Spain’s Economy Minister Nadia Calvino arrives for the closing session of the New Global Financial Pact Summit, Friday, June 23, 2023 in Paris, France. Lewis Joly/Pool via REUTERS/File Photo Acquire Licensing Rights
BRUSSELS/MADRID, Dec 8 (Reuters) – EU finance ministers on Friday picked Spanish Deputy Prime Minister Nadia Calvino to become the next head of the European Investment Bank in a boost for Spain’s clout within the bloc.
If confirmed by the EIB’s board, she would start at the European Union’s financial arm and world’s largest public development bank on Jan. 1, the EIB said in a statement.
Europe’s antitrust chief Margrethe Vestager said minutes earlier that she had withdrawn her candidacy.
“I am grateful and honored to get the support of my fellow finance ministers,” Calvino said, adding that the EIB’s role was set to grow in importance as it funded the green transition and provided financial support to rebuild Ukraine.
The 55-year-old mother of four, a staunch defender of women’s rights, will replace German economist Werner Hoyer, 72, becoming the first woman and first Spaniard to lead the EIB.
Josep Borrell, another Spaniard, has been the EU’s top diplomat since late 2019.
“We are convinced that Nadia Calvino has all the qualities needed to manage the world’s biggest multilateral bank, channelling much-needed financing to businesses, and supporting investment to boost Europe’s competitiveness and sustainable growth,” said the EIB’s Belgian Chairman Vincent Van Peteghem.
Under Hoyer’s stewardship since 2012, the EIB has increased its capital and lending for clean energy and security investments in Europe and financed the development of COVID-19 vaccines.
Soft-spoken and typically measured in public appearances, Calvino has been the economy minister, a post that in Spain encompasses many aspects of public finances, since June 2018, when Pedro Sanchez, a Socialist, first became prime minister.
Widely seen as a technocrat, she is a career civil servant and not a member of Sanchez’s party.
Spain has put Calvino forward for several top jobs since 2019, including chair of the Eurogroup meeting of euro zone finance ministers and head of the International Monetary Fund, a position that eventually went to Bulgaria’s Kristalina Georgieva.
Calvino spearheaded Spain’s economic response to the pandemic with an unprecedented 200-billion euro package in 2020 and has managed the implementation of the European Union’s pandemic relief package.
After holding senior posts in Spain’s Economy Ministry, she went to the European Commission in 2006, and in 2014 was appointed the Commission’s director-general for the budget. She has been the chair of the IMF steering committee since December 2021.
Reporting by Charlotte Van Campenhout in Brussels, Andrei Khalip and Belen Carreno in Madrid; Editing by Kirsten Donovan
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People walk past a row of colourful houses in London, Britain, March 19, 2023. REUTERS/Henry Nicholls/File Photo Acquire Licensing Rights
LONDON, Dec 7 (Reuters) – British house prices rose for a second month in a row in November, figures from major mortgage lender Halifax showed on Thursday, adding to signs that the past year’s fall in house prices is bottoming out.
Halifax, part of Lloyds Banking Group, said house prices rose 0.5% in November on a seasonally adjusted basis after a 1.2% increase in October which followed an unbroken six months of declines.
The average house price of 283,615 pounds ($356,447) was 1.0% lower than a year earlier but up 1.7% from their trough in September.
Rival mortgage lender Nationwide reported last week that house prices on its measure rose for a third month in a row in November, and were 2% lower than a year earlier.
“The resilience seen in house prices during 2023 continues to be underpinned by a shortage of properties available, rather than any significant strengthening of buyer demand. That said, recent figures for mortgage approvals suggest a slight uptick in activity,” Halifax director Kim Kinnaird said.
Consultancy Capital Economics forecast a further 1.5% fall in house prices for 2024, but said the decline may be smaller.
“While a shallow recession and a rise in unemployment next year may cause a further modest fall in house prices, with the peak in mortgage rates behind us, prices may well have already bottomed out,” Capital economist Imogen Pattison said.
British house prices, like those in many other rich countries, surged during and after the COVID-19 pandemic due to demand for more living space, temporary tax incentives and record-low interest rates.
Between February 2020 and a peak in September 2022, British house prices rose 27% according to official statistics.
Over the past year, house prices have fallen due to a sharp rise in mortgage costs as the BoE raised interest rates from 0.1% in December 2021 to a 15-year high of 5.25% by August 2022 in response to the highest inflation in more than 40 years.
($1 = 0.7957 pounds)
Reporting by David Milliken; Editing by Kate Holton and Paul Sandle
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[1/2]Construction cranes are seen at dusk at an apartment complex under construction in Madrid, Spain, November 21, 2022. REUTERS/Susana Vera/File Photo Acquire Licensing Rights
MADRID, Dec 5 (Reuters) – Spanish property prices rose 4.5% from a year earlier in the third quarter, led by the highest increase in new home prices in 16 years, official data from the country’s National Statistics Institute (INE) showed on Tuesday.
New home prices in the quarter were up 11% compared with the same period a year ago due to low supply, high demand from foreign buyers and an increase in costs due to inflation.
Second-hand home prices were up 3.2% versus last year.
“The rise, especially in new housing, is largely due to the fact that we are still at very low levels of new housing production, below 100,000 new homes per year,” said Javier Diaz Izquierdo, a real estate analyst at Madrid-based broker Renta 4.
In 2006, Spain approved 850,000 new licences to build homes before the property market collapsed, triggering a financial crisis years later.
Diaz said the rise in prices was also driven by the profile of new home buyers who tend to be less indebted and less sensitive to interest rates and price rises.
“There are also lots of foreign buyers that drive prices higher in holiday areas,” he said.
Last week, Bank of Spain Governor Pablo Hernandez de Cos said property prices required close monitoring, although the risk of them becoming over-valued had lessened.
On Tuesday, online property portal Fotocasa said interest in house buying exceeded pre-pandemic levels, and the reduction in supply over the past year would make it even more difficult to reach a balance quickly.
“We predict that by the end of the year the price increase will be close to 5%,” said Maria Matos, a spokesperson for Fotocasa.
Reporting by Emma Pinedo, additional reporting by Jesús Aguado, editing by Charlie Devereux and Christina Fincher
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A “sold” sign is seen outside of a recently purchased home in Washington, U.S., July 7, 2022. REUTERS/Sarah Silbiger/File Photo Acquire Licensing Rights
NEW YORK, Dec 4 (Reuters) – U.S. home buyers are becoming more willing to purchase properties even as interest rates stay high, according to a study by Bank of America (BAC.N) published on Monday.
About 62% of respondents said they would wait for borrowing costs to fall before buying a house, according to 1,000 people polled in September. That is down from 85% six months earlier.
“We are beginning to see that lack of patience play out in the survey, which ultimately should lead to activity going forward,” Matt Vernon, head of consumer lending at Bank of America, told Reuters.
In a bid to tame inflation, the Federal Reserve has raised its policy rate a total of 5.25 percentage points in the last 20 months. The U.S. economy is showing signs of cooling, raising expectations that the rate hikes are likely done.
Nearly 80% of U.S. mortgages have an interest rate below 5%. That compares with average 30-year fixed mortgage rates that surged to 8% in October, the highest in more than two decades, which deterred buyers.
“There’s a clear desire for homeownership, but for some, it has become more challenging to achieve due to current market realities,” added Vernon.
Homeowners were willing to sell their existing homes and take on higher-interest mortgages if they found a property in a more affordable area or their dream home became available, the survey showed. They also sold their homes for career or family reasons or to seek a lower cost of living.
New-home sales dropped 5.6% to a seasonally adjusted annual rate of 679,000 units last month as mortgage rates squeezed out buyers.
Still, Americans’ pent-up demand for homes is expected to increase sales.
“We will be ready and we will be able to utilize our internal resources to meet the improved demand when it happens,” Vernon said.
The second-largest U.S. lender beat Wall Street estimates in its third quarter earnings and its consumer banking revenue increased 6% year-on-year to $10.5 billion.
Reporting by Nupur Anand in New York; Editing by Lananh Nguyen and Leslie Adler
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Governor of the Bank of Canada Tiff Macklem walks outside the Bank of Canada building in Ottawa, Ontario, Canada June 22, 2020. REUTERS/Blair Gable/File Photo Acquire Licensing Rights
BENGALURU, Nov 30 (Reuters) – The Bank of Canada will start cutting interest rates in the second quarter of next year as inflation and the economy slow, according to economists polled by Reuters, who forecast base borrowing costs will drop by at least one percentage point by end-2024.
BoC Governor Tiff Macklem said in a recent speech “interest rates may now be restrictive enough” with excess demand gone and weak growth expected to persist, leading most to conclude the central bank is done hiking.
But Macklem also said “right now, it is not time to start thinking about cutting interest rates.”
While the economy was expected to have grown a modest 0.2% annualized rate last quarter after contracting 0.2% in April-June, inflation has come down significantly to 3.1% last month from a peak of 8.1% in June 2022.
All but one of 26 economists in a Reuters poll taken Nov. 27-30 forecast the BoC will now keep its main policy rate on hold at 5.0% until at least end-March, similar to what is expected from the U.S. Federal Reserve.
Only Barclays expects one more 25 basis point rate hike in January. Interest rate futures are pricing the first rate cut in March, earlier than the poll prediction.
“It’s readily apparent in the past two quarters, interest rates in the 5% range are a significant headwind to growth, one that is desirable now while the BoC seeks to cool inflation, but too much of a drag to be sustained for a full year ahead,” said Avery Shenfeld, chief economist at CIBC Capital Markets.
“Our call does imply a bigger gap between U.S. and Canadian rates, but that’s consistent with the evidence at hand that shows the American economy, due to lower household debt levels and locked-in long-term mortgages, is better able to withstand interest rates near 5%.”
The poll predicts that the BoC will start cutting interest rates from the second quarter and medians showed it would deliver 100 basis points of rate cuts next year, more than the 75 basis points expected from the Fed.
About 70% of economists, 18 of 26, expected the rate to be at 4.0% or lower by end-2024, much below the expected fed funds rate, in a 4.50-4.75% range.
“The Bank of Canada will be thinking ahead with its policy rate still at 5%…(and) it will basically conclude the hiking cycle has done its job and it needs to start shifting towards a more normal monetary policy setting,” said Robert Hogue, assistant chief economist at RBC.
Economists at Desjardins were slightly more pessimistic than others on growth, expecting “a short, shallow recession in the first half of 2024.”
“Accompanying labour market weakness should put downward pressure on inflation and prompt the Bank of Canada to cut the policy rate around of the spring of 2024,” they wrote.
With nearly 60% of mortgage holders yet to renew their home loans at higher rates, the big question is what do these rate cut expectations mean for the housing market and for those who for years have been eagerly waiting to own a home.
A separate Nov. 15-30 poll of 11 property analysts forecast average home prices, which surged over 50% during the pandemic, to stagnate in 2024 after declining 3.3% this year, compared to a 2024 rise of 2.0% predicted in an August poll.
All but one of nine property market analysts said purchasing affordability next year would improve. But seven of nine respondents said the proportion of home ownership to renters would decrease over the coming five years.
That was despite several government measures announced in the latest Fall Economic Statement to boost housing supply and help lenders dealing with homeowners at risk amid high interest rates.
Sebastian Mintah, an economist at Moody’s Analytics, said the new supply set to come to market will mostly address past shortages, not prepare for the future.
“Given strong demographics are expected to continue, a continued robust pace of new building is needed. Problematically, new supply is likely to come up short as builders turn more cautious.”
(For other stories from the Reuters global economic poll:)
Reporting by Mumal Rathore; Editing by Ross Finley and Tomasz Janowski
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The Danish central bank, also known as Danish Nationalbank, is seen in Copenhagen, January 22, 2015. REUTERS/Fabian Bimmer/File Photo Acquire Licensing Rights
COPENHAGEN, Nov 28 (Reuters) – Denmark’s central bank said on Tuesday that the risk of further price drops in the commercial property market could be accelerated by Swedish real estate firms selling out of their Danish portfolios, which could hurt banks.
Swedish property firms struggling to refinance their debt amid rising interest rates have begun selling their portfolios, which could have a spillover effect on the Danish property market by pushing down prices, the central bank said.
“Due to the low level of transactions, a price correction related to divestment by the Swedish firms at this point in time would have a relatively great effect,” the central bank said in a financial stability report on Tuesday, adding that the largest Swedish firms have properties in Denmark worth 99 billion Danish crowns ($14.5 billion).
Any heavy divestment by Swedish firms would come amid a sharp drop in the number of commercial real estate deals in Denmark this year, which according to the central bank indicates that prices have not yet adjusted to the new interest rate level.
The central bank warned that as commercial real estate prices fall, the collateral pledged by property firms for loans may not be sufficient to cover their full exposure to banks.
“This may lead to losses for the institutions in the case of default of the loans,” the bank said.
Lending by Danish credit institutions to real estate firms has increased in recent years, amounting to 537 billion crowns or around 38% of their exposure to companies.
The central bank also said Danish real estate firms do not face the same refinancing risks as their Swedish counterparts, because they mostly are financed by mortgage loans with long maturities.
($1 = 6.8090 Danish crowns)
Reporting by Louise Rasmussen and Anna Ringstrom, editing by Louise Rasmussen and Kim Coghill
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The trading floor of Norges Bank Investment Management, the Nordic countryÕs sovereign wealth fund in Oslo, Norway, June 2, 2017. REUTERS/Ints Kalnins/File Photo Acquire Licensing Rights
OSLO, Nov 28 (Reuters) – Norway’s $1.5 trillion sovereign wealth fund, the world’s largest, should include private equity investments in its portfolio, allocating up to $70 billion, the country’s central bank recommended on Tuesday.
The Norwegian finance ministry in March asked the executive board of Norges Bank, which manages the fund, to assess whether unlisted shares should be added as an asset class.
Some 3-5% of the fund’s assets could gradually be moved to private equity funds, equivalent to between $40 billion-$70 billion, the central bank said in a statement.
A final decision will be made next year by parliament. It has previously rejected requests by the fund to move assets into private equity, arguing it could be too costly and would hamper the ability to judge its performance on an ongoing basis.
The fund, which invests Norway’s surplus oil and gas revenue abroad, is the world’s biggest single stock market investor, owning some 1.5% of all globally listed shares, and has stakes in more than 9,200 companies.
“Norges Bank considers it a natural evolution of the investment strategy for unlisted equity investments to be permitted on a general basis,” the central bank wrote in a letter to the finance ministry.
“A broader investment universe will provide more investment opportunities and help the fund benefit from a larger share of global value creation than today,” it added.
At the end of September, 70.6% of the fund’s assets were invested in listed stocks, 27.1% in fixed income, 2.2% in unlisted real estate and 0.1% in unlisted renewable energy infrastructure.
By way of comparison, the ten largest investors in private equity had an average of $80 billion invested at the end of 2022, Norges Bank said.
The fund in 2018 sought permission to acquire unlisted shares via private equity funds or by investing alongside such funds, but the then-government rejected the proposal, arguing it would impede transparency and drive up asset management costs.
But in 2022, a government-appointed commission again raised the topic of private equity, arguing that this could allow the fund to invest in promising companies at an earlier stage and thus potentially earn higher returns.
Reporting by Victoria Klesty and Terje Solsvik; Editing by Essi Lehto, Anna Ringstrom, Louise Rasmussen and Jan Harvey
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WASHINGTON, Nov 21 (Reuters) – U.S. existing home sales dropped to the lowest level in more than 13 years in October as the highest mortgage rates in two decades and a dearth of houses drove buyers from the market.
The report from the National Association of Realtors on Tuesday also showed that the median house price last month was the highest for any October. Barring a rebound in November and December, home resales this year are on track for their worst performance since 1992.
“The combination of high prices, high mortgage rates, and millions of homeowners unwilling to move, given they’ve locked in low rates, has frozen the market,” said Robert Frick, corporate economist at Navy Federal Credit Union in Vienna, Virginia.
Existing home sales tumbled 4.1% last month to a seasonally adjusted annual rate of 3.79 million units, the lowest level since August 2010 when the sales were declining following the expiration of a government tax credit for homebuyers.
Home resales are counted at the closing of a contract. October’s sales likely reflected contracts signed in the prior two months, when the average rate on the popular 30-year fixed-rate mortgage jumped to levels last seen in late 2000.
Economists polled by Reuters had forecast home sales would slide to a rate of 3.90 million units. Sales fell in the Northeast, West and the densely populated South. They were unchanged in the Midwest, the most affordable region.
Home resales, which account for a big chunk of U.S. housing sales, plunged 14.6% on a year-on-year basis in October.
The rate on the popular 30-year fixed-rate mortgage averaged 7.31% in the final week of September, before peaking at 7.79% in late October, the highest level since November 2000, according to data from mortgage finance agency Freddie Mac.
Though it has since retreated following data this month showing the labor market cooling and inflation subsiding, the rate averaged a still-high 7.44% last week.
Stocks on Wall Street were trading lower as investors awaited minutes of the Federal Reserve’s Oct. 31-Nov. 1 meeting later in the day. The dollar fell against a basket of currencies. U.S. Treasury prices rose.
TIGHT SUPPLY
There were 1.15 million previously owned homes on the market last month, down 5.7% from a year ago. Most homeowners have mortgage rates under 5%, making many reluctant to sell.
Lawrence Yun, the NAR’s chief economist, told reporters that realtors will be speaking with their representatives in the U.S. Congress about a government tax incentive for homeowners who have been living in their homes for a long period to encourage them to put their houses on the market.
Yun also noted that even if mortgage rates continued to slide, in tandem with U.S. 10-year Treasury yields, affordability would remain a challenge in the absence of adequate supply. The lack of previously owned houses is boosting demand for new homes.
At October’s sales pace, it would take 3.6 months to exhaust the current inventory of existing homes, up from 3.3 months a year ago. A four-to-seven-month supply is viewed as a healthy balance between supply and demand.
Builders have been breaking more ground on new housing projects, but are being constrained by higher borrowing costs.
“Homebuilders should take the opportunity to supply the market to meet demand,” said Jeffrey Roach, chief economist at LPL Financial in Charlotte, North Carolina.
With supply still tight, multiple offers were the norm in some areas, keeping house prices on an upward trend on a year-over-year basis. The median existing house price rose 3.4% from a year earlier to $391,800, the highest for any October. About 28% of the homes sold last month were above the listing price.
Properties typically remained on the market for 23 days in October, up from 21 days a year ago. Sixty-six percent of homes sold in October were on the market for less than a month.
First-time buyers accounted for 28% of sales, as they did a year ago. This share is well below the 40% that economists and realtors say is needed for a robust housing market.
All-cash sales accounted for 29% of transactions compared to 26% a year ago. Distressed sales, including foreclosures, represented only 2% of transactions, virtually unchanged from the prior year.
Reporting by Lucia Mutikani; Editing by Paul Simao
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A sign reads “new tenant wanted” in a window of a commercial building in Frankfurt, Germany, July 19, 2023. REUTERS/Kai Pfaffenbach/File Photo Acquire Licensing Rights
FRANKFURT, Nov 21 (Reuters) – The euro zone’s commercial real estate market could struggle for years, leaving bank loan books, investment funds and insurers exposed, the European Central Bank said on Tuesday.
Economic weakness and high interest rates have depressed real estate prices over the last year, reducing real estate firms’ profitability and even challenging the commercial property market’s business model.
The sector is not big enough to create a systemic risk for lenders but could increase shocks across the financial system and greatly impact the financial firms, from investment funds to insurance firms, collectively known as shadow banks.
“While the relatively limited size of bank commercial real estate portfolios implies that they are unlikely on their own to lead to a systemic crisis, they could play a significant amplifying role in the event of broader market stress,” the ECB said in a Financial Stability Review article.
Residential mortgages make up about 30% of bank loan books, while commercial real estate accounts for about 10%.
“A negative outcome of this type would also drive large losses in other parts of the financial system which are significantly exposed to CRE, such as investment funds and insurers,” it added.
Commercial real estate transactions were down 47% in the first half of 2023, compared with the same period a year earlier.
That makes it hard to say how far prices have dropped, but the bloc’s largest listed landlords are trading at a discount of over 30% to net asset value, their largest such discount since 2008, the ECB said.
It said a sample of bank loans to real estate firms implies the recent rise in financing costs may cause the share of loans extended to loss-making firms to double to as much as 26%.
If the tighter financing conditions persist for two years as markets expect, and firms are required to roll over all maturing loans, this number would increase to 30%.
“There are substantial vulnerabilities in this loan book, particularly when considering that it is expected that both higher financing costs and reduced profitability will persist for a number of years,” the ECB said.
“Business models established on the basis of pre-pandemic profitability and low-for-long interest rates may become unviable over the medium term.”
Reporting by Balazs Koranyi; editing by Barbara Lewis
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A person waits for a teller at a Signature Bank branch in New York City, U.S., March 13, 2023. REUTERS/David ‘Dee’ Delgado Acquire Licensing Rights
Nov 19 (Reuters) – Blackstone (BX.N) is the lead to win the $17 billion portfolio of commercial-property loans from the U.S. Federal Deposit Insurance Corp’s (FDIC) sale of Signature Bank debt, Bloomberg News reported on Sunday.
In September, the FDIC was seeking buyers for the $33 billion commercial real estate loan portfolio of failed New York lender Signature Bank.
The bidding process has brought in several finance companies such as Starwood Capital Group and Brookfield Asset Management (BAM.TO), according to the Bloomberg report.
The FDIC hired Newmark Group (NMRK.O) in March to sell about $60 billion of Signature Bank’s loans, after state regulators decided to close the failed lender amid turmoil in regional banks earlier this year.
FDIC declined to comment on the report. “We only comment on sales after they close. The entire portfolio sale has yet to close,” it said.
Blackstone, and Newmark Group did not immediately respond to requests for comment.
Reporting by Chandni Shah in Bengaluru; Editing by Lisa Shumaker and Bill Berkrot
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