Singapore Real Estate Trilive condo in Kovan off to slow start Of 80 units released at 222-unit project, 30 sold since Friday Source: Business Times / Singapore ROXY-PACIFIC Holdings has had a slow start to its Trilive condo project in the Kovan area, moving close to 30 units since sales began last Friday. It has released 80 units in the 222-unit freehold project along Tampines Road at an average price of $1,550 per square foot (after early-bird discounts). Absolute prices start from around $730,000 for a one bedder-with study of 463 sq ft. A typical two-bedder starts from around $870,000, a two-bedroom dual-key unit from around $960,000, and a three-bedder dual-key apartment from around $1.3 million. Prices of four-bedroom dual-key begin from $1.65 million. Unit sizes range from 463 sq ft for a one-bedroom-with study unit to 1,195 sq ft for a four-bedroom dual-key unit. Commenting on the slow start, Teo Hong Lim, executive chairman of Roxy-Pacific, said: "The market is challenging. And potential buyers also seem to be distracted by the World Cup."
Making a general observation on the market, he added: "In the current climate, private home sales are likely to be slow and steady, though not too alarming. At times like these, product differentiation and a developer's skill-sets come into play." -By Kalpana Rashiwala http://www.businesstimes.com.sg/premium/singapore/trilive-condo-kovan-slow-start-20140625 Fourth Gambas site, two Tuas South plots for sale Consultants split whether Far East will bid again for Gambas site Source: Business Times / Singapore ANOTHER Gambas Crescent industrial parcel has been launched for sale - the fourth in the area to be offered in the span of a year. The three earlier adjacent sites were all bought by Far East Organization in 2013, leading industry watchers to speculate whether the property giant will again bid to build a stronghold in the area. The 30-year lease, 15,665 square metre site, located right next to the latest sold Parcel 3, was released by the Urban Redevelopment Authority (URA) yesterday. It has a maximum gross plot ratio of 2.5 and is zoned for Business-1 development, or light industrial use.
Property consultants are split on whether Far East will bid aggressively for it this time around. SLP International executive director Nicholas Mak, for instance, believes it will, but R'ST Research director Ong Kah Seng thinks there is a possibility that it may not place a bid for the site. -By Lee Meixian 3 more industrial sites released for sale Two sites at Tuas and one site at Gambas have been launched under the Industrial Government Land Sales (IGLS) Programme for the first half of the year. Source: Channel News Asia / Business SINGAPORE: The Urban Redevelopment Authority (URA) and JTC have launched three sites under the Industrial Government Land Sales (IGLS) Programme, as part of the Government's efforts to offer more choices for industrial development. In a joint statement on Tuesday (June 24), the agencies said two confirmed list sites at Gambas Crescent and off Tuas South Avenue 7, and a reserve list site off Tuas South Avenue 14 are now available for public tender. Confirmed list sites go on sale regardless of interest from developers, while reserve list sites are triggered for a public tender only if a developer makes an acceptable opening offer. The 1.57-ha site at Gambas Crescent released by the URA is zoned for Business-1 development and has a 30-year tenure and a maximum gross plot ratio of 2.5. The Tuas site on the confirmed list launched by JTC has a land area of 25,700 sqm, and is zoned for Business-2 development with a lease of 30 years and maximum gross plot ratio of 2. Mr Nicholas Mak, Executive Director at SLP International Property Consultants, said in a separate statement on Tuesday that the tender for the Gambas Crescent site is likely to attract "a more subdued interest" because the tender for another land parcel 1.2 kilometres away is due to close on July 1. He expects Far East Organization to "bid aggressively" for this site though, since it had bought the other three sites along Gambas Crescent within the span of a year. As for the reserve list site in Tuas, it is launched by JTC and zoned for Business-2 development. It has a 30-year tenure and maximum gross plot ratio of 2, according to the statement. Mr Mak said given its proximity to the other plot of land in Tuas launched on Tuesday and the ample supply of Business-2 developments in the area, the tender for this reserve list site is "unlikely to be triggered any time soon". The closing date for the tender of the Gambas Crescent site is Aug 26, 2014 at 12pm, while applications for the Tuas site will close on the same day at 11am, the statement said. Deputy Prime Minister Teo Chee Hean said last Friday that the new supply of industrial and retail space coming up in the next three years is double the average demand over the past three years. "This strong upcoming supply of industrial and retail space will give businesses more options and ample space to expand their operations in Singapore," he said. - CNA/kk
http://www.channelnewsasia.com/news/business/singapore/3-more-industrial-sites/1199464.html Real Estate Companies' Brief Oxley's Sepang tie-up falls through Source: Business Times / Companies OXLEY Holdings' tie-up with Sepang Goldcoast and Sepang Bay to develop two parcels of land in Selangor, Malaysia has fallen through. The company said yesterday that the memorandum of understanding (MOU) signed between its wholly owned unit Oxley Treasure and the two Malaysian companies in January has been terminated by "mutual agreement". http://www.businesstimes.com.sg/premium/companies/others/company-briefs-20140625 Yanlord gets US$385m syndication loan Source: Business Times Yanlord Land Group has secured a three-year US$385 million syndication loan from Hang Seng Bank, HSBC, Standard Chartered Bank (Hong Kong) and DBS Bank. This comprises a US$242 million equivalent dual-tranche term loan facility and a US$143 million equivalent dual-tranche revolving credit facility.
http://www.businesstimes.com.sg/premium/companies/others/company-briefs-20140625 Views, Reviews & Forum Wise up to 'smart city' goals Source: Straits Times The use of data analytics to establish consumer patterns and foot traffic in large malls is common enough but smart ways of shopping are rarely offered. If there are several options for a consumer seeking to make a quick purchase, he or she will as likely as not end up browsing very much, as the system is designed to get shoppers to walk around a lot.
Reclamation work in Johor affects S'pore too Source: Straits Times THE report "Mega reclamation project off Johor raises concerns" (Sunday) shows that land reclamation is a sensitive issue that affects the territorial rights of one's immediate neighbours. In 2002, when Singapore reclaimed land in Pulau Tekong and Tuas View, Malaysia responded with a strongly worded protest, and said such reclamation caused pollution and harm to the marine environment.
Global Economy & Global Real Estate Johor reclamation project 'to create oil storage hub' Source: Straits Times One of the two massive reclamation projects coming up in the Johor Strait will be turned into an oil storage hub to capture spill-over oil and gas business from Singapore, an official with the company involved in the works said yesterday.
Work near Second Link 'has stopped' Source: Straits Times Johor's Cabinet minister for the environment Ayub Rahmat said the Chinese developer of a controversial reclamation project in the Johor Strait voluntarily stopped work about a week ago, pending studies on its environmental impact.
Is Malaysia's Iskandar losing its shine? Projects by China's real estate giants raise doubts Source: Business Times / Top Stories RED speckles of danger have surfaced in Malaysia's hot zone Iskandar on the back of frenzied building by gungho developers from China, stirring some agitation over the sustainability of what was once a buoyant property scene in Malaysia's southern growth corridor. Amid a housing slump back at home, China's real estate giants with great financial muscle and aptitude to finish projects in record time, are set to flood the Iskandar area with huge supply of homes. If anything, the plans are lofty; from a sweeping media blitz in Malaysia and Singapore to trumpet their project launches, to reclaiming large swathes of land to raise a man-made island on the Johor strait, and building a gobsmacking 15 towers of 35-storey apartments under a single project. But the timing is starkly inopportune as Iskandar's property sector is in consolidation mode after ripping through record transaction volumes last year of RM30 billion (S$11.6 billion), up by a stomping 80 per cent from a year earlier.
Pounding further on that soft patch is a string of property curbs, particularly for foreigners, this year that turned bullish foreign buyers of properties there - the majority of whom are Singaporeans - a tad weary. The signs are acutely evident. Brisk sales for new property launches that made developers gleeful are faltering. Nowhere is that clearer than in the case of Malaysian firm UEM Sunrise's luxurious 34-storey block Almas Suites in Puteri Harbour, launched last December and priced on the conservative end. -By Anita Gabriel Senior Correspondent http://www.businesstimes.com.sg/premium/top-stories/malaysias-iskandar-losing-its-shine-20140625 Swiss banks curb loans as home prices soar Source: Business Times / World [ZURICH] Swiss banks will tighten requirements for mortgage loans after repeated warnings from Switzerland's central bank and the International Monetary Fund of a looming housing bubble. Switzerland's lenders and financial regulators have been at odds on how best to safeguard against the risk posed by historic highs in house prices and mortgage debt, driven in part by ultra-low interest rates. The Swiss central bank has pared back rates to lessen the appeal of the safe-haven franc and stave off a recession.
Yesterday, Switzerland's banking association said it cut the required time by which one-third of any mortgage must be repaid to 15 years, from 20 currently. Banks will also apply a more conservative measure of price when financing property loans. "These measures will contribute to a calming and stabilisation of potential hotspots in the real estate market," the Swiss Bankers Association said in a statement. -From Zurich, Switzerland http://www.businesstimes.com.sg/premium/world/swiss-banks-curb-loans-home-prices-soar-20140625 New home sales in May up at 6-year high Source: Business Times / Top Stories [WASHINGTON] Sales of new US single-family homes jumped to a six-year high in May, the latest indication that the housing market was starting to dig out of a recent soft patch. The Commerce Department yesterday said that sales surged 18.6 per cent to a seasonally adjusted annual rate of 504,000 units. That was the highest level since May 2008, while the increase was the biggest since January 1992. April's sales pace was revised down to 425,000 units from a previously reported 433,000 units.
Compared with May last year, sales were up 16.9 per cent, pointing to some momentum in the new homes market. New home sales are, however, very volatile because of the small size of the sample. -From Washington, US http://www.businesstimes.com.sg/premium/top-stories/new-home-sales-may-6-year-high-20140625 India can reap benefits of urbanisation Source: Today Online / China & India One of the main reasons Mr Narendra Modi scored such an overwhelming victory in last month’s general election is also one of the least recognised: India is far more urban than it likes to think. India thinks nostalgically of itself as a nation that “lives mainly in its villages” and official statistics show that more than 30 per cent of its population is urban. However, that wildly underestimates the true number. If “urban” India is defined by population density and includes former “villages” whose life has been turned upside down by roads, the Internet, satellite television and availability of non-farm jobs, it is more likely that 70 per cent of citizens are living something akin to “city life”. MORE URBAN THAN INDIA ADMITS Mr Modi, the new Prime Minister, realised this. He tapped the sense of aspiration this rapid urbanisation has engendered. The paternalistic Congress party did not. It continued to talk to the villages, failing to recognise it was addressing a dwindling constituency. Even official statistics are striking. In 1951, there were only five cities with a population above one million and only 41 with more than 100,000. At that time, most of India’s 360 million people lived in 560,000 villages. Now, there are at least 53 cities or “urban agglomerations”, the term used by demographers, with a population above one million and three with more than 10 million. By 2031, six cities — Mumbai, New Delhi, Kolkata, Chennai, Bangalore and Hyderabad — will have 10 million to 30 million inhabitants each. Today, cities with such unfamiliar names as Kozhikode have joined the likes of Barcelona in the million-plus club. India’s population, now 1.2 billion, is expected to peak at 1.6 billion in 2050. The really interesting developments are happening outside the biggest cities altogether. India’s statisticians define an “urban” place as one with more than 5,000 people, at least 75 per cent of male inhabitants working in non-farm jobs and a population density of more than 400 per sq km. However, if density alone is counted, then, as far back as the 2001 census, 68 percent of Indians were already urban. Indeed, it is in towns and peri-urbanlandscapes, where rural and urban India blend into one another, that the biggest changes are taking shape. Mr RajivKumar of New Delhi’s Centre for Policy Research estimates that more than half of those living in so-called villages derive at least part of their income from activities besides farming. Forty years ago, Mr Yamnaji Gule was driven by hunger from his village in Maharashtra to work in Mumbai, where he delivered tiffin lunch boxes. He says younger people these days prefer to work at the factories that have sprung up near his village. India, then, is more urban than it admits. This has big implications, not least for business, which has much money to make if it can anticipate the needs — from toiletries to cars — of the new aspirant class. ENGINES OF POVERTY REDUCTION From the administrative side, too, there are vital challenges and opportunities. For a start, more effort must go into planning cities. India can no longer pretend urban squalor is temporary and that migrants can simply return to their villages. The same goes for transport, housing, roads and sewerage. Of the 53 cities with a population above one million, only eight have integrated transport authorities, said Chennai-based economist Jessica Seddon. Cities have been allowed to sprawl willy-nilly, depriving them of the cost and energy efficiencies that can result from density. Nor has welfare provision, still mostly directed at poor villagers, caught up with new demographic realities. Creating the conditions for enough urban jobs, one of Mr Modi’s main election promises, will be another crucial task. If most men, half of whom are below the age of 26, have cut ties with village life, they will become frustrated and potentially dangerous if they do not find gainful employment. Without jobs, the supposed demographic dividend may become more like a time bomb. Male violence could also increase due to the sex imbalance that has resulted from selective abortions of female foetuses. On the other hand, social mores are changing fast as more people break free from the influence of conservative villages. Mr Modi’s Hindu nationalist Bharatiya Janata Party does not have a reputation for being socially progressive. To prevent an ugly conservative backlash against such shifts, the Prime Minister will need to steer his party towards tolerance. Properly run and supported by appropriate legislation, the country’s “cities could be engines of poverty reduction”, in the words of the Indian Institute for Human Settlements. As countries such as China have found, urbanisation can do wonders for productivity growth and wealth creation. India’s 53 biggest cities alone, home to 13.3 per cent of the population and occupying only 0.2 per cent of the land, produce nearly a third of national output. The 100 biggest cities produce 43 per cent. Mr Modi owes his job in large part to the ranks of new urbanites. He should now make it his mission to put India’s cities to work.
-By David Pilling http://www.todayonline.com/chinaindia/india/india-can-reap-benefits-urbanisation Sold Signs on Builder Lots as U.S. Confidence Rises Source: Bloomberg / Luxury Buyers swarmed builder lots in May to propel the biggest gain in sales of new homes in 22 years, while consumer confidence this month was the strongest since 2008, showing how an improving U.S. job market is giving the economy a much-needed lift. Home sales jumped 18.6 percent, the largest one-month surge since January 1992, to a 504,000 annualized pace, according to figures from the Commerce Department today in Washington. Another report showed household sentiment climbed in June to the highest point since the early days of the recession that began more than six years ago. Payroll gains that have exceeded 200,000 workers for four consecutive months and stable borrowing costs at historically low levels are giving Americans the assurance to step back into the real-estate market. The need for builders such as Hovnanian Enterprises Inc. (HOV) to keep up with the growing demand will lead to gains in construction that will boost the economic expansion. “Confidence is percolating up through the economy, making people reach for big purchases like new homes,” said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York, who had forecast gains in consumer confidence and new home sales. “The risks to the outlook seem to be diminishing.” Stocks fell a second day, after equity benchmarks rose to record levels last week, as reports of escalating violence in the Middle East overshadowed the economic data. The Standard & Poor’s 500 Index dropped 0.6 percent to 1,949.98 at the close in New York. German ConfidenceElsewhere today, sentiment was flagging. German business confidence fell in June to the weakest level this year amid signs of slower growth in Europe’s largest economy. The number of new homes sold in the U.S. last month was the most since May 2008, and exceeded all 74 forecasts in a Bloomberg survey of economists. The median estimate called for a gain to a 439,000 annualized rate. Projections ranged from 415,000 to 462,000. The reading for the prior month was revised to 425,000 from a previously reported 433,000. Today’s report followed data yesterday that showed sales of existing homes climbed to the highest level since October as purchases jumped in May by the most in three years. New-home sales, which account for about 7 percent of the residential market, are tabulated when contracts are signed, making them a timelier barometer than purchases of previously owned dwellings. The latter are calculated when a contract closes, typically a month or two later. Broad-Based GainDemand for new houses climbed in all four regions, led by a 54.5 percent jump in sales in the Northeast. “Housing is beginning to revive,” said Stephanie Karol, an economist at IHS Global Insight, and the top forecaster of new home sales in the past two years, according to data compiled by Bloomberg. “It’s a step in the right direction. The job market is helping, and there was an expansion of supply the past couple of months.” Hovnanian Enterprises, New Jersey’s largest homebuilder, is optimistic that demand will continue to rise though sales have been uneven in recent months. Household formation will be the primary driver of long-term housing demand, Chief Executive Officer Ara Hovnanian said during an earnings conference call on June 4, and “the creation of well-paying jobs will go a long way” toward it. “Given the low levels of total U.S. housing starts, we remain convinced that we are still in the early stages of the housing industry recovery,” Hovnanian said. Housing StartsResidential construction is picking up this quarter after a weather-induced slump at the start of the year. Builders broke ground on homes at a 1 million annualized pace in May following 1.07 million in April, the best two-month reading since late 2013, a Commerce Department report showed this month. A revival in homebuilding will help the economy rebound after a difficult first three months of the year. A Commerce Department report tomorrow is projected to show gross domestic product shrank at a 1.8 percent annualized rate in the first quarter, the worst performance since the depths of the recession in early 2009, according to the median forecast of economists surveyed by Bloomberg. Another report today showed home prices in 20 U.S. cities rose at a slower pace than forecast in the year ended in April, which will preserve affordability and sustain the recovery. The S&P/Case-Shiller index of property values increased 10.8 percent from April 2013, the smallest 12-month gain in more than a year, after rising 12.4 percent in March. Home PricesIncreasing property prices hurt affordability for prospective buyers trying to get into the market. At the same time, they also help homeowners feel wealthier and may keep boosting profits for developers. Rising real-estate wealth and a better job market are contributing to improving household sentiment. The Conference Board said its consumer confidence gauge rose to 85.2, the highest since January 2008, according to the New York-based research group. “More and more consumers seem to recognize that there’s some improvement under way in the labor markets,” said Mark Vitner, senior economist at Wells Fargo Securities LLC in Charlotte, North Carolina, who projected an 84.4 reading for sentiment. “The job market has been slow to improve and now that things are finally picking up, we’re beginning to see that in the consumer confidence numbers.” The share of Americans who said jobs were currently plentiful rose to the highest since May 2008, and more also expected increased employment opportunities in the coming six months. Payrolls climbed by 217,000 workers in May, the fourth consecutive month employment increased by more than 200,000, figures from the Labor Department showed this month. It was the first time that’s happened since early 2000. The jobless rate held at an almost six-year low of 6.3 percent. -By Shobhana Chandra and Nina Glinski Silverstein Said to Seek Private Funding on 3 World Trade Source: Bloomberg / News Developer Larry Silverstein will seek private funding for the construction of lower Manhattan’s 3 World Trade Center as the Port Authority of New York and New Jersey backs away from providing a loan guarantee, a person with knowledge of his plans said. Silverstein will take the next two to three months to work on a financing package, said the person, who asked not to be identified because nothing is official. The Port Authority, which owns the Trade Center site, is set to affirm its support tomorrow for a 2010 agreement on the project that doesn’t include the $1.2 billion backstop the developer sought, three people with knowledge of the board’s intentions said. Silverstein now must turn to private investors as he seeks to keep 3 World Trade Center’s anchor tenant, the advertising firm GroupM, which has a June 30 opt-out clause in the lease it signed in December. He is altering his plans after about a year of negotiations with the Port Authority for financing for the 80-story tower, which is stalled at eight floors. The board balked at providing the loan guarantee after some members viewed it as too risky and a threat to the agency’s credit rating. “It’s not the public who should pay for this,” authority Commissioner Kenneth Lipper, who led opposition to the loan guarantee, said yesterday in a telephone interview. “I believe the financing will be available in the private markets.” GroupM agreed to rent about 20 percent of the building’s planned 2.5 million square feet (230,000 square meters). Under a provision in the lease, Silverstein can pay the firm to stay committed to the project beyond the end of the month, the person with knowledge of the developer’s plans said. Financing OptionsIt’s not yet clear how Silverstein will structure the financing, nor who the investors might be, the person said. Martin Burger, chief executive officer of Silverstein Properties Inc., is leading the financing negotiations, the person said. Christopher Valens, a Port Authority spokesman, declined to comment, as did Bud Perrone, a spokesman for Silverstein Properties. A call and an e-mail to Stuart Diamond, chief financial officer at GroupM, weren’t immediately returned. Last month, Port Authority Vice Chairman Scott Rechler said several options were under consideration, including reinsurance, equity partners and preferred debt, in combination with tax-advantaged Liberty Bonds. He said he was confident that a public-private partnership could be formed to build the skyscraper, and that there was enough leasing momentum in lower Manhattan to mitigate the risk. Reached by phone today, Rechler said he intends to comment on the status of the project at tomorrow’s meeting. Insurance ProceedsThe 2010 agreement will be adjusted to allow Silverstein to use about $150 million of insurance proceeds left over from the $4.6 billion payout from the Sept. 11, 2001, terrorist attack, according to the people familiar. Silverstein had signed a 99-year lease for the original twin towers six weeks before they were destroyed. The four-year-old deal on 3 World Trade Center called for about $600 million of cash support, split about equally between the Port Authority, New York City and New York State. To qualify for those funds, Silverstein would have had to raise $300 million of equity or high-interest mezzanine debt, and pre-lease at least 400,000 square feet. The agreement also required him to raise $1.3 billion of Liberty Bonds to finance the $2.3 billion tower. -By David M. Levitt and Martin Z. Braun Lend Lease Sees 45% Profit Jump on $1.2 Billion Bluewater Sale Source: Bloomberg / News Lend Lease Group, Australia’s biggest developer, said it expects a 45 percent profit boost this fiscal year after selling its stake in the Bluewater Shopping Center in the U.K. for 696 million pounds ($1.2 billion). Net income will be between A$810 million ($759 million) and A$830 million for the 12 months to June 30, the Sydney-based company said in a regulatory filing. The developer sold its 30 percent stake in Bluewater for 656 million pounds, and its management rights and land interests for 40 million pounds to London-based Land Securities Group Plc (LAND), it said. “The cash proceeds of the sale will initially be used to pay down debt and subsequently support investment in our significant global development pipeline,” Lend Lease Chief Executive Officer Steve McCann said in the statement. Lend Lease, whose A$38 billion of planned developments include the A$6 billion Barangaroo redevelopment in Sydney and the Elephant & Castle regeneration in London, reported net income of A$551.6 million in the year ended June 30, 2013. Its profit on the Bluewater sale is expected to be about A$480 million after transaction costs, it said today. The company held the Bluewater stake at its inventory value of A$507 million as of Dec. 31, it said. The market value of Lend Lease’s stake was A$1.02 billion, according to a regulatory filing by the company in February. Lend Lease is also seeking to exit some projects in the U.K. and Australia as their marginal return on capital is below targets for new projects, and expects to take some provisions on them, it said today. Lend Lease shares have gained 22 percent this year compared with a 1.5 percent increase in the benchmark S&P/ASX 200 index. -By Nichola Saminather No Housing Bubble Seen by Treasury as BOE Poised to Act Source: Bloomberg / Luxury As Britons brace for the Bank of England to announce steps to restrain the housing market this week, the No. 2 at the U.K. Treasury dismisses talk of a bubble. “People shouldn’t get carried away with the scale of the problem,” Chief Secretary to the Treasury Danny Alexander said in an interview at Bloomberg LP’s New York headquarters yesterday. “It’s localized” in London and southeast England, he said. “Across the rest of the U.K. you have seen rises in property prices but they’re at a much more subdued level.” The comments come amid investor expectations that BOE financial-stability officials will outline action to stop households taking on levels of debt that could threaten the economy. The Financial Policy Committee met on June 17 and its decisions will be made public when the BOE publishes its twice-yearly Financial Stability Report on June 26. “The committee is expected to have come to the view that acting now to curb risks of financial instability is a prudent course of action,” said Sam Hill, senior U.K. economist at RBC Capital Markets in London. Pressure to act has mounted as rising house prices stretch affordability, with first-time buyers in London now borrowing 200,000 pounds ($341,000) on average, almost four times their gross income. Chancellor of the Exchequer George Osborne acknowledged the risks when he proposed this month giving the FPC direct powers to limit the amount homebuyers can borrow. Recovery ThreatBOE Governor Mark Carney says household indebtedness, at about 140 percent of gross disposable income, leaves Britain vulnerable and that macro-prudential tools, rather than interest rates, should be deployed first if financial stability is at risk. In the U.S., the debt-to-GDI ratio was 109 percent in 2012, according to the latest estimates from the Organization for Economic Cooperation and Development. It was 87 percent in Germany. Government data last week showed home prices rose 9.9 percent in April from a year earlier, the most in four years, and by almost 20 percent in London. Rising prices are spurring an economy set to grow at its fastest pace since 2007. That’s led BOE officials to warn that the benchmark interest rate could go up as early as this year. Investors are fully pricing in a quarter-point increase to 0.75 percent by February, according to derivatives trading. ‘Edging Closer’“As the economy progresses, the time to normalize interest rates is edging closer,” Carney told lawmakers in the House of Commons today. “What’s most relevant is our view that those adjustments will be to a level of interest rates, through a gradual process, that’s likely to be materially lower than historic averages.” Options for the FPC, which is led by Carney, included toughening affordability tests and making banks hold more capital against mortgage lending. Officials can also recommend putting limits on loan-to-income or loan-to-value ratios -- an outcome seen as the most likely by Hill at RBC -- and urge changes to Help to Buy, a government program for people with small down payments. “We’ve equipped the BOE with very substantial new powers to manage and address” risks stemming from the housing market, said Alexander. “Of course if they recommend changes, then those changes should be followed through.” Carney will hold a press conference in London at 10:30 a.m. on Thursday when the Financial Stability Report is published. Balanced JudgmentAlexander said that, adjusted for inflation, U.K. house prices remain below their level in 2007, with average values outside London and the southeast rising at about 6 percent a year. “Action that ends up suppressing the housing market across the rest of the U.K. -- that could cause a difficulty for our recovery,” he said. “It’s quite a balanced set of judgments that need to be made.” He also denied Help to Buy is contributing to pressure on prices, saying the average value of a home bought under the program is about 150,000 pounds -- compared with a national average of 260,000 pounds and 485,000 pounds in London -- and almost all purchases are outside the capital. Instead, homebuilding in the U.K. needs to double to about 300,000 units a year, he said. In a survey published yesterday, the Bank of England said mortgage demand increased “significantly” this quarter, though new rules to ensure borrowers can meet repayments over the long-term were having an effect. That trend was reinforced by industry data today showing mortgage approvals fell for a fourth month in May. “I’m confident the Bank of England has all the powers that it needs to take appropriate action,” Alexander said. -By Svenja O’Donnell and Sandrine Rastello Home Prices in 20 U.S. Cities Rise at a Slower Pace Source: Bloomberg / Luxury Home prices in 20 U.S. cities rose at a slower pace than forecast in the year ended in April as declining affordability put a lid on appreciation. The S&P/Case-Shiller index of property values increased 10.8 percent from April 2013, the smallest 12-month gain in more than a year, after rising 12.4 percent in March, the group reported today in New York. The median projection of 25 economists in a Bloomberg survey called for an 11.5 percent year-over-year increase in April. Sellers’ ability to ask ever-higher prices has diminished as smaller wage gains make it difficult for some prospective buyers to qualify for financing. Cheaper properties, an easing of credit standards and employment opportunities accompanied by faster income growth would help brighten the outlook for residential real estate. “We’re still expecting prices to appreciate, but at a much reduced rate,” said Kevin Cummins, an economist at UBS Securities LLC in New York. “The amount of homes on the market is still relatively low. You’re likely to see a less-booming pace of prices, and that’s a good thing.” Stocks fell after the figures as investors watched developments in Iraq. The Standard & Poor’s 500 Index slid 0.2 percent to 1,959.37 at 9:31 a.m. in New York. The S&P/Case-Shiller Index is based on a three-month average, which means the April figure was influenced by repeat sales transactions in February and March. Monthly ChangeHome prices adjusted for seasonal variations increased 0.2 percent in April from the prior month, the smallest gain since February 2012 and less than the 0.8 percent median forecast in the Bloomberg survey. Unadjusted prices rose 1.1 percent. Another report today confirmed the slowdown in appreciation as an index from the Federal Housing Finance Agency showed no change in April from a month earlier. Property prices rose in 14 of 20 U.S. metropolitan areas in April from a month earlier, led by a 1.9 percent jump in Boston. Adjusted prices fell in Cleveland, New York, San Diego and Washington. The year-over-year gauge, based on records dating back to 2001, provides a better indication of price trends than the monthly figure, the group has said. Economists Karl Case and Robert Shiller created the index. Las VegasAll 20 cities in the index showed a year-over-year gain, led by an 18.8 percent increase in Las Vegas and an 18.2 percent advance in San Francisco. Cleveland showed the smallest year-over-year increase, with prices rising 2.7 percent. Residential real estate is regaining its footing after stumbling at the start of the year. Purchases of previously owned homes climbed 4.9 percent last month, the biggest gain since August 2011, to a 4.89 million annualized rate, the National Association of Realtors reported yesterday. That report also showed price appreciation slowing as more homes go up for sale. The number of homes on the market increased 6 percent from a year earlier to 2.28 million, the most since August 2012. At the current sales pace, it would take 5.6 months to sell those houses compared with 5.7 months at the end of the prior month. Slower price appreciation and borrowing costs that have fallen since the start of the year will help support sales. The average rate on a 30-year, fixed mortgage was 4.17 percent in the week ended June 19 compared to 4.53 percent in the period ended Jan. 2, according to Freddie Mac in McLean, Virginia. Further Gains“Near-term economic factors favor further gains in housing: mortgage rates are lower than a year ago, the Fed is expected to keep interest rates steady until mid-2015 and the labor market is improving,” index committee chairman David Blitzer said in a statement. “However, housing is not back to normal.” Still, Freddie Mac and the Mortgage Bankers Association last week both trimmed their home-sales forecasts for 2014, with the banker trade group predicting a decline in sales for the first time in four years, to 5.28 million for 2014. Marianne Lake, chief financial officer for JPMorgan Chase & Co. in New York, called 2014 “a transition year” for housing and mortgage markets. Most owners have refinanced into lower rates and demand for purchase financing is weaker than it once was, she said at a June 11 conference. “The combination of refi burnout as well as slow purchase improvement has led to the smallest production market in over 14 years,” Lake said. “Income growth isn’t where it needs to be, but we are still expecting that to be recovering over the course of the next several years.” Federal ReserveFederal Reserve policy makers said in a statement last week that “the recovery in the housing sector remained slow.” At the same time, progress in the rest of the economy allowed the Fed to trim their monthly bond purchases by $10 billion for a fifth straight meeting, to $35 billion, keeping them on pace to end the program late this year while avoiding a rapid increase in interest rates. “The Committee’s sizable and still-increasing holdings of longer-term securities should maintain downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative, which in turn should promote a stronger economic recovery,” the committee said in the June 18 statement. -By Lorraine Woellert |