UK house prices
CFTC has subpoenaed companies including Goldman Sachs, JPMorgan Chase and Glencore || Japan’s core machinery orders rose 4.9% in June as Abe looked at cutting corp taxes || BoJ minutes were cautiously optimistic || German regulator to order Deutsche Bank to tighten controls after Libor review || German investor confidence increased more than economists expected in August || UK gov faces pressure to drop Help to Buy extension || Former Goldman managers start Asia hedge fund || Blackstone raises bet on US rental property || Keita won Mali’s presidential run-off || Markets wrap
Asian shares higher, yen weakens || Japan’s machinery orders beat || CFTC subpoenas Goldman, JP Morgan, Glencore over warehousing || Bafin to order tighter controls at Deutsche after Libor || UK govt faces pressure to drop next Help to Buy phase || Blackstone adds to US rental holdings || Elon Musk unveils Hyperloop
Even before last week’s FOMC meeting and the subsequent spike in long-term rates, the US refinancing wave was already receding, the result of both the higher rates and the limited pool of eligible borrowers. Refinancing showed further unsurprising signs of decline in Wednesday’s mortgage application numbers, even as the number of applications for home purchases continued its steady uptick. (Though be careful with the dual Y axes above, and see Calculated Risk for more).
The IMF and the EU creditors of Greece have openly sparred over debt targets, delaying its next bailout payment even further. Jean-Claude Juncker, chair of the Eurogroup, told an evening press conference that Greece’s debt should fall to 120 per cent of GDP by 2022, two years beyond the target long set by the IMF. Christine Lagarde, the fund’s director, used the same press conference to insist the original timeline must stay. “In our view, the appropriate timetable is 120 per cent by 2020,” Lagarde said. “We clearly have different views.” The European Commission sees the IMF’s view of the Greek bailout, which favours relief on Greece’s debts to official eurozone creditors, as too pessimistic compared to economic growth projections. A November 20 meeting will aim to bridge the differences. (Financial Times, Bloomberg) Asian markets — down, led there by Australian banks and Chinese property developers. An Australian business confidence survey went into negative territory; the Nikkei drifted down more than 0.4 per cent. (Bloomberg)
Something is up with China’s steel production. It reached record levels in March, driving up expectations of rising coking coal and iron ore prices. As the FT and Reuters have reported, there are accounts of both thermal coal and iron ore shipments being deferred or even defaulted on, and prices of both commodities have fallen 12 per cent since the beginning of April. To an extent, China’s steel production growth has also slowed: April’s production only increased 1.9 per cent compared to a year earlier, versus March’s rate of 2.5 per cent compared to a year previous. So why is China still producing steel at relatively high rates? There are a few theories. Wood Mackenzie says that even very thin margins are enough to keep privately-owned steel mills operating, while the state-owned operators had no incentives to stop production. The research house also says about 58 per cent of Chinese steel is typically used for construction.
First, do read Dan Davies’ bailout options post if you haven’t already. It’s like a Greek Kobayashi Maru. Except you have no hope of ending up like James T Kirk. We got to number 5. But speaking of Greek debt situations where there are no good outcomes left…
As Monday’s Lex notes regarding the US stock bounce has a sting in the tail Don’t look now but amid the negative news on everything from the shambles in Europe, America’s debt wranglings or worries over China, the good old US of A seems to be stringing together a nice run of positive data…
The Royal Institution of Chartered Surveyors said its monthly gauge of prices edged up, the WSJ reports. The index reached a balance of minus -22 from minus -26 in June. The negative reading means prices are still falling, with the balance being the percentage of surveyors reporting higher prices, minus those reporting lower prices. Respondents also reported the lowest average number of sales over the past three months since the summer of 2009, the FT says. Meanwhile, retailers saw a slight increase in sales in July after they used deep discounts to draw shoppers in. The total value of retail sales rose 2.5 per cent compared with a year ago, according to the British Retail Consortium’s retail sales monitor – higher than this year’s average increase of 1.9 per cent. However, Stephen Robertson, director general of the BRC, cautioned that the survey’s figures do not strip out the effect of inflation or the rise in value added tax this yea.
A leading European hedge fund is preparing to build one of London’s most expensive housing developments as global investors scramble to gain a foothold in the capital’s resurgent residential market, the FT reports. In a deal completed over the weekend, Orion Capital Managers acquired an acre of prime residential land in Chelsea. The fund plans to build a £300m ($493m) housing complex on the site, which is bought for £85m. It has planning consent in place for a building designed by Sir Norman Foster’s practice, with six apartments, a duplex penthouse and two detached villas, which are expected to price at between £25m-£35m ($41m-$57m). Knight Frank found the price of London luxury homes recorded their highest rise in July for six months, says Bloomberg, driven by the low pound and an aversion to mainland Europe.
Despite house prices that remain comfortably below their 2007 peak and interest rates at record lows, first-time buyers still find UK house prices unaffordable, the FT says. An analysis by Coutts, the private banking arm of RBS, says that while official data from the Council of Mortgage Lenders suggest that average mortgage interest at 12.7 per cent of income, the lowest it has been since early 2004, this overlooks key aspects of homebuying. For one thing, the average deposit required of first-time buyers is far higher than it has ever been, totalling 20 per cent of the purchase price in May of this year and, in the recent past, 25 per cent of the purchase price.
British Land is in advanced talks to buy a City of London residential complex, in its first acquisition under a strategy to focus on the booming market for prime homes in the capital. The UK’s second-largest property company has agreed to buy Wardrobe Court being sold by the Warnford Group, a privately owned property company, the FT reports. The company declined to comment. Chris Grigg, British Land chief executive, has said residential will be an increasingly important part of its portfolio, which is mainly in offices and retail property.
Hands up — looks like we’re gonna have to rethink one of our previous previous assumptions. Sam Schulhofer-Wohl, a researcher at the Minnesota Fed, scutinised a previous study showing that an increase in negative equity (like what we’ve seen since the end of the housing bubble) harms labour mobility and therefore contributes to higher unemployment — and he found its methodology flawed.
UK house prices fell for a third month in succession according to figures from Acadametrics Ltd. and LSL Property Services Plc, reports Bloomberg. The news agency reports that a shortage of mortgage finance prevented buyers from making a purchase. The average price of a home in England and Wales fell 0.2 per cent to £222,827 from November, the research companies said in a report issued in London on Thursday. Values rose 2.9 per cent in 2010. October and November had previously shown rises but were revised to declines as more transaction data became available.