“What if I were to die tomorrow, what would you do for the rest of your life?”
That’s what Malaysian Samantha Khoo asked her Singaporean husband Rene Sullivan in 2017, when he came home late from a long day of work.
“It was really sudden and it took me some time before I answered her,” he told CNBC via video from Langkawi, Malaysia. “I said, ‘Well, if that happens, then I just take my guitar … and then travel the world’.”
Khoo replied, “Why are we waiting for me to die for you to do this?”
Living in a sailboat together has allowed Rene Sullivan and Samantha Khoo to work on their communication skills. “In a house, if you get pissed off at each other, you can just leave … Here you can’t. You have to make up and say you’re sorry,” said Khoo.
24 Hour Travellers
“Here we are chasing these goals. Pay up your debts, get your house, do your business … We did it all. We’re at this point where we’re still like: When is it ever enough?”
The couple, now in their late 40s, were running businesses of their own back then.
“It was a change of perspective. Money can no longer be our currency because … it’s never going [to be] enough. Time became our currency — how do we spend our time doing what we want?”
How they got started
The first thing the duo did was sell most of their possessions, including their businesses and real estate, said Sullivan.
“We start cutting everything,” he said. “You realize you don’t really need a lot of money — because you’re not paying your staff, you’re not paying your rent, you’re not paying for a property, you’re not paying for your [credit] cards.”
They have since become “small-time investors,” said Sullivan.
Sullivan and Khoo, who’ve been married for 22 years, said the most important thing that enabled them to travel full time was being debt-free.
“We are not rich,” Khoo insisted. “It was very important [to be debt-free]. For example, for properties that we bought, we made sure that [they were] paid off within five years.”
The couple bought an ex-military van for $3,600 and converted it into a campervan. For three years, they traveled across Malaysia and conquered “the whole of Thailand,” said Khoo.
“The best part of van life for both of us is the freedom of not having to pre-book air tickets or trains, buses or hotels. We can come and go when we like,” she added.
Discovering boat life
In 2019, they started planning a six-month road trip to the U.K., which would have taken them through China, Mongolia, Russia and Europe.
They were all ready to go when the Covid-19 pandemic hit. So they put their plans on hold.
Earlier this year, many countries reopened their borders to travelers, and the couple were preparing to leave.
“And then the [Russian-Ukraine] war happened. Nothing said that it was a good time to do land travel,” said Khoo.
With their plans thwarted, the couple started dreaming about their next adventure. Khoo spent a lot of time watching videos on YouTube, and she chanced upon one about living in a tiny boat.
“I was like, ‘Oh, I can do this,'” she said. Sullivan, however, was not so keen.
“I was skeptical of everything — [dealing with] the weather and then being in the ocean all by yourself. I’m kind of chicken that way,” he said with a laugh.
The compromise? Sullivan agreed to test the waters of sail life before committing to buying a boat.
They spent four months at Pangkor Marina in Malaysia, where they worked for boat owners without pay to gain knowledge about boat life and maintenance.
Sullivan eventually fell in love with the lifestyle. In April this year, the couple bought a secondhand full-keel boat for $15,000.
‘Bring on another 1,000’
While the idea of living on a sailboat is relaxing, Khoo and Sullivan said it’s anything but glamorous.
“There’s really a lot of hard work that goes into it. We are learning new skills every day,” said Khoo. “This boat is not just our home, but it’s also our university, our dormitory, our office.”
There is a common saying that “boat” stands for “bring on another thousand,” said Khoo.
“It means that when something breaks, you’re going to spend $1,000 on it.”
A sailboat is “not just our home, but it’s also our university,” said Samantha Khoo. The couple added that they are learning new skills everyday — like fixing the water pump of a boat.
24 Hour Travellers
Sullivan added, “Learning about the engine and [fixing] it ourselves, you save a lot. So if you know how to do it, you just buy the parts, and you fix it yourself.”
Sullivan said he picks up skills from other boaters as well as online.
“It’s all available on YouTube … It just takes more time for you to learn,” he said.
That’s why the couple have yet to leave Talagar Harbor in Langkawi, where their boat has been anchored for the past three months.
“People are like: ‘Go already, you guys are ready,'” said Sullivan.
But he said they’re content to go slowly — to focus on anchoring the boat, then returning to shore for the time being — and review their progress quarterly.
“We don’t pressure ourselves because we just want to be like 1% better than yesterday,” he said.
Becoming capable sailors
Khoo and Sullivan also run a YouTube channel called 24 Hour Travellers, where they document their adventures and interview other travelers.
The couple said being round-the-clock travelers is matter of perspective.
“It’s about … how you can change your perspective and be happy where you are,” Khoo said.
“At Talagar Harbor, when we walk to the main gate, we pass a South African captain, a French captain, a German sailor, an Indonesian carpenter … they become your neighbors,” she added.
“Knowing the boat owners, it’s already like traveling the world,” she said.
For now, the couple are focused on taking “baby steps” to achieve their goal — to become capable sailors and set sail to Thailand next year.
“The dream is to anchor our boat in blue water and be surrounded by islands,” Khoo said.
2023 Ford Super Duty F-350 Limited
Ford
DETROIT – Ford Motor is redesigning a pivotal product lineup, leaning on new software and connected data metrics, to boost profits in its commercial vehicle business.
The Detroit automaker on Tuesday revealed its 2023 F-Series Super Duty trucks, a lineup of vehicles ranging from large pickups to commercial trucks and chassis cabs that are used for emergency response, towing and plowing, and construction or utility work.
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The vehicles – part of Ford’s best-selling F-Series truck lineup – are high-margin, key to retaining recurring fleet customers and a major part of Ford’s plans to grow its commercial business.
“These are massively important. Super Duty is the size of revenue of Southwest Airlines, Marriott or Nordstrom. It’s a big part of the business,” Ted Cannis, CEO of Ford Pro, told CNBC. “And now we’re bringing them into the digital age.”
Cannis declined to disclose revenue for Ford’s Super Duty lineup, but Southwest, Marriott and Nordstrom most recently reported annual revenues of between $14 billion and $16 billion. Ford reported more than $136 billion in total revenue in 2021.
Super Duty trucks have more than 50% market share in utility, mining, construction and emergency response vehicles, according to Ford, citing data from S&P Global Mobility.
The designs of the new trucks are notably different on the exterior, featuring redesigned C-clamp lights and larger grilles. But the most important changes for Ford can’t be seen by the naked eye, including new electrical architectures, or brains, of the vehicles. The updates will give Ford the ability to introduce new software, data telematics and fleet management tools, Cannis said.
2023 Ford Super Duty F-550 Chassis Cab
Ford
The software tools will help businesses track maintenance needs, vehicle locations, driver behaviors, wasted idle time and other metrics. Fleet operators also can set operation times that would prevent the vehicles from starting outside of approved times.
Such services are viewed as major opportunities for Ford to create recurring revenue throughout the lifecycles of the vehicles – something automakers such as Ford have been unable to achieve beyond regular maintenance and repairs through franchised dealers.
The mission of Ford Pro is to act as a one-stop shop for vehicles as well as the software management that companies use to monitor them, Cannis said, laying the groundwork for subscription-based businesses and additional recurring revenue opportunities for Ford that have historically been the domain of third-party companies.
The connected features are powered by embedded 5G connectivity – a first for pickups in the U.S — utilizing AT&T service and a Qualcomm modem.
2023 Ford Super Duty F-350 Limited
Ford
“We’re focused on maximizing productivity, maximizing the bottom line for businesses of all sizes,” Raj Sarkar, Ford Pro general manager of product marketing and strategy, said during a media briefing.
Ford Pro is one of three main business areas for the company under CEO Jim Farley’s Ford+ restructuring plan, which targets growth and value creation in all three segments in the years to come.
The Super Duty trucks also feature new interiors as well as other trailering and towing updates – both key to owners of larger trucks. The new features include trailer navigation, which plots routes that can be safely navigated with given trailer dimensions and weight to avoid potential issues with low bridges and tight turns, as well as a second backup camera that can be used when the tailgate of a truck is down.
Though Ford is investing billions in electric vehicles, the new trucks are powered by one of four V-8 gasoline or diesel engines. Large trucks such as Ford’s Super Duty are expected to continue to be powered by traditional engines for the foreseeable future.
The 2023 F-Series Super Duty is built at Ford assembly plants in Kentucky and Ohio. Pricing will be available closer to launch in early 2023. The starting prices of the vehicles currently range from about $40,000 to nearly $100,000.
Ford unveiled its new Super Duty products a day after crosstown rival, General Motors, announced updates to its 2024 Chevrolet Heavy-Duty pickup that is expected to go into production the first half of next year.
2023 Ford Super Duty F-250 XL STX
Ford
In just three years, Beijing-based Well-Link Technologies has built a business on real-time cloud rendering, including helping miHoYo launch the cloud version of the hit game Genshin Impact.
Ina Fassbender | Afp | Getty Images
BEIJING — Singapore state investment firm Temasek is leading a $40 million funding round in a Chinese startup despite a dry spell of deals in the country.
The startup, Well-Link Technologies, counts Chinese tech company Xiaomi and Chinese gaming star miHoYo as investors, according to business database Tianyancha.
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The $40 million deal announced Monday is an early-stage, or B2 round, led by Temasek and includes existing shareholders Future Capital and VGC.
Temasek confirmed the deal in an email.
The Singapore firm’s publicly disclosed exposure to China has declined over the last two years, from 29% in 2020 to 22% as of this March. As of last week, Temasek had only participated in eight China financing deals, down from 41 last year, according to Dealogic.
In just three years, Beijing-based Well-Link Technologies has built a business on real-time cloud rendering, including helping miHoYo launch the cloud version of the hit game Genshin Impact.
Cloud gaming requires fast processing speed since it relies on remote servers and an internet connection to offer people a smooth gaming experience with just a small file download.
For example, the cloud version of Genshin Impact is just 78.5 megabytes on Apple’s App Store in China, versus the exponentially larger 3.7 gigabytes for the non-cloud version.
Soaring revenue
Well-Link claims its revenue for each of the last two years has grown by a whopping 400% or more, putting the company on track for revenue of several hundred million yuan — the equivalent of tens of millions of U.S. dollars.
CEO Guo Jianjun told reporters the valuation that Temasek offered wasn’t the highest one the startup received. But he said the latest financing round is part of the company’s plans to expand its business overseas.
It was difficult to raise funds during the pandemic, and the startup still has a lot of money, Guo said. But he added that he’s confident in Well-Link’s future development and wants to stick to its fundraising plan.
One of Well-Link’s next steps is encouraging more developers to create games that originate in the cloud.
The company is also exploring how its real-time cloud rendering tech can help with the development of virtual reality and other technologies of the future.
On the issue of regulation, Guo said his startup faces little policy uncertainty, and noted that Well-Link is a not a consumer-facing company.
“From the time of this company’s founding in 2019, our requirement was that we must do compliant, reasonable and legal things,” Guo said in Mandarin, according to a CNBC translation.
“Really excellent and good companies and good content will continue to get [approvals] or support,” he said. “So all we need to do is serve the good content that’s in accordance with policy requirements.”
China’s gaming industry has come under increased regulatory scrutiny in the last 18 months, with tighter restrictions on how long minors can play. Regulators have also been slow to approve many new games by industry giants NetEase and Tencent, although the two companies each received approvals for titles this month.
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Even with signs that the housing market is cooling, homebuyers are still feeling the sting of elevated prices and higher interest rates.
The average rate on a 30-year fixed-rate mortgage is 6.7% as of Friday, up from 3.3% at the start of 2022, according to Mortgage News Daily. Alongside that, home prices — the median is $435,000 — are up 13.1% on average from a year ago, according to Realtor.com.
“I think the major problem is payment shock,” said Stephen Rinaldi, president and founder of Rinaldi Group, a mortgage broker based near Philadelphia. “When I sit down with clients and the rate is in the 6s, their payment is outrageous sometimes.”
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The difference that interest rates make can be significant. For illustration: On a $300,000 mortgage at 6.5% over 30 years, monthly payments for principal and interest only would be $1,896. That same loan at 3% would result in a payment of $1,264 (a savings of $632). Other charges such as property taxes or mortgage insurance would be on top of those amounts.
Yet there are ways to reduce the cost of buying a house. While there’s no one-size-fits-all approach, you can evaluate various options available to you and consider whether any of them make sense for your situation.
Here are some options.
An ARM could be a short-term answer
An adjustable rate mortgage may be worth considering. With an ARM, as it’s called, the appeal is its lower initial rate compared with a traditional fixed rate mortgage.
That rate is fixed for a set amount of time — say, seven years — and then it adjusts up, down or remains the same, depending on where interest rates are at the time.
While there’s a limit to how much the rate can change, experts recommend making sure you’d be able to afford the maximum rate if faced with it down the road. As illustrated above, a few percentage points can make a big difference in the monthly payment.
Keep in mind, though, that at any point before the rate adjusts you may be able to refinance your mortgage, said Rinaldi.
Or, if you anticipate moving before the initial rate period expires, an ARM may make sense. However, because life happens and it’s impossible to predict future economic conditions, it’s wise to consider the possibility that you won’t be able to move or sell.
Additionally, if the ARM rate isn’t much lower than a fixed rate, the savings may not be worth the uncertainty. Rinaldi said that while some lenders aren’t offering much in the way of a discounted rate, he’s finding some that are about one percentage point or more lower.
15-year mortgages reduce what you pay in interest
While the typical mortgage is for 30 years, a shorter loan with a more favorable rate may be appealing. The average rate for a 15-year loan is 6% as of Friday, according to Mortgage News Daily. Additionally, you save a boatload in interest over the life of the loan and you build equity in the house faster.
For illustration: A 30-year, $300,000 mortgage with a fixed 6.5% rate would mean paying $382,786 in interest over the life of the loan. In comparison, a 15-year mortgage, even at the same rate, would translate into paying $170,438 in interest during the loan.
It’s not just the rate difference, but the equity buildup, too.
David Demming
President of Demming Financial Services
“It’s not just the rate difference, but the equity buildup, too,” said certified financial planner David Demming, president of Demming Financial Services in Aurora, Ohio.
At the same time, he said, if the higher payment squeezes your budget too much it may not be the best route.
First-time homebuyer programs can help with costs
If you’re a first-time homebuyer with limited means, you may be able to qualify for one of the federal programs available that help you buy a house with a lower down payment and reduced closing costs. Additionally, state and local governments (city or county) often offer grants or no-interest loans to help buyers cover their down payment and closing costs.
Rent-to-own works in some cases
Sometimes, a potential homebuyer might be unable to qualify immediately for a mortgage due to credit issues or short work histories. Or, they might need more time to save for a down payment but want to get in a house and stay put.
In those cases, it may make sense to consider a lease- or rent-to-own contract. One common aspect of these arrangements is for a portion of the monthly rent to go into an escrow account until the date of purchase a couple or few years down the road, at which point the escrowed amount goes toward closing costs or a down payment. But if you walk away or otherwise can’t meet the contractual obligation, the money is forfeited.
If you consider going this route, It’s important to do due diligence and make sure you understand the terms of the contract — including the type of mortgage the property is eligible for and how the purchase price will be set, Demming said.
Buying ‘points,’ trimming closing costs can save, too
You may be able to negotiate closing costs, such as the fees you pay for various aspects of the homebuying process or by using a lower-cost title company. Or, the seller may be willing to pay some of your costs, depending on competing offers presented.
You also may be able to buy extra “points” — one point is worth 1% of the loan amount — to get a lower interest rate.
However, Rinaldi cautions that because it can take years to break even when you go this route, it may not be worth it.
“You don’t want to pay extra origination charges because if you refinance, that’s lost money,” Rinaldi said.
Michelle Gass
Chris Ratcliffe | Bloomberg | Getty Images
Activist investor Ancora Holdings is pushing Kohl’s to remove its chief executive and its chairman.
Ancora sent a letter to the board Thursday asking for the replacement of CEO Michelle Gass and Chairman Peter Boneparth. The firm, which has a 2.5% stake in Kohl’s, wants new leadership so the company can revamp its business.
“Kohl’s needs new leadership with demonstrated experience in cost containment, margin expansion, product catalog optimization and, most importantly, turnarounds,” says the letter, which has been obtained by CNBC.
The push comes a few months after Kohl’s terminated its talks to sell to Franchise Group. The company had been encouraged by activist investors to pursue a sale. Franchise Group proposed a bid of $60 per share before the uncertain economic environment forced it to bring its potential offer down to $53.
Gass came from Starbucks to take over as CEO for Kevin Mansell in 2018, with plans including the expansion of Sephora’s presence in Kohl’s stores. Ancora called her a “talented leader” and praised the Sephora partnership. Boneparth has been a director at the company since 2008 and became chairman this year.
“During the Boneparth era, the Board has created an environment in which Ms. Gass is no longer well-positioned to lead,” the Ancora letter said.
The activist investor, along with Macellum Advisors, attempted to seize control of Kohl’s board in 2021. In that attempt, Ancora, along with other stakeholders, pushed for new directors with retail experience, inventory reduction and the sale of Kohl’s real estate. Kohl’s pushed back against the endeavor, and the two parties settled to add three new directors.
Kohl’s received a bid on its property from Oak Street Real Estate Capital earlier in September. The real estate investor offered as much as $2 billion for the chain’s property, which Kohl’s would lease back for its store locations.
“Now you’ve got an environment where financing has changed so much that it may in fact be more attractive to use real estate as a monetization vehicle,” Boneparth told CNBC in a phone interview prior to the Oak Street offer.
Kohl’s and Ancora Holdings did not immediately respond to requests for comment.
Shares of Kohl’s are down about 43% so far this year.
A lot of “ghost malls”, or properties with a vacancy of more than 40 per cent, have sprung up in the organised retail sector in India, resulting in a loss of over $524 million, according to a new report by property consultancy Knight Frank.
As many as 21 per cent or 57 malls across the top eight cities in India are currently in “different stages of dilapidation”, the report said, citing reasons ranging from lack of due diligence to faulty layout.
“All attempts to breathe life into these assets and attract a good retailer mix and footfalls have been unsuccessful,” Knight Frank said on Tuesday, adding that it was “imperative” to repurpose them as an enormous amount of capital was trapped in such assets.
The top three markets comprising the vacant space include NCR (40 per cent), followed by Bengaluru (16 per cent) and Hyderabad (14 per cent).
“Ghost malls covering an area of 8.4 million square feet present a prime opportunity to unlock alternate usage and improve mall health,” the property consultant said.
Excluding the ghost malls, the overall mall health has improved in the top eight markets from when the pandemic started, with their numbers rising to 271 from 255 in 2019.
“Grade A malls continue to perform well, beating pre-pandemic consumption, footfalls, and occupancy levels,” Knight Frank said.
Vivek Rathi, Director of Research of Knight Frank India, expected the fresh supply of retail space in malls to be at 50-55 million square feet over the next six years, and organised retail sales volume in the top eight cities to rise at a CAGR of 17 per cent to $136 billion by FY 2028 from $52 billion in FY 2022.
Commercial property is a bright spot in Chinese real estate, in contrast with the doom and gloom of the residential housing market.
Property analysts and developers said offices, warehouses and business parks are proving resilient, and continuing to turn over steady rental revenue — albeit discounted due to softer demand.
Hong Kong-listed property group KWG Group Holdings recently said earnings from rents from offices and other commercial property rose 6% in the first half of the year, even though revenue from housing development and sales in China had fallen nearly 37% from a year ago.
Likewise, property group CIFI Holdings posted a 23% year-on-year drop in home sales in China for the first half, but reported a 69.5% lift in its property investment revenue.
In July, Hong Kong’s Hang Lung Properties reported a small lift in its first half profits, which Vice Chairman Adriel Chan called a “pleasant surprise.” While the company reported lower revenue from malls and hotels due to pandemic lockdowns, prime office rents surged 16%.
“Office has done surprisingly well for us. It now accounts for about 20% of our mainland China revenue. And it’s been very resilient. I know that not all developers have had the same experience. And so yes, we would continue to look at offices,” Chan told CNBC’s “Squawk Box Asia” in late July.
Hang Lung, which primarily invests in commercial property in mainland China, saw occupancy rates at its office towers in Wuxi, Kunming, and Wuhan continue to rise, while levels in Shenyang and Shanghai held up amid dim prospects of new rentals.
Advantages for commercial sector
Chinese commercial property investors and their tenants do not face the same difficulties as their residential counterparts, which are struggling with slower sales as well as recessionary and debt pressures, said real estate advisory Lauressa Advisory partner Nicholas Spiro.
The commercial sector has not been spared the crisis of confidence that has swept across the housing market. While some investors sold assets to stay liquid, Spiro said the commercial sector generally has more supportive government and fiscal policies.
While Beijing is seeking to deflate the bubble in the residential market without crashing the economy, it is prioritizing investment in infrastructure and the new economy, which benefits the industrial and logistics property sector in particular.
Nicholas Spiro
partner at Lauressa Advisory
“While Beijing is seeking to deflate the bubble in the residential market without crashing the economy, it is prioritizing investment in infrastructure and the new economy, which benefits the industrial and logistics property sector in particular,” Spiro said.
He also sees room for growth in China’s commercial sector, with “huge scope for further development in secondary cities.”
“And Chinese companies’ conservative mindsets — which make pandemic-induced changes to working patterns more problematic than in the U.S. and U.K. — augur well for the sector in the long term,” he said.
Aside from wider supportive policies, Chinese authorities also have more direct schemes to help landlords, such as reducing urban land use taxes and providing subsidies to landlords to cover waived rents.
As for tenants, despite the challenge of lockdowns and China’s Covid-zero policy, global real estate investor Hines sees rising demand for retail and office space as businesses see opportunities in a down market leading to many opening offices or leasing space.
“We are seeing retailers use the current market reset to experiment with new brand concepts and experiences,” said Claire Cormier Thielke, China country head at Hines which has property investments in mainland China.
“For the office, we’re seeing tenants looking to upgrade to spaces and locations better suited to their needs and modern, more collaborative work.”
All in all, the Chinese commercial property sector’s resilience lies in its ability to rebound faster than its residential counterpart.
According to real estate advisory CBRE’s latest China update, between the first and second quarters of this year — during China’s worst lockdown in Shanghai — new office supply and rentals fell 56% and 75%, respectively.
Fixed asset investment data for the first five months of 2022 showed real estate investment declined at a greater scale than it did during the first four months of the year. Pictured here on May 16 is a development in Huai’an City in Jiangsu province in east China.
CFOTO | Future Publishing | Getty Images
Rents declined across 18 markets tracked by CBRE. The firm’s national rental index fell 0.5% quarter-on-quarter.
Retail leasing was also hit hard, with rentals in the second quarter plunging 44% from the previous quarter and 87% from a year ago.
Logistics did better with rentals lifting over the second quarter, but were down compared with last year.
Down but not out
But unlike housing, the commercial sector is rebounding particularly after lockdowns ended and government incentives kicked in, CBRE said. CBRE also anticipates the commercial sector, except retail, to do well for the rest of the year.
The recovery will come from demand for space from tenants in the financial, technology, media and telecom and life sciences sectors, property advisory Cushman & Wakefield’s head of occupier research in greater China Shaun Brodie said.
“Into 2022, the central and local governments in China have taken active measures to deal with the epidemic and effectively promote steady economic growth,” Brodie said.
Commercial property sales and deal flow in China have also slowed, investment research firm MSCI said last month.
Again, unlike the housing market, deal recovery is stronger in the commercial property market as there are many players not affected by financing restrictions still looking to buy and sell assets, Benjamin Chow, head of Asia real assets research at MSCI.
“Domestic institutions are a good example – they were the biggest buyer group this year. Within this group, insurance-backed players, banks and financial groups were among the biggest purchasers of commercial real estate year to date,” he said.
“Another buyer group comprises the corporates, which made a big splash last year, and have still been relatively active in 2022.”
Singapore has become a hub for private equity in Asia.
Roslan Rahman | AFP | Getty Images
Ultra-rich investors in Asia-Pacific are shifting away from a “wait and see” approach they adopted at the onset of the pandemic as concerns over market volatility set in, a new survey by Swiss private bank Lombard Odier showed.
The survey of 450 the region’s wealthy investors — defined as those with a minimum of $1 million of investable assets domiciled in Asia-Pacific — revealed their top concerns.
They included how to manage current market volatility and geopolitical risks, as well as how to better diversify their portfolio to mitigate these risks, according to the 2022 HNW Individuals (HNWIs) Study.
The urgency of these strategies has risen since the survey in 2020, Lombard Odier said.
“During the peak of COVID-19 in 2020, a majority of APAC HNWIs surveyed did not change their portfolio characteristics and were adopting a ‘wait and see’ approach,” said Lombard Odier’s Head of Ultra High Net Worth Individuals Offering Asia, Jean-Francois Aboulker.
“This was mainly due to a lack of understanding of the risks involved and uncertainty over how the pandemic would evolve.”
High inflation
Now, about 68% of the investors in Singapore, Hong Kong, Japan, Thailand, the Philippines, Indonesia, Taiwan and Australia have realigned or changed their portfolios to better weather current market conditions.
Even if the impact of Covid-19 is global, there are significant divergence in equity returns in different countries, and certain asset classes are underrepresented in some markets.
Jean-Francois Aboulker
Lombard Odier
About 77% of those surveyed said rising inflation and the prospect of recession were the most troubling. Singaporeans were the most worried about this condition.
“Even Japan, where inflation had been close to zero for more than three decades, is now facing inflation pressure, and 69% of Japan HNWIs are concerned about it,” the report said.
“Whether the Bank of Japan will make a tightening move remains unclear, but a third of Japan HNWIs believe it will happen in the coming 12 months.”
Rising rates
Wealthy investors in the region are generally less concerned about possible rising interest rates, mainly because they think most governments will be prudent not to increase rates to the point that they may damage economic growth, the survey showed.
However, Australian and Indonesian investors are not so sure. A majority of those surveyed in those countries, around 70%, say higher interest rates are a “significant worry.”
Geopolitical risks
Investors in the Philippines are the most concerned with geopolitical instability, while those in Hong Kong and Singapore also cited geopolitical tensions as one of the top risks in the next 12 months.
These investors are worried about the impact of geopolitical risks and conflicts on the returns of their investments, with many expecting lower returns ahead. They are also concerned they may miss out on opportunities during this time of volatility.
Many in Hong Kong and Japan questioned the effectiveness of their current diversification strategies given how the current environment of “falling stock prices, widening credit spreads and high long-term rates” have negatively impacted their portfolios.
Two things have happened
In an effort to mitigate these risks, two things have transpired.
Ultra-rich investors in APAC have turned more conservative, and are diverting more from traditional asset classes — such as stocks and bonds — toward investing in their own company, the survey found.
Many have also put money into “safer” assets such as cash and gold. Some are also investing in private assets including private equity, private debt, real estate and infrastructure investments and investors in Singapore and Australia are leading the charge.
Additionally, many investors have moved away from their domestic markets in the past two years. To manage the post-Covid uncertainty, a more global mix in their portfolios has been the result and Japanese and Indonesian investors are actively doing this, the report found.
“Even if the impact of Covid-19 is global, there are significant divergences in equity returns in different countries, and certain asset classes are underrepresented in some markets,” Lombard Odier’s Aboulker said.
“These investors are sophisticated, and understand the importance of a long-term approach in looking out for assets beyond their domestic markets, whilst reducing their reliance on domestic factors.”
A “For Sale” sign is seen outside a home in New York.
Shannon Stapleton | Reuters
The slowdown in the otherwise red-hot housing boom has been stunningly swift.
The U.S. housing market surged during the pandemic as homebound people sought new places to live, boosted by record-low interest rates.
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Now, real estate agents who once reported lines of buyers outside open houses and bidding wars on the back deck say homes are sitting longer and sellers are being forced to lower their sights.
That has both potential buyers and sellers wondering where they stand.
“As recession concerns weigh on consumer outlooks, our survey shows uncertainty has made its way into the minds of many buyers,” said Danielle Hale, chief economist at Realtor.com.
Here are the major factors behind the topsy-turvy housing market.
Mortgage rates
The main driver of the slowdown is rising mortgage rates. The average rate on the 30-year fixed mortgage, which is by far the most popular product today, accounting for more than 90% of all mortgage applications, started this year right around 3%. It is now just above 6%, according to Mortgage News Daily.
That means a person buying a $400,000 home would have a monthly payment about $700 higher now than it would have been in January.
High prices, low supply
The other drivers of the slowdown are high prices and low supply.
Prices are now 43% higher than they were at the start of the coronavirus pandemic, according to the S&P Case-Shiller national home price index. The supply of homes for sale is growing, up 27% at the start of September compared with the same time a year ago, according to Realtor.com. While that comparison seems large, it’s still not enough to offset the years-long shortage of homes for sale.
Active inventory is still 43% lower than it was in 2019. New listings were also down 6% at the end of September, meaning potential sellers are now concerned as they see more houses sit on the market longer.
Paul Legere is a buyer’s agent with Joel Nelson Group in Washington, D.C. He focuses on the competitive Capitol Hill neighborhood, and he said he saw listings jump by 20 to 171 just after Labor Day. He now calls the market “bloated.” As a comparison, just 65 homes were listed for sale in March.
“This is a very traditional post Labor Day inventory bump and seeing in a week or so how the market absorbs the new inventory is going to be very telling,” he said. “Very.”
Inventory is taking a hit nationally because homebuilders are slowing production due to fewer potential buyers touring their models. Housing starts for single-family homes dropped 18.5% in July compared with July 2021, according to the U.S. Census.
Homebuilder sentiment in the single-family market fell into negative territory in August for the first time since a brief dip at the start of the pandemic, according to the National Association of Home Builders. Builders reported lower sales and weaker buyer traffic.
“Tighter monetary policy from the Federal Reserve and persistently elevated construction costs have brought on a housing recession,” said NAHB Chief Economist Robert Dietz in the August report.
Some buyers are hanging in
Buyers, however, have not disappeared entirely, despite the still-pricey for-sale market and the equally expensive rental market.
“Data indicates that some home shoppers are finding silver linings in the form of cooling competition for rising numbers of for-sale home option,” said Realtor.com’s Hale. “Especially for buyers who are getting creative, such as by exploring smaller markets, this fall could bring relatively better chances to find a home within budget.”
Home prices are finally starting to cool off. They declined 0.77% from June to July, the first monthly fall in nearly three years, according to Black Knight, a mortgage technology and data provider.
While the drop may seem small, it is the largest single-month decline in prices since January 2011. It is also the second-worst July performance dating back to 1991, behind the 0.9% decline in July 2010, during the Great Recession.
Affordability woes
Still, that drop in prices will do very little to improve the affordability crisis brought on by rising mortgage rates. While rates fell back slightly in August, they have risen sharply again this week, making for the least affordable week in housing in 35 years.
It currently takes 35.51% of median income to make the monthly principal and interest payment on the median home with a 30-year mortgage and 20% down. That’s up marginally from the prior 35-year high back in June, when the payment-to-income ratio reached 35.49%, according to Andy Walden, vice president of enterprise research and strategy at Black Knight.
In the five years before interest rates began to rise, that income-to-payment ratio held steady around 20%. Even though home prices surged in the 2020 and 2021, record-low interest rates offset the increases.
“Given the large role affordability challenges appear to be playing in shifting housing market dynamics, the recent pullback in home prices is likely to continue,” Walden said.
A new report from real estate brokerage Redfin showed that while homebuyer demand woke up a bit in August, the latest increase in mortgage rates over the past week put it right back to sleep. Fewer people searched for “homes for sale” on Google with searches during the week ending Sept. 3 – down 25% from a year earlier, according to the report.
Redfin’s demand index, which measures requests for home tours and other home-buying services from Redfin agents, showed that during the seven days ending Sept. 4, demand was up 18% from the 2022 low in June, but still down 11% year over year.
“The housing market always cools down this time of year,” said Daryl Fairweather, Redfin’s chief economist, “but this year I expect fall and winter to be especially frigid as sales dry up more than usual.”