China capital curbs reflect buyer’s remorse over market reforms

Last year the reformist head of China’s central bank convinced his Communist party bosses to give market forces a bigger say in setting the renminbi’s daily “reference rate” against the US dollar. In return, Zhou Xiaochuan assured his more conservative party colleagues that the redback would finally secure coveted recognition as an official reserve currency […]

Continue Reading

Capital Markets

Mnuchin expected to be Trump’s Treasury secretary

Donald Trump has chosen Steven Mnuchin as his Treasury secretary, US media outlets reported on Tuesday, positioning the former Goldman Sachs banker to be the latest Wall Street veteran to receive a top administration post. Mr Mnuchin chairs both Dune Capital Management and Dune Entertainment Partners and has been a longtime business associate of Mr […]

Continue Reading


Financial system more vulnerable after Trump victory, says BoE

The US election outcome has “reinforced existing vulnerabilities” in the financial system, the Bank of England has warned, adding that the outlook for financial stability in the UK remains challenging. The BoE said on Wednesday that vulnerabilities that were already considered “elevated” have worsened since its last report on financial stability in July, in the […]

Continue Reading


China stock market unfazed by falling renminbi

China’s renminbi slump has companies and individuals alike scrambling to move capital overseas, but it has not damped the enthusiasm of China’s equity investors. The Shanghai Composite, which tracks stocks on the mainland’s biggest exchange, has been gradually rising since May. That is the opposite of what happened in August 2015 after China’s surprise renminbi […]

Continue Reading


Hard-hit online lender CAN Capital makes executive changes

The biggest online lender to small businesses in the US has pulled down the shutters and put its top managers on a leave of absence, in the latest blow to an industry grappling with mounting fears over credit quality. Atlanta-based CAN Capital said on Tuesday that it had replaced a trio of senior executives, after […]

Continue Reading

Archive | Property

Spanish construction rebuilds after market collapse

Posted on 30 November 2016 by

Property developer Olivier Crambade founded Therus Invest in Madrid in 2004 to build offices and retail space. For five years business went quite well, and Therus developed and sold more than €300m of properties. Then Spain’s economy imploded, taking property with it, and Mr Crambade spent six years tending to Dhamma Energy, a solar energy business.

Now, however, the pendulum has begun to swing back. Therus has just broken ground on what Mr Crambade describes as Spain’s first large-scale speculative office project since the crisis, a 34,000 sq m complex near Madrid’s Barajas airport. Hispania, a socimi, or Spanish Reit (real estate investment trust), which counts George Soros among its investors, is forward funding the €106m project, which it will rent out.

“Now that they see that the Spanish economy is growing, that at least we have a government, businesses that had been waiting are looking for more space for growth, says Mr Crambade.

After one of the most brutal property busts in history — housing prices fell 45.2 per cent from 2007-2015, according to property site Fotocasa — the market seems to have turned a corner.

During the third quarter of 2016, average office rents rose 9 per cent in Madrid and 14 per cent in Barcelona year-on-year, says BNP Paribas Real Estate. Home sales are up 10 per cent and home foreclosures down 30 per cent annually, according to Spain’s national statistics agency, INE. Asking prices for homes in downtown Madrid and Barcelona are up 7 per cent and 9 per cent respectively since 2015, says Beatriz Toribio, Fotocasa’s head of research.

“From 2010 to 2012, international investors didn’t want to touch the Spanish market with a stick,” says Fernando Encinar, co-founder of property website Idealista. “We’ve passed from a brutal lack of trust in the Spanish economy, to now when you speak with investors [they say] ‘Give me yield.’ ”

The nascent recovery in Spain’s real estate market has come in stages, starting with opportunistic investors who bought high-risk assets in search of big returns. The first wave arrived in 2013, when large international funds from Goldman Sachs, Cerberus Capital Management and Blackstone bought bad loans and apartment portfolios.

The following year, the first socimis listed on Spain’s stock exchange and raised funds for more value-added investing. These Reits, along with funds such as GreenOak Real Estate, bought into the shopping centre market. They also began to bet on Spain’s economy — GDP is expected to grow 3.2 per cent in 2016, one of the fastest rates in the EU — by financing prime office renovations.

One of the earliest arrivals after the distressed asset investors was Lar España, the first socimi to list its shares publicly, in March 2014. Its primary bet has been on retail, as a way to ride increasing consumer spending. Today it has 26 properties worth some €1.2bn, 75 per cent of which is in shopping centres.

“There’s been a clear recovery of consumption in Spain, as well as a drop in unemployment,” says Miguel Pereda, chief executive of Grupo Lar. Sales at its shopping centres rose 9.2 per cent in the first nine months of 2016, he adds.

Investment in commercial real estate boomed in 2015, rising 25 per cent to €13bn, according to CBRE Spain; 43 per cent of that went into offices. This year’s figure is expected to be about €9.5bn, slowed in part by global uncertainty and the lack of a proper government in Madrid for 10 months, until October.

The residential market has also returned, led by foreign nationals who bought in Madrid and Barcelona and on the Mediterranean coast. There are still 500,000 unsold housing units in Spain, but new residential housing has begun to sprout. Last year, US investment firm Lone Star Funds bought a local residential real estate development firm, Neinor Homes, for €930m, with plans to build 1,000 units in the first year.

“We’ve gone from ‘invest and wait’ to ‘produce and generate’,” says Adolfo Ramirez-Escudero, chief executive of CBRE Spain. “Now there’s more development and construction, more cranes, more economic activity leading to better sale prices and rents.”

Referring to a Neinor Homes sign in the CBRE’s Madrid offices, Mr Ramirez-Escudero says that the firm returned to promoting new residential units only last year. Now, he says, it has 1,500 and demand has returned.

Weak spots remain. Outside prime locations in Madrid and Barcelona and on the coast, many markets still have a “major hangover”, with no recovery in sight, Mr Pereda says.

In the office market, investor competition has pushed up prices and squeezed profitability. In downtown Madrid, prime office yield has fallen from 6.2 per cent at its peak to 4 per cent today, says Ramiro Rodríguez, European analyst at BNP Paribas Real Estate.

Madrid and Barcelona have voted in city leaders who are less friendly with property developers than their predecessors, stalling the massive Castellana Norte development in Madrid and also hotel projects in Barcelona.

For developers like Mr Crambade, however, it is good to be back. “After six years of being a taboo topic in economic circles, real estate developers are being invited back into the official cocktails,” he says. “The stars are lining up again.”

Zoopla wins back customers from online property rival

Posted on 30 November 2016 by

Zoopla chief executive Alex Chesterman has branded rival OnTheMarket “a failed experiment”, and said that his property site was winning back customers at a record rate.

OnTheMarket was set up last year, aiming to compete with Zoopla and Rightmove, the UK’s two biggest property portals. It allowed estate agents to list their properties more cheaply than rivals, but insisted that any agents using its site could only use one other portal. As the number two in the market, Zoopla was expected to suffer most.

However, reporting full-year results on Wednesday, Mr Chesterman said Zoopla had won back 600 agents. “This is the beginning of the end for OnTheMarket,” he added.

Zoopla’s property services revenue rose 9 per cent to £87m in the year to September. The company said it had 927,000 properties listed on its sites, up almost a tenth on the year. It said it had more than 23,000 estate agents and other customers using its products, with numbers growing for 18 consecutive months.

But Mr Chesterman was cautious about the property market’s prospects. “Brexit has caused uncertainty, which has naturally led to a slowdown in property sales, but the rental market remains very strong.” He added that rental deals outnumber property sales by a ratio of three to one.

Overall Zoopla, which also owns the PrimeLocation and uSwitch sites, reported revenues of £198m, up 84 per cent on the previous year partly due to an acquisition. Pre-tax profits rose 38 per cent to £46m while earnings per share rose from 6.2p to 8.9p.

The dividend was increased from 3.5p per share to 5.2p.

Zoopla’s shares, which have risen by more than a third in the past year, outperforming those of rival Rightmove, gained more than 7 per cent on Wednesday morning.

Alongside the results, Zoopla unveiled two new investments. The company has put money into Neos, a home insurance company which uses connected devices such as alarms, smoke detectors and water detectors to monitor what is happening in the home.

It has also bought Technicweb, which provides web design and hosting services to estate agents.

“We now have significant cross-selling potential with over 23,000 partners taking at least one of our services,” said Mr Chesterman, who added that the company was “stronger and more diversified than ever”.

US pending home sales inch higher in October

Posted on 30 November 2016 by

A forward-looking indicator of US home sales edged slightly higher in October, indicating steady recovery in the country’s housing market.

The National Association of Realtors said pending home sales, based on signed contracts to buy previously-owned single-family homes, rose 0.1 per cent from September, in line with economists’ estimates. The rate of growth had slowed from September, when sales rose 1.5 per cent to post their biggest gain in five months.

“Most of the country last month saw at least a small increase in contract signings and more notably, activity in all four major regions is up from a year ago,” said NAR chief economist Lawrence Yun.

The figure comes hot on the heels of Tuesday’s report of September’s S&P CoreLogic Case-Shiller national price index, another closely-watched gauge, which surpassed a previous high notched in July 2006.

London to offer grants in £3.2bn affordable housing boost

Posted on 29 November 2016 by

London has said it will spend £3.2bn to build 90,000 affordable homes over six years, with grants of up to £60,000 per council house built by non-profit housing associations.

The Greater London Authority said that there would also be grants of £28,000 to build affordable homes, where either the ownership is shared, or the rent is set at one-third of average earnings.

The target of 90,000 new homes by 2020-21 represents a 48 per cent increase from the number of affordable homes built between 2009-10 and 2014-15.

Property developers that do not include at least 35 per cent of affordable housing in their projects can expect to be “properly interrogated”, said the GLA, as it offered developers the choice between voluntarily raising their affordable housing share or going through a drawn-out planning process.

Last year, 13 per cent of homes granted planning permission were classed as affordable, the GLA said.

James Murray, deputy mayor for housing, said the approach represented the GLA being “ambitious but practical”, seeking a big increase in affordable housing while recognising the limits to its ability to do so.

Sadiq Khan, London’s mayor, is legally unable to introduce a binding target for affordable housing levels until the next version of the London Plan, a citywide rule book, is adopted in late 2019.

Iain Gilbey, property lawyer at Pinsent Masons, said the GLA was going to “apply a great deal of scrutiny to less than 35 per cent affordable housing and a light touch approach to more than 35 per cent”.

Mr Khan has a “long-term strategic target” of achieving 50 per cent affordable housing on new developments. Housing associations receiving grants from the mayor will be expected to deliver 50-60 per cent, with private developers expected to deliver 35 per cent.

Andrew Boff, the Conservative chair of the London Assembly’s housing committee, criticised Mr Khan for his refusal to set a numerical target for the total number of homes built, as opposed to the percentage target for affordable homes.

A rising percentage of affordable homes could obscure a falling number of total homes built, he said, adding that a numerical target would provide a way to judge the mayor’s performance at the next election.

“Every housing problem in London — poor private rented homes, the social hollowing-out of London — comes back to the fact there aren’t enough incentives to build and nothing here addresses that,” Mr Boff said.

The GLA also said it had devised a way of adapting affordable housing requirements to rental homes.

US home-price gauge hits new high in September

Posted on 29 November 2016 by

A closely-watched measure of US home prices in September shot past a peak set at the height of the housing boom in 2006, as home prices across the nation continued to post steady gains that could signal that the post-recession housing market has turned a critical corner.

The S&P CoreLogic Case-Shiller national price index reported a 5.5 per cent annual gain in September, surpassing a peak set in July 2006 amid the housing boom, according to the report.

Housing prices in 20 cities posted a year-over-year gain of 5.1 per cent during September, unchanged from the previous month, the report said. Western cities Seattle, Portland and Denver notched the largest gains, with Seattle leading the way with a 11 per cent increase, closely followed by 10.9 per cent boost in Portland, Oregon.

The new national index peak “will be seen as marking a shift from the housing recovery to the hoped-for start of a new advance,” said David Blitzer, managing director and chairman of the S&P Dow Jones Indices index committee.

UK housebuilder Countryside reports profits up a third

Posted on 29 November 2016 by

Housebuilder Countryside Properties brushed aside fears about the health of the UK’s property market as it reported a 34 per cent jump in operating profits to £123m.

Concerns about a housing slowdown have been growing — last week Countrywide, a British estate agent, said transactions were running “significantly below” last year.

But on Tuesday Countryside, which develops housing in the south east, Midlands and the north west, said “demand for all tenures of housing, particularly in London and the south east, continues to be strong and resilient”. It added that reservations were “robust”.

Analysts said there was a growing difference between the new build and second-hand markets, which means UK housebuilders have still largely reported robust demand.

“The new-build market is in rude health, but second hand has been slow,” said Gavin Jago, analyst at Peel Hunt. “Housebuilders are willing sellers but the second-hand market is different — if you get a slowdown in activity, it can be a vicious circle.”

He added that the government’s Help to Buy scheme, which provides support for people wanting to purchase new-build homes worth up to £600,000, was helping this sector.

In the past month, UK groups Persimmon and Bellway have reported resilient trading, with sales rates ahead of last year. Taylor Wimpey, the UK’s third-largest homebuilder, said its total order book was ahead of a year ago.

Countryside chief executive Ian Sutcliffe also put the company’s resilience down to its partnership division, which accounts for just under half of the group’s revenues. In this business, Countryside works with local authorities and housing associations to redevelop public sector land into mixed schemes that include privately owned homes, affordable housing and rented properties.

“Government sentiment seems to be moving away from ownership and towards broader housing delivery and mixed tenure,” he said.

Profits at Countryside’s partnership division in the year to September rose 40 per cent. At the private housebuilding unit, which focuses on the south east and the London suburbs, profits were up by 30 per cent.

Reported pre-tax profits rose from £28m to £79m, while earnings per share were up from 4.4p to 13.6p. The company proposed a maiden dividend of 3.4p per share.

Mr Jago said it was “a very strong set of results”, and added that the company was on track to double its pre-tax profits over the next two years.

“All housebuilders had a bit of a blip around the time of the referendum but they have had a strong rebound,” he said.

Countryside’s shares were flat at 230p on Tuesday. They floated in February at 225p, and have since outperformed those of rival housebuilders such as Barratt, Taylor Wimpey, Persimmon and Bellway.

Mortgage rates: self-extending prophecy

Posted on 29 November 2016 by

The recent uptick in US mortgage rates has home buyers scrambling to finalise new purchases. Since the election, a benchmark index of 30-year mortgage rates has gained half a per cent at a speed reminiscent of the taper tantrum in 2013. The impact on borrowers is clear. Several factors will determine the effect on lenders.

Predictably, the move has brought a decline in refinancing activity; no rational borrower will pre-pay when market rates are higher than the interest on their existing loans. Once the rush to beat the rise is over, higher rates may ultimately also mean less demand for mortgages in general as interest payments become less affordable. Wells Fargo made 10 per cent of this year’s non-interest income on mortgage originations. And nonbank lenders, often focused on refinancing existing mortgages, may have to rethink business models.

In the meantime, the average maturity of the bonds into which the mortgages are packaged will increase as prepayments become less likely. Mortgage-backed securities might then pay low coupons for longer. This increases duration, making their prices more vulnerable to the rising rates that extended their maturity.

For banks, higher rates will mean higher net interest income, although this benefit will take time to percolate through. More immediately, it will mean losses on mortgage-backed securities, although banks had already reduced their portfolio allocations to MBS as capital charges against them increased and lawsuits highlighted the reputational risk of lending to consumers. MBS losses may be offset by gains in the value of mortgage servicing rights, as lower refinancing activity means they will collect administration fees for longer. And gains on hedges will depend on the extent to which lower for longer expectations were built into them.

The Mortgage Bankers Association predicts an average rate of 4.8 per cent for 2018. How that would impact on demand among borrowers who have grown used to 30-year rates of 3.5 per cent is unclear. But habits form quickly, and mortgage related headwinds could loom both in the short and the longer term.

Email the Lex team at

Mongolian property heads to London market

Posted on 28 November 2016 by

Mongolian property is coming to a stock market near you.

Asia Pacific Investment Partners, which describes itself as a “leading developer of Mongolian property” is seeking to list on London’s junior market Aim next month.

Lee Cashell, the CEO who is married to co-founder and president Tsendsuren Bordukh, said:

We have spent the last 15 years in the Mongolian market building what we believe is the country’s only vertically integrated property development company, and we believe the Group is now well positioned to capitalise on the strong growth opportunities of the Mongolian economy.

Our research driven model provides us the insights necessary to take advantage of future opportunities in frontier markets. This IPO will allow us to accelerate the Company’s growth momentum by providing additional funding for our real estate and other businesses.

China mulls extension of contentious property leases

Posted on 28 November 2016 by

China’s leaders are pondering how to solve a simmering problem which is increasingly worrying the country’s home owners – what to do when decades-long private leases on land expire.

All mainland Chinese land is state-owned, but use rights for periods ranging from 20 to 70 years have been granted since the 1990s.

The low end of that range came to national attention in April, when the eastern city of Wenzhou told local homeowners who held 20-year usage rights that they had to pay a third of their homes’ value to renew them.

That sparked an outcry from middle-class families across the country who have poured their savings into property, the ultimate fate of which has never been fully resolved under Chinese law.

The central government’s powerful State Council is researching how to extend usage rights for urban land, according to an official dispatch by the official Xinhua news agency which provided little detail on what measures might be adopted.

The guidelines, which state media said were published Sunday, appear to pick up on a 2007 property law which asserted land use rights could be renewed, but failed to specify how that would happen.

They also include exhortations to limit the conflicts that arise from ubiquitous government land grabs, as well as calls to grant greater property rights to farmers. But there was no indication Beijing intends to grant farmers full private ownership of their plots, collectively ownership of which enabled local officials to expropriate land in the first place.

BoE questions big banks over buy-to-let lending

Posted on 27 November 2016 by

The Bank of England has questioned big UK lenders about buy-to-let loans, which they have interpreted as a signal to rein in their mortgages for landlords.

Supervisors from the central bank’s Prudential Regulation Authority have visited lenders in the past two weeks to express concern over the buy-to-let market, according to sources at three institutions.

This was despite tax changes introduced earlier this year to cool the market and efforts by regulators to insist banks “stress test” landlords’ ability to repay mortgages, which have already caused a sharp slowdown in lending.

While the PRA did not tell banks to stop extending buy-to-let loans, banks have interpreted supervisors’ raised eyebrows in this way, they told the Financial Times. “The message was clear — we think you have enough buy-to-let loans,” said one.

The PRA declined to comment.

The buy-to-let market has been on the BoE’s radar for some time. Earlier this month the government gave the BoE an official “power of direction”, which enables it to order the PRA or Financial Conduct Authority to demand lenders limit buy-to-let mortgages. The government’s move essentially formalised powers the BoE already had to suggest such a move.

Regardless of the PRA’s concerns, the buy-to-let market was showing signs of cooling because of stamp-duty changes for second homes introduced in April, and tougher underwriting standards for banks. While those standards do not come into effect until January, banks have been tightening their lending criteria in anticipation of the changes.

Average monthly buy-to-let mortgage lending was down a third in the six months since April, compared with the six months before April, according to the Council of Mortgage Lenders.

One senior UK banker said the BoE was “concerned” about aggressive lending practices at some banks. But large mortgage lenders, such as Lloyds Banking Group and Royal Bank of Scotland, have already restricted their risk appetite in this area.

The BoE’s latest snapshot of the buy-to-let market is expected to come on Wednesday, when it publishes its next Financial Stability Report along with the unveiling of this year’s stress-test results.

The PRA has examined the UK’s top seven banks’ balance sheets under various doomsday shock scenarios — even though real-life events such as the Brexit referendum and the US election this year have caused foreign-exchange swings that go further than the ones envisaged by the stress test.

Unlike previous years, each bank will have its own threshold to clear to “pass” the tests.

“Also for the first time they are testing both severe domestic and international scenarios, whereas previous years have focused on one or the other,” said Steven Hall, a KPMG partner. “The impact of conduct risk is expected to weigh heavy on this year’s results as we saw with the 2015 exercise and the European Banking Authority’s July results.”

RBS was particularly badly hit by the EBA’s stress tests published in July, in part because of the likely multibillion pound cost of settling a US investigation into alleged mis-selling of mortgage securities before the 2008 crisis.

Additional reporting by Judith Evans