Real Estate

Morrisons split is the right idea at the wrong time

7 Feb 2014

The UK grocer has property assets worth more than its enterprise value. That’s why hedge funds want to split its operations from its real estate. Sadly, such “opco-propco” structures require a stability that Morrisons currently lacks.

Swiss housing bubble-poppers are bolder than UK’s

23 Jan 2014

Switzerland’s central bank has intervened for the second time in a year to check house price inflation. Mortgage stocks are growing quicker than in the UK. But the Swiss regulator’s willingness to deploy macro-prudential tools is at odds with British inactivity.       

New target for UK: build 600,000 homes per year

3 Jan 2014

Britain’s biggest economic weakness is its dilapidated and inadequate stock of housing. GDP and inflation goals have their place but they miss this point. A five-fold increase in annual construction would bring stock up to snuff in a decade. All it needs is political will.

U.S. housing recovery could run out of steam

24 Dec 2013

Banks are likely to tighten lending standards once new rules come into place in 2014. Rising interest rates may drive down home loan volume, too. Cash purchases by investors could set a floor for house prices, but they may not be enough to prevent a major slowdown.

New U.S. mortgage bubble index is worth watching

19 Dec 2013

Many people thought the last U.S. housing boom was unsustainable – but couldn’t prove it. Metrics created by a Washington think tank could help spot the next round of home loan excesses as they emerge. It may repay investors and regulators to keep the new data on their checklists.

Carney can do more to curb mad UK house subsidies

28 Nov 2013

The Bank of England governor has rightly binned incentives for banks to pile into mortgage lending. Further focusing cheap central bank funding on small companies also makes sense. But Carney is still pulling his punches. He should demand changes to the UK’s Help to Buy scheme.      

UK budget must deliver homes not bubbles

28 Nov 2013

George Osborne can boast that the UK economy is growing and the deficit is diminishing. But the recovery is too typically reliant on house price inflation. The chancellor’s budget update should aim for radical change: getting finance to work for house building, not house bubbles.

Fannie, Freddie buyout offer too good to be true

14 Nov 2013

A group of investors wants to buy their insurance businesses. The offer of a takeover windfall might appeal. But the easy transition they promise and the need for no taxpayer backstop sound unlikely. The plan wouldn’t end the cycle of privatizing profit while socializing losses.

Rehab needed for U.S. 30-year mortgage habit

11 Nov 2013

America’s standard home loan format only really works well with stable interest rates. Floating-rate mortgages make more sense, especially when rates shoot up. But neither borrowers nor regulators seem fond of them. These obstacles risk a shock to the recovering housing market.

U.S. homebuilder deal heralds two-tiered recovery

7 Nov 2013

A $1.6 bln acquisition by McMansion specialist Toll Brothers marks a timely expansion in California. Years of depressed house sales translate into pent-up demand. Only the very rich, though, will be able to shrug off rising mortgage rates. No wonder Toll’s shares are so pricey.

Say goodbye to American housing finance reform

7 Nov 2013

Bailed-out mortgage backers Fannie and Freddie had an astounding $39 bln quarter. That sort of performance won’t last forever, and it doesn’t erase the companies’ past misdeeds. But as Congress mulls fixing the housing system, it might have trouble slaughtering two cash cows.

Blackstone builds tricky fix for landlord funding

1 Nov 2013

The private equity firm is selling bonds backed by rent on foreclosed homes. Not much data exists for this market, which may make investors nervous. But with home ownership dropping and renting on the rise, this rare example of post-crisis financial innovation may have a future.

Predicting BofA penalty as dicey as its mortgages

29 Oct 2013

The mega-bank faces a hefty fine after being found liable for selling dodgy loans to Fannie and Freddie. Just how large is anyone’s guess, given the loose legal guidelines involved. U.S. Judge Jed Rakoff will make the final call, but Breakingviews attempts its own calculation.

At last, central bank candour on property bubbles

22 Oct 2013

The Bundesbank says apartment prices in some German cities could be 20 pct overvalued. Policymakers usually avoid such blatant views on prices, saying distortions aren’t their problem unless leverage is a factor. That’s too narrow: central banks have a role as market critics.

UK’s Help to Buy scheme is a no-brainer for banks

3 Oct 2013

Sure, the government’s mortgage guarantee scheme could backfire on banks’ reputations if overstretched borrowers lose their homes and taxpayers wind up paying the bill. But capital benefits and the need to defend market share look like compelling reasons for banks to sign up.

How to respond to rising London house prices

27 Sep 2013

Some day, the return of normal financial conditions might cool down the capital’s soaring property market. While waiting, policymakers should fight against the possible consequences: economic drag, social injustice and cultural degradation.

Fresh U.S. mortgage bailout raises timely red flag

26 Sep 2013

Fannie and Freddie are on the mend, but the Federal Housing Administration may need extra Treasury support. New U.S. capital for an agency that backstops home loans would coincide with the re-emergence of private guarantors. It’s a helpful reminder to remember past mistakes.

Foxtons makes fittingly brash London market debut

20 Sep 2013

The estate agent’s IPO got its full price and a 649 mln stg valuation. The stock popped 21 pct. BC Partners even sold a majority stake, a bit of a no-no for private equity nowadays. It’s London property all over: a sale at the asking price and the buyer still gets a quick flip.

China property boom built on blind faith

19 Sep 2013

House prices rose at their fastest pace in almost three years in August. Investors like KKR and Blackstone believe they can sift good property from bad. Almost everyone believes the government will never allow the market crash. Neither assumption looks solid.

UK growth story is good, but not that good

18 Sep 2013

Hopes for a British economic recovery are running high. The news on inflation is a bit better too. But households have been saving less to spend more and the unhealthy addiction to housing bubbles is back. The enthusiasm for the UK economy needs to be tempered.