilbert Solomon estimated. In the last boom, the rate for development sites was US$400-450 psf, she said.
At the current prices, builders are counting on selling units for an average of about US$2,400 psf to make the returns worth the risk, she said.
"Every project south of 96th Street is assuming sellouts in excess of US$2,000 a square foot, and that really creates a problem" for buyers, said Robert Knakal, chairman of brokerage Massey Knakal Realty Services.
A building on West 77th Street that he was planning on marketing for about US$40 million sold last month for US$55.5 million, or about US$725 psf, according to Mr Knakal and public records. The buyer, developer Naftali Group, has already gotten calls from people interested in an apartment at the site, which still houses a Hertz parking garage, the firm's chief executive officer, Miki Naftali, said in an interview.

[phantom_opera]

Singkies should be very grateful to PAP, a 45sqm 99LH HDB for 100k SGD

OMG :doh:

[maisonjai]

Even Assoc Prof of psychology also cannot find logic after 3 yrs. :p

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Auckland’s New York House Prices Prompt Lending Curbs: Mortgages
By Matthew Brockett - Aug 12, 2013

When it comes to buying a house, New Zealander Ginny Braun is finding that her home town of Auckland is rapidly catching up to New York City.

“The market feels crazy, it feels like it’s out of control,” said the 40-year-old associate professor of psychology at the University of Auckland, who’s been looking for a house for more than three years. “I’ve heard people say it’s cheaper to buy in New York than in Auckland. Having lived in New York, that doesn’t seem an outrageous claim.”

Prices in New Zealand’s largest city have already surpassed four of New York’s five boroughs with an average of NZ$768,664 in July, the equivalent of $617,852. While short of Manhattan levels, prices are rising 13 percent a year. That’s why the central bank is set to join counterparts from Sweden to Canada in limiting mortgages. It wants to damp the booming housing market without raising interest rates and denting the nation’s economic recovery.

Curbing mortgages may not be enough. Rates are the lowest in almost 50 years and there’s a shortage of new homes in Auckland and earthquake-ravaged Christchurch, New Zealand’s third-largest city. Auckland’s growing population and limits imposed on urban sprawl left it with a shortfall of 30,000 homes last year, according to research by ANZ Bank New Zealand Ltd.

“The Reserve Bank is treating a symptom rather than the cause,” said Luke Malpass, a research fellow at the New Zealand Initiative, which analyzes public policy. Limiting lending will “take a bit of heat out of the market in the short term, but in the medium-to-long term it could have some unintended and undesirable consequences.”

‘Speed Limit’

Reserve Bank Governor Graeme Wheeler said in May he wants to place a “speed limit” on the number of loans banks can make against down-payments of less than 20 percent of a home’s value. In its Financial Stability report that month, the central bank expressed concern that banks were lending too much on assets that may suffer a price correction.

The Organization for Economic Cooperation and Development said in May that New Zealand’s homes were the fourth most over-valued in the developed world, behind only Belgium, Norway and Canada.

The RBNZ estimates that of the NZ$9.2 billion of new mortgages written in the year to May, 30 percent had a loan-to-valuation ratio of 80 percent or more. That’s up from 23 percent of new mortgages 18 months earlier, Wheeler told a parliamentary committee on June 13.

First-Time Buyers

While the central bank hasn’t yet specified its planned limit for high loan-to-value mortgages, in a June consultation paper it gave 12 percent of new loans as an example.

The measures could make it harder for first-home buyers like Ginny Braun to get a loan. Braun said she has a deposit of around 10 percent, and saving to come up with a 20 percent downpayment “would push things a long way into the future.”

The lending curbs will “punish people low on equity for the sins of councils and central government,” said Malpass, who specializes in research into New Zealand’s housing market. “The real culprit here is a lack of supply.”

In the South Island city of Christchurch, more than 6,000 houses were destroyed or rendered uninhabitable by earthquakes in 2010 and 2011, the worst of which killed 185 people.

Christchurch’s city council had its accreditation to issue building permissions revoked in July after it failed to improve the approvals process. A government monitor has been appointed to help reduce supply constraints in a city where house-price inflation is running at 10.8 percent.

Low Permits

Across the country, there were only 16,929 residential building permits issued last year, down from 25,590 in 2007 and 39,766 in 1973. In Auckland, permits have averaged less than 3,800 a year since 2009 while the population has grown by more than 20,000 a year, ANZ Bank research shows.

Council regulations on urban sprawl, inefficiencies in the building permits process, high construction costs and population growth have all contributed to the housing shortage, said Cameron Bagrie, chief economist at ANZ in Auckland.

“The attack needs to be multi-pronged,” he said. “People are starting to realize the economic significance of this. If we don’t get Auckland right, the rest of New Zealand is going to pay for it through higher interest rates.”

Low Rates

While the Reserve Bank has pledged to keep its benchmark rate at a record low of 2.5 percent through the end of this year, Wheeler signaled for the first time on July 25 that he’s started to think about increasing it. The average floating mortgage rate is 5.8 percent, the lowest since February 1965, according to Reserve Bank data.

“It’s hard to see them avoiding putting interest rates up,” said Nick Tuffley, chief economist at ASB Bank Ltd. in Auckland. “But macro-prudential action may mean slightly later rate increases or slightly less tightening over time.”

Low borrowing costs are something the government has highlighted after the central bank rejected a call by Prime Minister John Key to exempt first-home buyers from the new lending rules. Key yesterday announced a package of measures aimed at helping first-home buyers.

“The Reserve Bank is clearly trying to damp demand by shutting a portion of the market out,” said Kirk Hope, chief executive at the New Zealand Bankers’ Association in Wellington. “But international experience shows that credit controls don’t work.”

Sweden, Canada

In Sweden, which in October 2010 capped mortgages at 85 percent of a property’s value, apartment prices jumped 11 percent in the 12 months through June compared with a 3 percent gain the previous year, according to Svensk Maeklarstatistik.

There are signs lending curbs are working in Canada, which in June 2012 reduced the amount homeowners can borrow against the value of their house to 80 percent from 85 percent and lowered maximum borrowing periods to 25 years. Prices across 11 Canadian cities rose 1.8 percent in June from a year ago, the slowest since October 2009, according to the Teranet-National Bank Composite House Price Index. Hong Kong and Singapore have also imposed lending limits.

The Reserve Bank is considering public submissions on its new tools and will publish a response in due course, spokesman Angus Barclay said.
Auckland city’s average house price of $617,852 makes it more expensive than London and most of New York.

While the Real Estate Board of New York put the average for the city at $779,000 in the second quarter -- led by Manhattan’s $1.4 million -- Auckland city’s average exceeded those of the Bronx, Queens, Staten Island and Brooklyn.

In the wider Auckland region, home to a third of New Zealand’s 4.4 million people, the average price in July was NZ$644,973 ($518,429), Quotable Value New Zealand Ltd. said Aug. 8, higher than in three of New York’s five boroughs. In London, the average house cost 318,214 pounds ($493,168) in the second quarter, according to Nationwide Building Society.

Pavlova Paradise

New Zealanders’ love of property has its roots in the country’s colonial past. Settlers arriving in the early 19th century saw land as a means to establish independence and generate wealth.

Houses were traditionally built detached on quarter-acre blocks of land, affording people the luxury of their own backyard and garden. The concept was immortalized by the 1972 book “The Half Gallon Quarter Acre Pavlova Paradise,” a humorous look at life in 1960s New Zealand.

While the quarter-acre block is increasingly rare today, home ownership is still a cultural rite of passage, reflected in the absence of a capital gains tax or stamp duties on residential property.

Political Pledges

Capital gains can be taxed if a property is bought solely to profit on resale. Still, the new lending curbs are unlikely to affect foreign speculators.

“There’s a hell of a lot of foreign investment,” said John Bolton, Principal at Squirrel Mortgages in Auckland. “I had a guy in here a few weeks ago who’d purchased six properties in Auckland and had no debt on any of them. He was from Malaysia. Everyone loves property in a rising market.”

The opposition Labour Party has pledged to ban overseas-based investors from buying houses in New Zealand if it wins next year’s election.

Both the government and the opposition are also promising to facilitate the construction of thousands of new homes in the next few years by forcing councils to free up land around cities and fast-track building consents.

Boom and Bust

In the meantime, the central bank’s new rules may simply push borrowers into the arms of less-regulated lenders such as finance companies, 45 of which went bust in the wake of the global financial crisis, said David Tripe, Director of the Centre for Banking Studies at Massey University in Palmerston North.

“We’re talking about the introduction of rules that might actually give that sector another boost, potentially exposing people to risk in other ways,” said Tripe, who argues the Reserve Bank would be better off forcing banks to increase capital buffers.

“The reason you implement macro-prudential policies in the first place is because you fear a boom might lead to a bust,” he said. “If you’ve got a bust, the best thing to have is banks with lots of capital.”

If lending curbs do succeed in damping demand, Malpass sees a risk that investment in new houses will also be discouraged. Unless the root causes of the housing shortage are addressed, “prices will probably continue to increase,” he said.

That’s little comfort to Braun, who said she’s tired of attending packed open homes and auctions where the sense of “greed and desperation” are palpable.

“People still have to live somewhere,” she said. “I started working 11 years ago, paid off my student loan and started to save for a house, but the Auckland housing market has moved faster than our ability to save. It’s incredibly depressing and disheartening.”

http://www.bloomberg.com/news/2013-08-11/auckland-s-new-york-house-prices-prompt-lending-curbs-mortgages.html (http://www.bloomberg.com/news/2013-08-11/auckland-s-new-york-house-prices-prompt-lending-curbs-mortgages.html)

[phantom_opera]

but MAS Lawrence said households are not over-leveraged

so I can only conclude that price is a bit expensive but not "peaking" yet

price already factoring in super low rate until 2017 I guess

[maisonjai]

How i interprete Lawrence's 3rd eye or msg

No. of over-leverage should happened btn 2010~2013
------------------------------------------------------------- = 5~10%
No. of ppty loans (for the pass 20yrs ???)

5~10% of new loans that run up after 2009 vs 5~10% of all ppty loans is a different story.

"majority took up private housing loans and are only servicing one housing loan, so they are likely to have a larger absolute buffer in income and assets."

How i read it is, hdb upgraders depending hdb rental to support 1 pte, should the need arises, need to sell 1, either pte or hdb have to go. The buffer comes from hdb appreciation. So mr wong hinting the mkt 'ai zhai, mai kan cheong". :D

[phantom_opera]

think ..why PAP allows this to happen:

Airport trolley handlers had their salaries nearly doubled from last month, as part of the labour movement's efforts to lift the pay of outsourced contract workers.

The 240 airport trolley handlers are now earning up to $1,000, up from their monthly pay of $550 to as much as $1,000. Their increase in pay depends on their work attendance and performance.

[maisonjai]

Bro PO, u made me push a ntuc trolley in circles thinking abt ur question.

$1000 can buy 2room bto?
For healthcare gov can reduce the burden on expenditure.

Time to retrieve my $1 coin.;)

[phantom_opera]

Bro PO, u made me push a ntuc trolley in circles thinking abt ur question.

$1000 can buy 2room bto?
For healthcare gov can reduce the burden on expenditure.

Time to retrieve my $1 coin.;)

bro, u are very smart ... but aother point I am trying to say is this $1000pm goes a long way in Singapore as it means u can use it to exchange with BTO additional grant entitlement vs the same $1000pm in NYC, London, Shanghai, Beijing

if u factor in inflation, $1000 is like $500 in 1997, but 1997 no 80/90k extra grant for BTO

$1000 purchasing power in for food is same as $500 in 1997, but the purchasing power for BTO is super duper :banghead:

and what is the implication? OCR no $1000psf no talk, Singapore no $1000pm no talk loh :tsk-tsk:

and I already can predict what PM Lee going to say:

"A million dollars won't get you anywhere in NY but a thousand SGD per month will get you a 2r or 3r BTO" - and I can see a lot of poor families with tears in their eyes :cheers5:

ok, they are still ppl thinking that property can crash from 1000psf to 600psf when salary can be 2x overnight ... nevermind lah

[maisonjai]

Scored 1 pt, tonight can :sleep:

“People still have to live somewhere,” she said. “I started working 11 years ago, paid off my student loan and started to save for a house, but the Auckland housing market has moved faster than our ability to save. It’s incredibly depressing and disheartening.”

After 11 yrs slogging before they can start thinking of owning a roof, sporeans lucky lot. Want cheap, big, nice view, high floor & near mrt.