Singapore Real Estate Mapletree starts work on new biz park tower Source: Straits Times The Alexandra area could soon boast the tallest business park in Singapore. Property firm Mapletree Investments is now building a 30-storey business park tower there and plans to expand into more sectors of real estate, it said yesterday as it posted its report card for the year.
Hip Tiong Bahru awaits new condo Source: Straits Times A remarkable stillness has settled over the private property market in the hip Tiong Bahru district in the past few months. Resale deals there have slowed to a trickle as most buyers eyeing the area wait with bated breath for the upcoming launch of a new condominium project in Kim Tian Road.
Real Estate Companies' Brief CapitaLand sweetens delisting offer for CMA with higher price of $2.35 per share No further revision to final offer price; closing date of unconditional offer extended from May 26 to June 9 Source: Business Times / Top Stories CAPITALAND has sweetened its delisting offer for CapitaMalls Asia (CMA) with a higher offer price of $2.35 per share, after shareholders voiced their unhappiness over the initial offer price of $2.22. The final offer price is ex-FY2013 final dividend, which means that CMA shareholders who received the final dividend of 1.75 cents per share for fiscal 2013 will still get $2.35 apiece for their acceptance shares. CapitaLand said that this final offer price will not be further revised. The offer was also declared unconditional and its closing date extended from May 26 to June 9. Earlier on, CapitaLand's offer to delist CMA at $2.22 per share was a point of contention among market watchers and CMA shareholders, given its narrow premium to CMA's initial public offer (IPO) price of $2.12 in November 2009. CMA shareholders conveyed their dissatisfaction to CapitaLand's key management officers last week at a closed-door dialogue session organised by the Securities Investors Association (Singapore) (SIAS). The initial offer price of $2.22 was "too low" for loyal shareholders who have been holding CMA shares since the IPO, said Phillip Lam, a CMA shareholder who attended the dialogue session. Given that CMA's malls have been reporting positive rental reversals, shareholders should reap higher returns for their CMA shares, he said. Some shareholders had suggested, however, at the dialogue session that an offer price of $2.45-$2.55 would have been appropriate for CMA. Regina Lim, head of Singapore equity research and ASEAN at Standard Chartered, said that with the higher offer price, more shareholders are likely to accept the offer. But there is a "small risk that CapitaLand may not get the 90 per cent acceptances that it needs to get CMA delisted within the offer period". Shares of CMA closed 4.9 per cent higher yesterday at $2.35 but had hit $2.36 several times yesterday after the trading halt was lifted, suggesting that some shareholders could still be hoping for a higher offer price. As at Thursday, CapitaLand received valid acceptances amounting to 100.59 million shares or 2.6 per cent of the issued share capital of CMA. SIAS president David Gerald said that the association is encouraged that CapitaLand has "taken into consideration not just the IFA (independent financial advisor) report but also strong feedback from CMA shareholders". The IFA report by Deutsche Bank last week noted that the terms in CapitaLand's delisting offer for CMA "are fair and reasonable from a financial point of view in the context of a non-change of control transaction". A CapitaLand spokeswoman said yesterday that this price revision has addressed several considerations in the IFA's report and "increases the certainty of success". The revised offer price of $2.35 now exceeds the mean broker price target of $2.28 and has eliminated the discount to CMA's adjusted net asset value. It now represents a 31.5 per cent premium to the last traded price on April 11 before the offer announcement, instead of a 23 per cent premium. CapitaLand has obtained a waiver from the Securities Industry Council (SIC) on the offer condition, which means that shareholders who accept the offer will still have their shares accepted by CapitaLand even in the event that the delisting does not succeed. "Going unconditional provides certainty of acceptances to CMA shareholders who accept the offer," the CapitaLand spokeswoman said.
Since its offer for CMA, CapitaLand has shored up its stake in CMA from 65.3 per cent to 70.4 per cent through open market purchases. Credit Suisse and Morgan Stanley are joint financial advisers to CapitaLand on the CMA offer. -By Lynette Khoo CapitaLand raises offer for subsidiary to S$2.35 a shareSource: Today Online / Business SINGAPORE — CapitaLand has raised its offer to take over all the shares of its subsidiary CapitaMalls Asia (CMA) that it does not already own to S$2.35 per share from S$2.22, said the companies yesterday. CapitaLand, South-east Asia’s largest property developer, launched a S$3.1 billion offer last month to buy out minority shareholders in CMA, of which it already owned about 65 per cent. It intends to delist the mall operator, whose assets include ION Orchard and Plaza Singapura. By Thursday evening, CapitaLand had received valid acceptances to shares amounting to about2.6 per cent of the issued share capital of CMA, an exchange filing by the parties showed. CapitaLand said yesterday it would not further revise the offer price and had extended the closing date of the offer to June 9 from May 26. The offer became unconditional after the 90 per cent acceptance condition was waived, providing certainty to CMA shareholders who accept the deal, it said. CMA shareholders who had accepted the earlier and lower offer will be entitled to receive the final offer price. There has been a spate of acquisitions in Singapore’s real estate sector over the past two years, as tycoons take advantage of depressed prices to delist property firms. A consortium, including Singaporean billionaire Ong Beng Seng and Wheelock Properties Singapore, increased its offer price for a stake in Hotel Properties earlier this week. REUTERS
http://www.todayonline.com/business/property/capitaland-raises-offer-subsidiary-s235-share Mapletree Investments FY14 earnings down 7.8% Turnover down after divestments; FY13 results include disposal gains Source: Business Times / Companies MAPLETREE Investments, a fully owned subsidiary of Temasek Holdings, has posted net earnings of $859.4 million for the year ended March 31, 2014 (FY2014), down 7.8 per cent from the preceding financial year which included major divestment gains. Mapletree Anson in Singapore was sold in February 2013 to Mapletree Commercial Trust and Festival Walk in Hong Kong was sold to Mapletree Greater China Commercial Trust in March 2013.
Besides the lack of disposal gains this time round, Mapletree Investments also saw a 20.1 per cent decline in FY2014 total turnover to $548.6 million as it deconsolidated the two assets. -By Kalpana Rashiwala Croesus trust eyeing two more malls Source: Straits Times The Japan-focused Croesus Retail Trust (CRT) is stepping up its growth strategy a year after its initial public offering (IPO). In March, it acquired two new malls, bringing the total to six and expanding net lettable area by about 9 per cent, and the portfolio value by about 28.3 per cent to 67.8 billion yen (S$834 million).
Global Economy & Global Real Estate US developers go big on elderly housing Supply glut feared as demand from ageing baby boomers may be years away, say analysts Source: Business Times / Wealth REAL estate developers are betting big on US housing for the elderly, preparing for a surge in demand as the population of senior citizens almost doubles in the next 35 years. They may be building too fast. A jump in supply is forecast to cut growth in senior housing net operating income to 1.8 per cent in 2015 and 1.4 per cent in 2016 from 3.3 per cent this year, according to Green Street Advisors. The increase may hurt healthcare real estate investment trusts and companies including Brookdale Senior Living, which is buying competitor Emeritus Corp for about US$1.4 billion to become the biggest owner of senior properties, the research firm said.
"Increased supply is always worrisome in any type of commercial real estate," said Jim Sullivan, a managing director at Green Street. "In senior housing, new construction has ramped up considerably over the last two years." -From Chicago, US Labour's rent control may put off investors Source: Business Times / Wealth A PLEDGE to introduce rent controls by Britain's opposition Labour party could dissuade companies from investing in the construction of homes for rent, two big landlords have warned. Labour leader Ed Milliband said last month he would bring in rent controls and longer tenancy agreements if he wins next year's election, which he said would help the rising number of Britons who rent rather than own their homes.
"People get very nervous when the words 'rent control' get bandied around," said Andrew Cunningham, chief executive of Grainger plc, which owns and manages a £1 billion portfolio of rental homes. "A lot of institutions take fright at hearing those words." -From London, UK Apartment Projects Fuel 13% Jump in U.S. Housing Starts Source: Bloomberg / Luxury A surge in construction of multifamily dwellings in April propelled U.S. housing starts to the highest level in five months, helping overcome slack demand for single-family homes. Housing starts climbed 13.2 percent to a 1.07 million annualized rate following March’s 947,000 pace, according to figures released today by the Commerce Department in Washington. Another report showed a measure of consumer confidence unexpectedly declined from a nine-month high. An almost 40 percent increase in construction starts on projects such as condominiums and apartment buildings accounted for almost all of the April gain, as single-family activity was held back by declining affordability. The report highlights a shift in demand for housing in the wake of the financial crisis, which left many Americans wary of taking on new debts. “What’s been notable since the housing crash is how much construction is aimed at meeting demand for rental housing,” said Ryan Wang, an economist at HSBC Securities USA Inc. in New York. “There’s been a trend away from homeownership that’s persisted even as the pace of foreclosures has slowed. What we can see is that higher home prices, particularly for new homes, have weighed on demand.” The Thomson Reuters/University of Michigan preliminary sentiment index decreased to 81.8 from 84.1 in April. The median projection in a Bloomberg survey of economists called for a gain to 84.5. Stocks were higher after the reports, with the Standard & Poor’s 500 Index rising 0.1 percent to 1,871.70 as of 12:18 p.m. in New York. The yield on the benchmark 10-year note rose one basis point, or 0.01 percentage point, to 2.5 percent. Forecasts ExceededHousing starts exceeded all analysts’ forecasts, with the median estimate of 79 economists surveyed by Bloomberg calling for 980,000. Building permits climbed 8 percent to a 1.08 million annualized pace, a sign activity might accelerate in coming months. Multifamily construction in the U.S. has surged from a 50-year low in 2009 as developers seek to accommodate rising rental demand, spurred in part by tight credit for homebuyers and a tide of foreclosures in the housing crash. The national apartment-vacancy rate was 4 percent in the first quarter, the lowest since 2001, according to New York-based Reis Inc. Effective rents, or what tenants paid after any landlord concessions, averaged $1,089 a month in the first quarter, up from $1,055 a year earlier, Reis said in a report last month. Gains have been led by technology and energy-driven markets with strong employment, such as San Jose, California \, San Francisco, Denver, Houston and Seattle. Urban SettingsBentall Kennedy U.S., a unit of Toronto-based real estate investment adviser Bentall Kennedy LP, is developing two Seattle apartment projects downtown that would total more than 500 units, along with new buildings in San Francisco, Chicago, Minneapolis, New York and Los Angeles, said Chief Executive Officer Michael McKee. Rentals in urban settings are particularly appealing for younger people who increasingly want to be close to work, he said. “They don’t want mortgages, they don’t want long freeway commutes,” McKee said in an interview this week. “Companies still have these big campuses because they invested in them 10 or 15 years ago, but really, the young people want to be in the city.” Single FamilyMultifamily construction starts jumped to a 423,000 annual rate from 303,000 in March, while work on single-family properties rose 0.8 percent to a 649,000 rate in April from 644,000 the prior month. Home construction increased in every region, led by the Midwest, with a 42.1 percent increase. Starts jumped 28.7 percent in the Northeast, 11.1 percent in the West and 1.5 percent in the South. Confidence among homebuilders dropped in May to the lowest level in a year, indicating the residential real estate market may be slow to recover after an unusually harsh winter, data showed yesterday. The National Association of Home Builders/Wells Fargo builder sentiment gauge fell to 45 this month, the weakest since May 2013, from a revised 46 in April that was lower than initially reported, figures from the Washington-based group showed today. Readings less than 50 mean fewer respondents report good market conditions. The median forecast in a Bloomberg survey called for 49. Job Growth“Single-family is still concerning,” said Richard Moody, chief economist at Regions Financial Corp. in Birmingham, Alabama, who had forecast 1 million housing starts. Still, “we’re seeing job growth pick up, income growth pick up, and now there’s talk of loosening up credit for home purchases,” and those “should contribute to a pick-up in single-family activity.” Borrowing costs, which climbed in the second half of 2013, are stabilizing. The average 30-year, fixed-rate mortgage was at a six-month low of 4.21 percent in the week ended May 8, according to data from Freddie Mac in McLean, Virginia. The average from July through December was 4.37 percent. While increasing prices are hurting affordability for those getting into the market, they also help homeowners feel wealthier. Real estate data provider Zillow Inc. sees those prices keeping up their climb. “For almost all of the country, home values are increasing,” Chief Executive Officer Spencer Rascoff said on a May 7 earnings call. “The rate of growth is slowing, but it’s still a very healthy housing market.” The latest data from S&P/Case-Shiller in New York showed an index of property prices in 20 U.S. cities increased 12.9 percent from February 2013, the smallest advance since August, after a 13.2 percent gain in the year ended in January. March data are due for release May 27. -By Michelle Jamrisko and Hui-yong Yu Home Starts Jump as U.S.
Builders Freed From Winter Slowdown Source: Bloomberg / Luxury The pace of U.S. home construction jumped in April to its highest level since November, led by a jump in starts on multifamily projects, showing builders returned to sites after freezing temperatures restrained work earlier this year. Housing starts climbed 13.2 percent to a 1.07 million annualized rate following March’s 947,000 pace, the Commerce Department reported today in Washington. Starts exceeded all analysts’ forecasts, with the median estimate of 79 economists surveyed by Bloomberg calling for 980,000. Permits (NHSPATOT) for future projects increased, a sign activity might accelerate in coming months. An almost 40 percent increase in construction starts on multifamily projects such as condominiums and apartment buildings accounted for almost all of the April gain, as single-family activity was held back by declining affordability. Hiring gains may spur a rebound in residential real estate after unusually harsh weather held back construction at the start of the year. “Single-family is still concerning, but multi-family is going full throttle,” said Richard Moody, chief economist at Regions Financial Corp. in Birmingham, Alabama, who had forecast 1 million housing starts. “We’re seeing job growth pick up, income growth pick up, and now there’s talk of loosening up credit for home purchases,” and those “should contribute to a pick-up in single family activity.” Another report showed consumer confidence slipped this month. The Thomson Reuters/University of Michigan preliminary sentiment index fell to 81.8 in May from 84.1 a month earlier. Stock DeclineStocks were lower after the reports, with the Standard & Poor’s 500 Index dropping 0.2 percent to 1,866.47 as of 10:08 a.m. in New York. The yield on the benchmark 10-year note rose one basis point, or 0.01 percentage point, to 2.5 percent. Estimates (NHSPSTOT) for starts in the Bloomberg survey ranged from 925,000 to 1.05 million. Building permits climbed 8 percent to a 1.08 million annualized pace. They were projected to rise to 1.01 million, according to the Bloomberg survey median. Multifamily construction starts jumped to a 423,000 annual rate from 303,000 in March, while work on single-family properties rose 0.8 percent to a 649,000 rate in April from 644,000 the prior month. Home construction increased in every region, led by the Midwest, with a 42.1 percent increase. Starts jumped 28.7 percent in the Northeast, 11.1 percent in the West and 1.5 percent in the South. Builder ConfidenceConfidence among homebuilders dropped in May to the lowest level in a year, indicating the residential real estate market may be slow to recover after an unusually harsh winter, data showed yesterday. The National Association of Home Builders/Wells Fargo builder sentiment gauge fell to 45 this month, the weakest since May 2013, from a revised 46 in April that was lower than initially reported, figures from the Washington-based group showed today. Readings less than 50 mean fewer respondents report good market conditions. The median forecast in a Bloomberg survey called for 49. Borrowing costs, which climbed in the second half of 2013, are stabilizing. The average 30-year, fixed-rate mortgage was at a six-month low of 4.21 percent in the week ended May 8, according to data from Freddie Mac in McLean, Virginia. The average from July through December was 4.37 percent. Housing AffordabilityWhile increasing prices are hurting affordability for those getting into the market, they also help homeowners feel wealthier. Real estate data provider Zillow Inc. sees those prices keeping up their climb. “For almost all of the country, home values are increasing,” Chief Executive Officer Spencer Rascoff said on a May 7 earnings call. “The rate of growth is slowing, but it’s still a very healthy housing market.” The latest data from S&P/Case-Shiller in New York showed an index of property prices in 20 U.S. cities increased 12.9 percent from February 2013, the smallest advance since August, after a 13.2 percent gain in the year ended in January. March data are due for release May 27. -By Michelle Jamrisko Miller Wagers Gundlach’s Bearish Housing Position Loses Source: Bloomberg / Personal Finance Bill Miller said investor Jeffrey Gundlach and real estate billionaire Sam Zell are wrong about housing. Gundlach, the chief executive officer of DoubleLine Capital LP, and Zell, chairman of landlord Equity Residential, predict fewer young people will buy homes, further driving down the U.S. ownership rate. Miller, the stock picker who beat the Standard & Poor’s 500 Index for a record 15 years, said he’s so confident lending and housing will rebound that he’s betting on mortgage insurers, homebuilders and subprime servicers. “Anytime there’s a cataclysm, people always say it’s never going to come back,” said Miller, 64, sitting outdoors at a table overlooking Baltimore’s harbor. “I don’t believe there’s been a secular change in demand for housing. People may just rent longer than they otherwise would have before eventually buying.” Miller, portfolio manager since 1999 of the $2.1 billion Legg Mason Opportunity Trust (LMOPX) at LMM LLC, is bullish on housing even as Federal Reserve Chair Janet Yellen raises concerns about the economic impact of slowing sales. U.S. mortgage lending contracted to the lowest level in 17 years in the first quarter, and sales of lower-priced existing homes plunged 12 percent in March compared with a year earlier. Since 2011, when homebuilder executives started talking about their improved outlooks, Miller has been adding to his real estate and financial holdings, which now make up 33 percent of the fund. Legg Mason Opportunity Trust, which Miller has co-managed with Samantha McLemore since 2008, returned 23 percent over the past 12 months, ahead of 97 percent of similarly managed funds, according to data compiled by Bloomberg. Easing CreditMiller, who can recall how the stock market performed on many days as far back as the 1980s, said he remains upbeat on housing because banks are beginning to ease lending requirements. In March, credit standards were the loosest in at least two years, according to a Mortgage Bankers Association index. The measure, based on underwriting guidelines, rose to 114 from 100 when it started in 2012. Wells Fargo & Co. (WFC), the largest U.S. home lender, last month cut its minimum credit score for borrowers of Fannie Mae and Freddie Mac-backed loans to 620 from 660. And earlier this week, the Federal Housing Finance Agency, which oversees the two government-backed mortgage companies, unveiled plans to spur lending by reducing the risk to banks of having to buy back loans that default. Gundlach’s Pessimism“The housing recovery is far less robust right now than it’s ever been historically coming out of a recession,” which means there’s so much room for improvement, said Miller. “That’s the opportunity and also what gives rise to the confusion” among investors, he said. Housing starts climbed 13.2 percent to a 1.07 million annualized rate following March’s 947,000 pace, the Commerce Department reported today in Washington. The median estimate of 79 economists surveyed by Bloomberg called for 980,000. Earlier this month at the Sohn Investment Conference in New York, Gundlach recommended betting against an exchange-traded fund that tracks an index of homebuilders because declining affordability will reduce housing demand. Gundlach said in an e-mail May 14 that he doesn’t expect a significant increase in housing starts. Gundlach’s $32.7 billion DoubleLine Total Return Bond Fund (DBLTX), which invests in mortgage-backed securities, returned 1.8 percent over the past year, ahead of 83 percent of rivals. ‘Uninterested Buyers’“You have a huge fraction of 18- to 34-year-olds who are unemployed and they also are much less interested in homebuying,” Gundlach said May 6 during an interview with Matthew Winkler, editor-in-chief of Bloomberg News, in New York. “Most of these people have been scarred by the housing collapse.” The share of Americans who own their homes was 64.8 percent in the first quarter, the lowest since 1995, according to a Census Bureau report last month. That’s down from 65.2 percent in the previous three months and 69.2 percent at its peak in 2004. Zell said in April at the Milken Institute Global Conference in Beverly Hills, California, that the rate may fall to as low as 55 percent as Americans postpone getting married and having children. “The deferral of marriage has such a staggering impact on real estate and I just don’t think people focus on it,” Zell said at the conference. Terry Holt, a spokeswoman for Zell, declined to comment for this story. 15-Year StreakThis isn’t the first time Miller has bet heavily on an optimistic outlook. His 15-year streak leading the Legg Mason Value Trust to better returns than the S&P 500 ended in 2006. His performance worsened as he wagered on financial stocks during the credit crisis, prompting a 55 percent decline in his fund in 2008. In 2012, Miller stepped down from the Value Trust, while staying on as the manager of the Opportunity fund. “Legg Mason Opportunity Trust is in the top 1 percent in good times and the bottom 1 percent in bad,” said Todd Rosenbluth, director of mutual-fund research for S&P Capital IQ in New York. “It will do well in a strong economic environment and continuation of the housing recovery, but when markets get choppy or flat, it won’t have other kinds of securities to provide an offset.” The fund delivered an annual 22 percent return over the past five years to beat 95 percent of rivals, according to data compiled by Bloomberg. In 2011, it fell 35 percent as the S&P 500 rose 2.1 percent. Home PricesMiller’s largest stake is insurer Genworth Financial Inc. (GNW), at 3.9 percent of the portfolio as of March 31, according to Legg Mason Inc.’s website. The Richmond, Virginia-based firm’s stock doubled to $15.53 in 2013 as rising home prices helped its mortgage insurance unit post its first profit since 2007. As home prices climb, mortgage insurers like Genworth will benefit as housing values support insurance claims and originate new business, according to Miller. U.S. home prices increased 12.9 percent in the 12 months through February, according to the S&P/Case-Shiller index of 20 cities. Miller started ramping up his Genworth holding in 2012 when shares were about $5 as mortgage insurers were reimbursing lenders for losses stemming from a wave of defaults. Genworth shares closed at $17.81 in New York yesterday. Homebuilders such as PulteGroup Inc. (PHM) and Lennar Corp., both among Miller’s top 30 holdings, have been discounted because of their weak earnings. Miller said they are poised to grow 20 percent to 25 percent a year for as long as the next five years, and will outperform the S&P 500. They’ve both increased their share of the market and reduced costs to boost profits, he said. Interest RatesA sustained rise in interest rates could delay the housing rebound for about a year, Miller said. Borrowers would eventually get used to the higher rates and return to the market, he said, pointing to the housing boom in the late 1990s when people purchased homes even as rates averaged about 6 percent. Now Miller is setting his sights on mortgage servicers, betting he’ll profit from changes in government policy. Servicers, who collect mortgage payments, are grabbing market share from banks, which face regulations limiting the amount of capital they can risk on servicing rights. More than $1 trillion in servicing rights have changed hands in the last two years. “Anytime the government makes a major change, it usually creates a big opportunity,” said Miller. The transfer of servicing rights is similar to when firms had to sell junk bonds about 25 years ago following new regulations, he said. Nationstar BetNationstar Mortgage Holdings Inc. (NSM), which is majority owned by Fortress Investment Group LLC, benefited during the boom in refinancing and then suffered as mortgage rates rose. It will again profit as originations return and it buys more servicing rights from banks, according to Miller. In March, Benjamin M. Lawsky, New York’s top bank regulator, asked Nationstar for information about the “explosive growth” in its mortgage-servicing business, citing hundreds of consumer complaints about the company’s practices. Miller started buying shares of the Lewisville, Texas-based servicer at the end of last year. The move damaged his fund’s performance since Nationstar shares, hurt partly by the state probe, are down 14 percent this year. Miller said he has long-term confidence in the stock and has been steadily increasing exposure whenever the shares are at $30 or below. “We’re optimistic in that we’re long-term investors,” Miller said. “Two thirds to three quarters of the time the market goes up, so if you’re longer term oriented, you have to be bullish.” -By Alexis Leondis Carney’s Hottest Topic Sets BOE Thinking on Housing Curbs Source: Bloomberg / Luxury Mark Carney has given himself one month to decide on what to do about the hottest topic in the U.K. economy: the housing boom. Batting away questions on a possible property bubble this week, the Bank of England governor pushed the onus for cooling the market onto his financial-stability officials. The Financial Policy Committee now has four weeks to prepare for a June 17 decision when it can either unleash untested tools to curb lending or come up with a good excuse as to why it didn’t. With the economic recovery broadening and inflation under control, housing has become Carney’s biggest domestic concern -- and threat to his reputation -- as he heads toward his first anniversary in charge of the BOE. Tackling a property boom revved up by record-low borrowing costs and government incentives, the governor will need to keep the Treasury posted on progress and involve rate-setting policy makers in meetings to keep everyone in the loop. “It would be surprising if we didn’t get something in June,” said Mike Amey, a money manager at Pacific Investment Management Co. in London. “The clearest component of economic strength in the U.K. at the moment is the housing market.” Carney said on May 14 that interest rates were the “last line of defense” against housing risks and that the FPC would “look hard” at vulnerabilities. BOE Chief Economist Spencer Dale, who will join the FPC next month, has said the June meeting could be “quite significant.” More MeasuresFinancial-stability officials have already ended incentives for mortgages and announced a set of bank stress tests. The panel, which will publish its recommendations on June 26, has said it’s ready to take more action if needed. “What we don’t have at the FPC, and never will have, is an ability to control all aspects of the housing market,” Carney said. “We can’t perform miracles. What the FPC can do is to reduce risks that emanate.” Carney’s comments this week “shine the light a bit more keenly on the FPC,” said Chris Scicluna, head of economic research at Daiwa Capital Markets in London. “This is the first meeting that anyone’s really going to be paying attention to, so one would hope that the communication will be very clear and lay down a marker and establish credibility.” Possible ToolsAffordability tests came into force in the U.K. last month, requiring borrowers to prove they can afford repayments even when interest rates rise. After its March meeting, the FPC said a tool to make those tests more stringent will be available as soon as June. This, along with higher capital requirements or maximum loan-to-value ratios on mortgages, are options for the committee. It could also recommend the government curtails its Help to Buy program. House prices jumped almost 11 percent in April, the biggest annual gain since 2007, according to Nationwide Building Society. The Royal Institution of Chartered Surveyors said this month values are on a “firmly upward trend.” The property revival is helping to boost the profits of homebuilders. Bovis Homes Group Plc (BVS) said today trading is “strong” and the outlook “very positive.” The number of loans advanced to first-time buyers was 24,400 in March, up 24 percent from a year earlier, data from the Council of Mortgage Lenders show. While some MPC members have expressed concern about the price gains, others, including Deputy Governor-designate Ben Broadbent, are more sanguine. He said yesterday that the central bank wouldn’t focus on house prices, but on credit growth. ‘Pent-Up Demand’BOE data show that the stock of outstanding mortgages was 1.28 trillion pounds ($2.2 trillion) in March, little changed from 1.27 trillion pounds a year ago. “The housing market is reflecting pent-up demand which will become exhausted,” said Alan Clarke, an economist at Scotiabank in London. “The impetus will fade. It’s sensible for the BOE to be alert to the risks, but in June we’ll probably see language rather than hard action.” One reason for steering clear of definite measures is the unknown potency of macroprudential tools. BOE official Andy Haldane has admitted they are “untested.” “What they need to do is work out what they’re trying to achieve,” said Richard Barwell, an economist at Royal Bank of Scotland Group Plc (RBS) in London who has written a book on macroprudential policy. “Is it protecting the banks from the housing market, or something beyond that? They’ll probably fire a shot across the bow in June. It will probably be more communication and guidance.” Financial ShocksThe BOE is about to gain an official who’s been working on the subject. Kristin Forbes, a professor at the Massachusetts Institute of Technology known for her work on the propagation of financial shocks across countries, will join the Monetary Policy Committee in July having recently done work on macroprudential policy and capital controls. “The U.K. is a very open economy and it’s important to have someone who understands international contagion channels,” said Helene Rey, an economics professor at the London Business school and member of the board of the French banking regulator, Autorite de Controle Prudentiel. “Her work in applied economics will be helpful.” -By Emma Charlton and Jennifer Ryan |