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Shared ownership has created new victims of precarious housingWhat used to be a good deal compared with private renting has become a financial trapReeling from the impact of the Grenfell Tower tragedy and the still-unfolding damp and mould scandal, social landlords may be breathing a sigh of relief this week at the prospect of a new, more sympathetic government. They would be foolish to relax. Public scrutiny is likely to return as another crisis heads towards them: the desperate plight of shared owners.Shared owners tend to be lower-middle income families. Priced out of the mainstream housing market, they buy a share of a property (usually less than 50 per cent of its value, raising a deposit of usually between 5 and 10 per cent of that share’s value) and rent the remainder from a housing association. The product was designed more than three decades ago to meet the needs of low-paid key workers, such as teachers and nurses, in Britain’s expensive cities. It worked well: as their salaries increased over time, they could “staircase” up to take full ownership of their homes. Meanwhile, the property itself rose in value. It offered a good deal compared with private renting.In the last 20 years, things changed. As the cost of housing spiralled, with the average house price tripling between 1999 and 2019, the product became popular with a growing group of priced-out people on middle incomes. Funding for social housing from central government was cut dramatically in the years since 2010, forcing housing associations to be creative in finding ways to house the poorest families. They did it by building shared ownership homes and channelling the profits back into social housing. They were balancing their books on the backs of the not-quite-poor.Because when it goes wrong, shared ownership is a very bad deal. Shared owners now face a triple threat to their finances, placing many in a desperate position. Higher mortgage payments are compounded by housing associations rapidly increasing rents on their portion of the property — linked to the consumer price index, which has shot up in the last two years. In the wake of the building safety crackdown sparked by the Grenfell fire, service charges for building maintenance (including remediation on cladding, or 24-hour security guards) have also rocketed.The shared ownership agreement requires a buyer to take on the maximum equity they can afford when assessed for eligibility. The day they complete and collect their keys, they are already financially stretched. No shared owner enters the agreement with the capacity for rapid and vertiginous growth in monthly housing costs. Yet one shared owner I interviewed in east London described how their service charge had almost doubled since signing her agreement at the end of 2018. Meanwhile, her rent has risen from £630 to £883; her mortgage repayments have also doubled. Her total monthly repayments are now more than £2,000. They are stuck in a building yet to have cladding fully removed — meaning the lease cannot be extended and the property cannot be remortgaged.Many shared owners now feel far worse off than in private rentals, even though in London rents have risen by 7 per cent in the last year. They are desperate to get out, but even many who own flats in blocks without issues around cladding or fire safety say they cannot find a buyer. The combination of house price inflation and rents that make saving for a deposit unthinkable has pushed even shared ownership out of reach of the lower-middle income market. The ongoing political battle over the future of leasehold has only added to the uncertainty for prospective buyers.In March, a long-running select committee inquiry finally reported: MPs concluded that shared ownership was now failing to provide an affordable route to home ownership. Worse than that, it has become a form of financial entrapment. Housing associations and successive governments should be challenged about their role in creating it.
US Banks Have a Commercial Property Blind Spot Risk, Study WarnsTerm loans and credit lines for REITs add to systemic riskFed stress tests should consider such lending, authors sayLarge US banks may be more exposed to commercial property than regulators appreciate because of credit lines and term loans they provide to real estate investment trusts, according to a new study.Big banks’ exposure to CRE lending grows by about 40% when that indirect lending to REITs is added, wrote researchers including Viral Acharya, a professor of economics at New York University. That’s largely been missed in the debate about the risks the troubled industry poses to lenders, they argue.“Everyone is focusing on on-balance sheet loans by banks,” Acharya, a former deputy governor at the Reserve Bank of India, said in an interview. “We should not get caught in a blind spot that large banks have relatively less exposure than smaller banks.”REITs have faced challenges since the start of the pandemic as working from home threatens the long-term value of offices while high borrowing costs have hurt many multifamily investments. Some investors responded by pulling money from trusts over the past two years, including those managed by Starwood Capital Group and Blackstone Inc., which limited redemptions to preserve liquidity.High StressREITs are companies that own, operate or lend to income-producing real estate. They are obliged to make large dividend payouts each year, meaning they’re comparatively cash poor. As a result, they tend to draw down credit from banks when they’re worried about redemptions and there’s high stress in the wider economy, making it a concern for the researchers.That can create “sudden encumbrance of capital and/or liquidity,” the report says. Regulators should better incorporate a lender’s exposure to property investment trusts when conducting stress tests on bank capital, it added.The risk from draw-downs can’t be easily managed by banks because borrowers decide when they make them, which “can exaggerate banks’ cyclical risks”, according to the report. In some cases, the money seems to be used to buy additional properties, the researchers found.“Collateral damage to the largest banks from intensive credit line draw-downs means that systemic risk from total CRE exposure is probably much greater than if you only look at direct exposure,” said Manasa Gopal, an assistant professor of finance at Georgia Tech, who’s one of the report’s authors.Of the largest five US banks by market capitalization, Morgan Stanley has the highest percentage of its own credit lines committed to REITs, according to fellow co-author Max Jager, assistant professor at the Frankfurt School of Finance & Management. Still, on an absolute basis Morgan Stanley’s exposure is smaller than its peers’. A company spokesperson declined comment.Higher FeesCredit lines to REITs have grown at a much faster rate than to other borrowers, and lenders should charge higher fees for the products to compensate for the risk they’re assuming, the researchers said.Months before Blackstone REIT halted redemptions toward the end of 2022, the firm secured an increase in its credit line at a little changed or unchanged spread “despite the obviously increased credit and draw down risks,” according to the report.“BREIT has a proactive and disciplined approach to managing liquidity,” a representative for Blackstone said in a statement. “It has maintained ample levels of liquidity through the cycle to run its business effectively and has a strong balance sheet.”Large US banks had $345 billion of indirect exposure to commercial real estate in the fourth quarter of 2022, the analysis found. That’s up from $109 billion in the same period of 2013.Still, leverage ratios for REITs remain low. Their debt to market assets ratio stood at 33.8% at the end of the first quarter, according to research by representative body NAREIT, meaning they “are facing less stress” than counterparts with higher debt loads.In the wake of the pandemic, much of the risk to banks from lending to stressed REITs was mitigated by the Federal Reserve’s backstop measures that ensured banks had sufficient liquidity to meet demands, Acharya said. That might not always be the case.“The credit line has an episodic aspect to it, you don’t know exactly when that event is going to happen,” he said. “The risk is that we don’t know exactly how the episodes play out.”
China Vanke in Advanced Talks With Banks for $6.9 Billion LoanChina Vanke Co., the Chinese state-backed developer that’s become the latest flashpoint in the nation’s property crisis, is in advanced talks with major banks for a loan of about 50 billion yuan ($6.9 billion), people familiar with the matter said.If signed, it would be the largest loan in Asia Pacific, excluding Japan, since Taiwan-based National Housing and Urban Regeneration Center’s $14 billion deal in 2022, according to Bloomberg-compiled data. Talks over the facility, led by Industrial & Commercial Bank of China, began a few months ago after financial regulators instructed the banks to offer funding support to the developer, said the people, who asked not to be identified as the matter is private.(...)
Carta interna: Siemens Energy quiere eliminar 4.100 puestos de trabajo en Gamesa
En este caso, un monotemático sobre el tema de “Baterías” y de cómo NO son ninguna solución.Por otra parte, no puedo “acusar” a los tecnooptimistas de no dar información y no darla yo tampoco.Que quede claro, que precisamente empecé por pedírsela “a los expertos”. Deformación profesional. No me han dado nada más que largas, cosa sospechosa.Pero yo trabajo o he trabajado de eso, así me he liado la cabeza a la manta, y por aquí he empezado.Hay más: esto es sólo una parte de un planteamiento de “solución” al problema de la intermitencia y de sus implicaciones
The writing is on the wall...Ayer mismo: Va a ser obligatorio renovar el 60% de los ascensores de la UE. Estamos tan en respiración asistida que la actividad económica es por decreto. Inventamos PIB obligando y por decreto. Donde no hay mata...
https://www.bloomberg.com/news/articles/2024-05-29/ecb-to-impose-first-ever-fines-on-banks-for-climate-failuresCitarECB to Impose First-Ever Fines on Banks for Climate FailuresSeveral lenders didn’t progress enough on risk assessmentFines per day can technically be up to 5% of daily revenueThe European Central Bank is set to take the unprecedented step of imposing fines on several lenders for their protracted failure to address the impact of climate change.As many as four lenders face penalties after not meeting deadlines set by the ECB for assessing their exposure to climate risks, according to people familiar with the matter. The amounts aren’t final yet and may be largely symbolic, the people said, who asked not to be named as the move isn’t public.A spokeswoman for the ECB, which directly oversees more than 100 banks, declined to comment.The imposition of fines still marks an unusually harsh step toward forcing banks to comply with the ECB’s views on how they should manage climate risks. The move comes after years of pressure, with former banking supervision head Andrea Enria stating in a September interview with Bloomberg that the ECB would resort to such sanctions as an alternative to higher capital requirements.The fines rack up every day and can amount to as much as 5% of a lender’s daily average revenue. For a bank with annual revenue of €10 billion ($10.9 billion), for example, that would suggest daily penalties of as much as €1.4 million in the toughest scenario, although the actual fines imposed may be much smaller.The banks singled out for penalties are now accruing daily fines for as long as the deficiencies persist, the people said. Mitigating factors may be taken into account as well, meaning some fines could be reduced or even negated, said one of the people.The ECB has repeatedly warned that lenders aren’t doing enough to prepare for the fallout of extreme weather shocks on asset values, or the risk that clients with big carbon footprints might go out of business. The watchdog has said it initially threatened 18 banks with penalties, implying that ECB pressure is leading to results for most firms.European regulations require banks to assess whether they are — or will be — exposed to material risks, and that they reflect that in their capital reserves. The ECB has said lenders typically need to understand all the relevant drivers of climate and environmental-related risk and how these are affected given their exposures.The rigor with which the ECB is pushing banks to manage their climate risk stands in contrast to the approach taken by the Federal Reserve, with Chairman Jerome Powell saying the Fed has “narrow, but important, responsibilities regarding climate-related financial risks.” Banks in Europe have warned that the schism in regulatory environments risks putting them at a competitive disadvantage to their US peers.Frank Elderson, a member of the ECB’s Executive Board, has shown little inclination to slow down European efforts on climate. In a May 8 blog post, he wrote that “a materiality assessment is not just a ‘nice to have’ — knowing your risks is a precondition for being able to address them.”While some banks have started to set aside capital to cover climate-related risks and improved their risk management, Elderson listed several deficiencies, including:*Not considering all relevant risk categories*Focusing only on transitional risks and omitting physical risks, or only looking at a subset of geographic regions*Using a net approach rather than gross to identify risks, undermining banks’ ability to measure actual impact and plan for mitigation
ECB to Impose First-Ever Fines on Banks for Climate FailuresSeveral lenders didn’t progress enough on risk assessmentFines per day can technically be up to 5% of daily revenueThe European Central Bank is set to take the unprecedented step of imposing fines on several lenders for their protracted failure to address the impact of climate change.As many as four lenders face penalties after not meeting deadlines set by the ECB for assessing their exposure to climate risks, according to people familiar with the matter. The amounts aren’t final yet and may be largely symbolic, the people said, who asked not to be named as the move isn’t public.A spokeswoman for the ECB, which directly oversees more than 100 banks, declined to comment.The imposition of fines still marks an unusually harsh step toward forcing banks to comply with the ECB’s views on how they should manage climate risks. The move comes after years of pressure, with former banking supervision head Andrea Enria stating in a September interview with Bloomberg that the ECB would resort to such sanctions as an alternative to higher capital requirements.The fines rack up every day and can amount to as much as 5% of a lender’s daily average revenue. For a bank with annual revenue of €10 billion ($10.9 billion), for example, that would suggest daily penalties of as much as €1.4 million in the toughest scenario, although the actual fines imposed may be much smaller.The banks singled out for penalties are now accruing daily fines for as long as the deficiencies persist, the people said. Mitigating factors may be taken into account as well, meaning some fines could be reduced or even negated, said one of the people.The ECB has repeatedly warned that lenders aren’t doing enough to prepare for the fallout of extreme weather shocks on asset values, or the risk that clients with big carbon footprints might go out of business. The watchdog has said it initially threatened 18 banks with penalties, implying that ECB pressure is leading to results for most firms.European regulations require banks to assess whether they are — or will be — exposed to material risks, and that they reflect that in their capital reserves. The ECB has said lenders typically need to understand all the relevant drivers of climate and environmental-related risk and how these are affected given their exposures.The rigor with which the ECB is pushing banks to manage their climate risk stands in contrast to the approach taken by the Federal Reserve, with Chairman Jerome Powell saying the Fed has “narrow, but important, responsibilities regarding climate-related financial risks.” Banks in Europe have warned that the schism in regulatory environments risks putting them at a competitive disadvantage to their US peers.Frank Elderson, a member of the ECB’s Executive Board, has shown little inclination to slow down European efforts on climate. In a May 8 blog post, he wrote that “a materiality assessment is not just a ‘nice to have’ — knowing your risks is a precondition for being able to address them.”While some banks have started to set aside capital to cover climate-related risks and improved their risk management, Elderson listed several deficiencies, including:*Not considering all relevant risk categories*Focusing only on transitional risks and omitting physical risks, or only looking at a subset of geographic regions*Using a net approach rather than gross to identify risks, undermining banks’ ability to measure actual impact and plan for mitigation
🚨 The German property crash is beginning to crystallise German property transaction volumes have been sluggish since interest rates started to inflect higher in late 2021.However, whilst overall volumes in April of this year were weak, a significant increase in insolvency-related transactions is noteworthy.🧵1/4
💥 Year-to-date, a record EUR1.6bn of distressed sales have already been recorded, according to Savills, making up 24% of overall transaction volumes - a new record. This, of course, is as much a reflection of a spike in foreclosure sales as it is the result of lacklustre overall transaction activity in the German market.The spike is somewhat explained by several large transactions, amongst them the sale of Berlin's KaDeWe luxury department store out of the Signa insolvency to Central Group.
😳 It is very likely that distress-related transaction volumes will remain high for some time for several reasons: (1) non-performing property-related loans at banks have increased 2.5x to EUR14bn, (2) open-ended real estate funds saw almost EUR2bn in redemptions since August of last year and (3) over the next 2 1/2 years, EUR25bn of bonds issued by real estate companies will mature, many of which need to be refinanced.
📉 Property prices in Germany are still declining: multi-family homes are now down 30% from their mid-2022 peak. Apartments were hit less and lost 14.5% over the last two years. Commercial real estate across its various categories is also down in the high-teens from peak. 🎉 The good news: rental yields have increased across all segments and are now back to levels last seen in 2013/14.
Eurozone unemployment falls to lowest level since 1999Eurozone unemployment dropped further in April, falling by 0.1 percentage points as a strong jobs market took the rate to its lowest level since the formation of the currency bloc in 1999. The euro area’s seasonally-adjusted unemployment rate fell to 6.4 per cent, with just under 11mn people unemployed, according to data from Eurostat, the EU’s statistics agency, on Thursday. This was down from 6.5 per cent in March. Across the wider EU region the figure was 6 per cent, amounting to 13.1mn people, a reading that remained flat on the previous month.
CitarCarta interna: Siemens Energy quiere eliminar 4.100 puestos de trabajo en Gamesahttps://www.wiwo.de/unternehmen/industrie/gamesa-internes-schreiben-siemens-energy-will-4100-jobs-bei-gamesa-streichen/29822482.htmlhttps://beamspot.substack.com/p/bateriasque-bateriasCitarEn este caso, un monotemático sobre el tema de “Baterías” y de cómo NO son ninguna solución.Por otra parte, no puedo “acusar” a los tecnooptimistas de no dar información y no darla yo tampoco.Que quede claro, que precisamente empecé por pedírsela “a los expertos”. Deformación profesional. No me han dado nada más que largas, cosa sospechosa.Pero yo trabajo o he trabajado de eso, así me he liado la cabeza a la manta, y por aquí he empezado.Hay más: esto es sólo una parte de un planteamiento de “solución” al problema de la intermitencia y de sus implicacioneshttps://www.eleconomista.es/economia/amp/12839195/crisis-energetica-en-argentina-el-gobierno-corta-el-gas-a-la-industria-por-escasez-en-plena-ola-de-frioSigue la cosa calentita, esto es como la inflación, serán cosas mías.