LONDON, Feb 7 (Reuters) – British house prices were unchanged in January after falling in month-on-month terms in each of the previous four months as borrowing costs rose, mortgage lender Halifax said on Tuesday.
The annual rate of house price growth slowed to 1.9%, the weakest increase in three years, Halifax said.
Britain’s housing market saw a surge in demand from buyers during the coronavirus pandemic but a sharp rise in interest rates over the past year and the squeeze on households’ budgets caused by high inflation has hit the momentum.
Kim Kinnaird, a director at Halifax Mortgages, said the trend of higher borrowing costs hitting demand was likely to continue in 2023.
“For those looking to get on or up the housing ladder, confidence may improve beyond the near term,” she said.
“Lower house prices and the potential for interest rates to peak below the level being anticipated last year should lead to an improvement in home-buying affordability over time.”
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In London, where the housing market has underperformed those of other regions of the country, prices in January were unchanged from the same month last year after rising by nearly 3% in the 12 months to December, Halifax said.
Rival mortgage lender Nationwide said last week its measure of house prices dropped by a bigger-than-expected 0.6% in January and was 3.2% below its peak in August.
As well as the Bank of England’s increases in interest rates since December 2021, there was a major disruption to the mortgage market in late September and October following former prime minister Liz Truss’s “mini budget”.
Mortgages approved in December fell to their lowest since the 2008-09 global financial crisis, excluding the start of the COVID-19 pandemic when there were strict lockdown restrictions, the BoE said last week.
Martin Beck, an economist with forecaster EY Item Club, said January’s flat-lining of prices, as recorded by Halifax, might prove only a temporary pause in a trend of falling prices.
“Although mortgage rates have dipped from post-mini-Budget peaks, they’re still at their highest in a decade,” he said.
Writing by William Schomberg; graphic by Sumanta Sen; editing by Sarah Young and Arun Koyyur
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Feb 1 (Reuters) – Humana Inc (HUM.N) on Wednesday beat Wall Street estimates for quarterly profit as the health insurer’s investment income jumped, even as the company reported higher-than-expected medical costs.
Humana’s fourth-quarter benefit expense ratio, or the percentage of payout on claims compared to its premiums, fell by 1 percentage point to 87.5%, but was higher than analysts’ estimate of 87.20%.
Health insurers’ costs were expected to decline on lower COVID-19-related hospitalizations, though there were concerns around a surge in flu and respiratory syncytial virus cases in the last quarter of 2022.
The respiratory season could be the primary reason behind high-than-expected benefit expense ratio, SVB Securities analyst Whit Mayo said.
Humana forecast adjusted earnings per share (EPS) of at least $28 for 2023, in line with analysts’ expectations, with Chief Executive Officer Bruce Broussard confident of achieving its 2025 adjusted EPS commitment of $37.
The health insurer said it expects to add at least 625,000 members to its Medicare Advantage plan this year.
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Medicare Advantage is the government-supported insurance by private companies for people over 65 years of age and has been growing at a rapid pace, outshining government-provided Medicare plans due to heavy competition among insurers for the same set of customers.
Excluding one-off items, the health insurer reported a profit of $1.62 per share, higher than analysts’ average estimate of $1.46 per share, according to Refinitiv data.
The company’s $160 million investment income was higher than Wall Street estimates of $136.7 million, Oppenheimer analyst Michael Wiederhorn said.
Humana recorded a loss of $71 million, or 12 cents per share, for the quarter due to a one-time charge of $188 million associated with its $1 billion investment plan for its Medicare business announced in February last year.
Reporting by Leroy Leo and Khushi Mandowara in Bengaluru
Editing by Vinay Dwivedi
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LONDON, Feb 1 (Reuters) – British house prices dropped by a bigger-than-expected 0.6% in January and are now 3.2% below their peak in August, following a surge in borrowing costs and broader inflation pressures, mortgage lender Nationwide Building Society said on Wednesday.
January’s decline in house prices was the fourth drop in a row and twice the size expected in a Reuters poll of economists, adding to signs that the market is slowing rapidly.
Interest rates have risen sharply since December 2021 and there was major disruption to the mortgage market in late September and October following former prime minister Liz Truss’s “mini budget”, which set market interest rates soaring.
“It will be hard for the market to regain much momentum in the near term as economic headwinds are set to remain strong, with real earnings likely to fall further and the labour market widely projected to weaken as the economy shrinks,” Nationwide chief economist Robert Gardner said.
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Nationwide forecast in December that house prices would fall 5% in 2023.
House prices in January were 1.1% higher than a year earlier, Nationwide said, the smallest year-on-year increase since June 2020 and down from a 2.8% increase in December. Economists polled by Reuters had expected a rise of 1.9%.
British house prices soared by more than a quarter during the COVID-19 pandemic, boosted by ultra-low interest rates, tax incentives and broader demand for more living space during lockdown, which was seen in other Western countries too.
However, the boom has now gone into reverse, accelerated by disruption to lending since the mini-budget.
The Bank of England reported on Tuesday that the number of mortgages approved in December fell to its lowest since the global financial crisis, excluding the very start of the COVID-19 pandemic when there were strict lockdown restrictions.
Gardner said this fall reflected a drop in mortgage applications after the mini-budget, and that it was too soon to know if the volume of house purchases would recover.
While lenders are now more willing to offer mortgages than just after the mini-budget, the BoE has steadily raised interest rates, and is expected to increase its main rate by half a percentage point to 4% on Thursday, the highest since 2008.
Reporting by David Milliken; Editing by Sarah Young and Sharon Singleton
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NEW YORK, Jan 31 (Reuters) – Memory chip maker Western Digital Corp (WDC.O) said on Tuesday it will receive $900 million through a convertible preferred stock deal from private equity firm Apollo Global Management Inc (APO.N) and hedge fund Elliott Management Corp.
Western Digital said the preferred stock it sold to Apollo and Elliot has a conversion price of $47.75 per share, which is approximately a 9% premium on its closing price of $43.95 on Tuesday. It will also pay a dividend starting at 6.25% per year.
Last year, Western Digital launched a review of strategic alternatives, including options for splitting off its flash-memory and hard-drive businesses, after activist Elliott disclosed a stake of nearly $1 billion in the company and pushed it to separate those businesses.
On Tuesday, Western Digital CEO David Goeckeler said the partnership with Apollo and Elliott would help “facilitate the next stages of Western Digital’s strategic review.”
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“We look forward to working together in advancing our goal of creating value and finalizing the best possible strategic outcome for our shareholders,” said Goeckeler.
The latest investment is a precursor to a potential merger between Silicon Valley-based Western Digital and Japan’s Kioxia Holdings Corp, according to people familiar with the matter. The sources, who requested anonymity as these discussions are confidential, said the talks between Western Digital and Kioxia are still active.
The two companies were in merger talks in 2021 before the negotiations cooled off.
Bloomberg reported on the talks between Western Digital and Kioxia earlier.
Western Digital and Kioxia jointly produce NAND chips, which are widely used in smartphones, TVs, data center servers and public announcement display panels.
Western Digital’s shares fell nearly 7% in trading after market hours.
Qatalyst Partners, Lazard and J.P. Morgan are serving as Western Digital’s financial advisers and Skadden, Arps, Slate, Meagher & Flom LLP is serving as Western Digital’s legal adviser. Paul, Weiss, Rifkind, Wharton & Garrison LLP is serving as the Apollo funds’ legal adviser, while Gibson, Dunn & Crutcher LLP is serving as Elliott’s legal adviser.
Reporting by Chibuike Oguh in New York; Editing by Anirban Sen and Lincoln Feast
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SYDNEY, Feb 1 (Reuters) – Australia’s house prices extended declines for the ninth straight month in January amid high mortgage rates, a drag on household wealth that will further erode consumer spending and add to economic stress.
Figures from property consultant CoreLogic on Wednesday showed prices nationally fell 1.0% in January from December, when values dropped 1.1%.
Prices were down 7.2% from a year earlier. They were also 8.9% lower from their April peak, making last month the largest and fastest decline in values since at least 1980 as the Reserve Bank of Australia embarked on the most aggressive tightening campaign in modern history.
The monthly fall was led by Sydney where prices slid 1.2% in the month to be down 13.8% on the year, while Melbourne dropped 1.1% on the month and 9.3% on a year earlier.
Prices across the combined capital cities fell 1.1% in the month, while outlying regions – which have performed better in this housing downturn – lost 0.8%.
Tim Lawless, research director at CoreLogic, does not expect listing and purchasing activity would return to average levels until consumer sentiment starts to improve, after prices suffered the biggest fall since 2008 last year.
New listings in capital cities in January were 22.2% lower than over the same period last year, implying that most home owners seem to be prepared to wait this downturn out.
“Until Australians have a higher level of confidence with regards to their household finances and the outlook for the economy, it’s likely they will continue to delay major financial decisions,” Lawless said.
The RBA has lifted rates by 300 basis points to a 10-year high of 3.1% to curb red-hot inflation. Investors are wagering rates would rise by another 25 basis points next week when the Board meets for the first time this year. ‘
Consumers are already feeling the pinch from rising borrowing costs and sky high inflation, with December retail sales tumbling the most in more than two years, in a warning for the economy.
Reporting by Stella Qiu; Editing by Jacqueline Wong
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STOCKHOLM, Jan 31 (Reuters) – The effects of rising interest rates on the highly indebted commercial real estate sector is the main risk to financial stability, but a crash is unlikely, Swedish policy makers said on Tuesday.
War in Ukraine and the lingering effects of the pandemic have sparked a surge in inflation and a rapid rise in interest rates for companies – and households – that took on big debts during a decade of ultra-easy monetary policy.
Commercial property companies need to refinance around 300 billion Swedish crowns ($28.69 billion) of loans over the next couple of years. But risk appetite among banks and investors has cooled and some could face problems rolling over loans at much higher rates.
“There has been an unsustainable build up of risk in recent years and we need to see a correction,” Susanna Grufman, the acting head of the Financial Supervisory Authority, said during a hearing in parliament.
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“What is important from a financial stability perspective is that this (correction) doesn’t happen too fast.”
Spreads have already widened on debt issued by commercial real estate firms and some have started reducing debt by selling off parts of their portfolios.
Property companies account for around 44% of banks’ commercial lending, figures from the Riksbank showed.
The FSA reckons banks could see credit losses of up to 45 billion crowns in a sharp downturn, mainly caused by unlisted commercial property firms.
Sweden’s retail housing market is also a worry. Prices have fallen about 15% over the past year amid soaring mortgage rates and cost of living pressures.
But authorities do not expect another financial crisis like that which hit Sweden in the early 1990s when the central bank policy rate was hiked to 500%.
Over the last decade, lending regulations have been tightened and banks’ buffers against credit losses are stronger.
Authorities have better tools to deal with problems that materialize, including winding up banks that get in trouble, Karolina Ekholm, the head of Sweden’s Debt Office, said.
Furthermore, the current downturn is expected to be relatively short and mild, meaning unemployment is not expected to surge.
Nevertheless, adjustments in the commercial property sector and tumbling house prices will be a challenge for banks.
“Debts don’t go away. They need to be paid,” Riksbank Governor Erik Thedeen said. “The level of debt is a challenge and I don’t think we can exclude a pretty nasty development.”
($1 = 10.4149 Swedish crowns)
Reporting by Simon Johnson; Editing by Christina Fincher
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Jan 27 (Reuters) – UK landlord Land Securities (LAND.L) said on Friday it sold One New Street Square office property in London to Hong Kong-based Chinachem Group for 349.5 million pounds ($432.12 million), in tune with its strategy to offload mature office spaces in the capital.
British landlords are grappling with a valuation slump of their properties, plagued by rising interest rates and broader economic uncertainty.
The 276,502 square-feet office space had a valuation of 362.8 million pounds in September 2022, Landsec said.
Landsec, after a strategic review undertaken in late 2020, had planned to sell about 2.5 billion pounds worth of mature London offices. With the latest sale, it is just 400 million pounds short of that target and will use the proceeds to repay debt.
London-headquartered Landsec, which has about 11 billion pounds worth of assets, with two-thirds of those properties in Central London, counts office spaces as its primary portfolio.
One New Street Square property, which Landsec bought in 2005 and, has 14 years of unexpired lease term remaining with Deloitte which has fully let the office space.
Landsec, one of the top UK landlords, had said in November the overall value of its properties dropped 2.9% as of Sept. 30 from the end of March, while the value of its key office portfolio dropped 4.4%.
($1 = 0.8088 pounds)
Reporting by Anchal Rana in Bengaluru; Editing by Arun Koyyur
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LONDON, Jan 26 (Reuters) – Britain’s commercial real estate sector is increasingly feeling the pinch of higher borrowing costs, as investor enquiries declined in the fourth quarter and the outlook for the year ahead worsened, an industry survey showed on Thursday.
The Royal Institution of Chartered Surveyors (RICS) said 83% of respondents to its quarterly commercial property survey thought the market was already in a downturn, up from 81% a quarter before. Almost half considered this downturn to be in its early stages.
RICS said investor enquiries fell across all sectors for the first time since the start of the pandemic, with a net balance of -30 of respondents citing lower investment demand.
Tarrant Parsons, senior economist at RICS, said the investment side of the commercial property market was “significantly affected” by the Bank of England’s (BoE) tighter monetary policy, and that higher borrowing costs were weighing on investor demand and hurting valuations.
The BoE’s Monetary Policy Committee raised its main rate at its last nine meetings and markets have priced in a half percentage point increase to 4% for Feb. 2.
British consumer price inflation was running at 10.5% in December, nearly five times the Bank’s 2% target.
Near-term capital value expectations dropped sharply across the board, and the industrial sector saw the weakest reading since 2011.
“Linked to the rise in government bond yields over the past six months, capital values have pulled back noticeably of late, while expectations point to this downward trend continuing over the near term,” Parsons said.
Looking at the year ahead, average capital values were forecast to fall further in all parts of Britain.
The survey of 940 companies was conducted between Dec. 7 and Jan. 13.
Reporting by Suban Abdulla; editing by David Milliken
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Jan 25 (Reuters) – Elevance Health Inc (ELV.N) said on Wednesday that the growth in the insurer’s commercial business is expected to keep concerns over attrition in Medicaid membership at bay, even as it forecast a weak 2023 adjusted profit.
Shares of the company rose nearly 5% as investors bet on improving margins and revenues at the commercial segment, through which it sells private insurance plans to employer groups and individuals.
The segment, which reported a profit of $260 million in the quarter, is expected to bounce back this year after its profit halved due to a hit from the pandemic.
Along with an “attractive” membership increase for its commercial plans, Stephens analyst Scott Fidel said margin improvement will also aid the insurer’s earnings in 2023.
This will likely help Elevance counter a hit to its Medicaid membership enrollments from the expected removal of pandemic-related relief measures later this year.
Several members who signed up under the COVID-19 relief measures to the government-aided insurance Medicaid plans will be deemed ineligible, beginning April 1, and will move to private or employer-backed plans.
Elevance, which was previously known as Anthem, expects total medical membership at 2023 end to range from 47.4 million to 48.5 million. Of these, total commercial memberships are expected to be between 32 million and 32.5 million.
“We anticipate growth in individual and group risk-based commercial membership… to be concentrated in the second half as consumers transition from Medicaid to commercial coverage,” Elevance’s finance chief John Gallina said on a conference call.
For the full year, Elevance expects to post more than $32.60 in adjusted profit per share, below estimates of $32.67 per share.
Elevance reported a higher-than-expected profit of $5.23 per share for the fourth quarter.
Reporting by Khushi Mandowara and Bhanvi Satija in Bengaluru; Editing by Shailesh Kuber
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FRANKFURT, Jan 25 (Reuters) – The European Union’s risk watchdog warned on Wednesday that market stress from a potential sharp downturn in the European commercial real estate sector could morph into systemic risk for banks that may lead to higher capital needs.
Supervisors have long warned that the bloc’s real estate market is at a turning point after a lengthy boom and commercial property was especially vulnerable as a cyclical downturn is exacerbated by changes in office use habits after the pandemic.
The European Systemic Risk Board has now issued a fresh recommendation to national and European Union authorities to monitor risks and get lenders to properly assess collateral while setting aside appropriate provisions.
“The sector is currently vulnerable to cyclical risks related to heightened inflation, a tightening of financial conditions limiting the scope for refinancing existing debt and taking new loans, and the pronounced deterioration in the growth outlook,” the ESRB said in a statement.
Climate-related economic policies such as changing building standards, a shift towards e-commerce and increased demand for flexibility in leasable office space, are adding to the pressures, the ESRB, chaired by European Central Bank President Christine Lagarde, said.
The recommendations come after the ESRB already sent a warning in September about rising default risks in he commercial real estate.
The worry is that a sharp downturn in the sector could have a systemic impact on the financial system and the broader economy by limiting banks’ lending capacity.
Lending to the sector is occurring at high loan-to-value ratios, which could rise even further if property valuations rise. This would then lead to higher provision and capital requirements, restricting banks’ ability to lend to others, the ESRB said.
An additional worry is related to liquidity mismatches in open-ended real estate investment funds, the ESRB added.
Funds therefore need to better align redemption terms and the liquidity of underlying assets and must assess risks arising from liquidity mismatch and leverage, it added.
Reporting by Balazs Koranyi; Editing by Emelia Sithole-Matarise
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