Thursday, July 14, 2005

First Active has become the first financial institution to offer 100% mortgages in the Republic of Ireland. The bank previously offered 100% financing to professionals in finance and medicine, but is now to offer this product to anyone who can afford to meet the repayments.

The development is a huge boost for first time home buyers who have been struggling to get on the Irish property market in recent years due to the rapid increase in house prices. A typical first time buyer in Dublin with 92% financing would normally have to put down a deposit of €20,000-€30,000 in cash, but now have the option to produce no deposit.

First Active has said that 100% mortgages will be available across its entire range of mortgage products.

Note however that this is not necessarily an entirely positive development.

The United States and most of Europe have experienced a housing price bubble in recent years. A bubble occurs when buyers purchase a property not because its price is appropriate for its actual value but because they expect the price to significantly rise in the short term permitting resale with a profit.

In other words, the prices people pay for properties becomes divorced from the real value of the property; the purchase is speculative and depends purely upon the expectation that people will continue to buy properties in this way (e.g. without proper consideration of their real value).

The terrible weakness in this is that when the market corrects itself and prices fall to a level where properties are being priced at their actual realistic value, anyone holding a property loses a great deal of money, since the price they paid does not reflect the actual realistic value of the property.

This kind of shock to the housing market is extremely undesirable. Significant write downs in the value of property often significantly depress the economy as a whole.

Less than 100% mortgages force buyers to invest a significant amount of money in the act of purchasing their house, which tends to discourage purely speculative purchasing, thus helping to mediate house price bubbles.

With 100% financing, anyone who can meet repayments can speculatively purchase a property. This naturally encourages pricing bubbles.

Wednesday, April 23, 2008

Catherine McGuigan, a resident in South Mimms, Hertfordshire, UK, found skeletons from over a century ago buried under her dining room.

She had hired builders for an extension for her cottage, where she has lived for eleven years, and at the beginning of April they found human bones in the ground.

Her cottage was built over a burial ground; from 1697 to 1820 the land was owned by the Religious Society of Friends. In the 1600s, members of the society, better known as Quakers, were persecuted for their beliefs and so were not allowed to be buried in consecrated church grounds. Instead burials, which were also sometimes for others not recognised as parishioners – such as homeless people, often took place in the countryside.

The Daily Mail states in its April article that the Religious Society of Friends have advised McGuigan that she “must cremate” the bodies, however Quakers have written an open letter to the Daily Mail, informing that for Quakers, there is “no specific advice on the disposal of bodies”, and that they had never expressed an opinion on how the discovered skeletons should be buried.

The cremation was rumoured to cost up to £32,000 – an £800 quote for cremation of a single body multiplied by 40, however as yet only ten bodies have been discovered.

The builders originally thought the bones were pieces of pipe, and McGuigan has now ordered coffins and is looking to holding a mass cremation or a burial in a nearby field.

Tuesday, May 22, 2007

Speaking in Washington Tuesday at the conclusion of the China-U.S. trade summit, Chinese Vice Premier Wu Yi warned the U.S. not to pursue a ‘blame game’ in continued trade negotiations. “We should not easily blame the other side for our own domestic problems,” Wu said, speaking through an interpreter. “Confrontation does no good at all to problem-solving.”

The valuation of the Chinese Yuan has been closely tied to the U.S. Dollar for years. Critics charge that this resulted in a relatively low value, making Chinese goods cheaper in the U.S., contributing to the current trade imbalance that favours China.

Although the Chinese government expanded the band in which the Yuan can float (relative to the U.S. Dollar) from 0.3 percent to 0.5 percent last Friday, critics say the measure doesn’t go far enough to address the U.S. trade deficit. Members of the U.S. Congress have blamed China’s policy of currency manipulation for the rising trade imbalance and a 16 percent drop in manufacturing jobs since 2000. In 2006, U.S. imports from China exceeded exports by US$232.5 billion, almost one third of the total trade deficit of US$765.3 billion.

In April, the U.S. Department of Commerce filed a WTO piracy complaint against China. Subsequently, China has agreed to talks and has issued some internal guidelines to address the issue. Wu said that both sides should “firmly oppose trade protectionism.” She said that any effort to “politicize” the economic relationship between the two nations would be “absolutely unacceptable.”

“The Chinese government will agree to U.S. demands” on piracy, predicted Albert Louie, in April, about the upcoming talks. Louie is the managing partner of A. Louie Associates, an anti-piracy company in based in China. “There is no question the government wants to crack down on counterfeiters. What remains in question is the consistency of enforcement,” he added.

The U.S. delegation also highlighted food safety as a concern with imports from China. The example of melamine-tainted pet food ingredients imported from China recently was used as an example of weak health and environmental controls in China. U.S. trade delegate Susan Schwab said the issue of food safety was raised by Agriculture Secretary Mike Johanns and Health and Human Services Secretary Michael Leavitt. “This is not necessarily reflective of more protectionism or anti-Chinese sentiment, but rather that there are concerns there and we need to be responsive,” said Schwab.

It is hoped that breakthroughs will be reached on issues such as U.S. complaints of high Chinese import duties on U.S. energy technology products and the restriction on U.S. airline flights to China.

In the US Congress, a number of potential bills that would impose trade restrictions on China, are being pursued. Recently, a trade panel voted to impose a 44.3 percent tariff on polyester imports. Meanwhile, the Bush administration increased duties on certain types of glossy paper from China. A bill imposing 27 percent tariff on all Chinese goods has been proposed in Congress but hasn’t yet passed.

“The frustration that I and many of my colleagues in the Senate feel is that China is not satisfying its obligations as a member of the WTO and as a major beneficiary of open trade,” wrote Charles Grassley, chairman of the Senate Finance Committee, in a letter sent to Wu in advance of the summit.

A compilation of brief news reports for Wednesday, December 23, 2009.

Saturday, October 23, 2021

China property giant Evergrande Group wired USD83.5 million in interest owed in an offshore bond from September 23 on Thursday, temporarily averting default, according to a Reuters source and Chinese newspaper Securities Times.

The wire to a Citibank fiduciary account following a 30-day grace period came after assurances by various members of the Chinese government, Reuters reported. At a Beijing forum Wednesday, Chinese Vice Premier Liu He described the risks as controllable, and chairman of the China Securities Regulatory Commission Yi Huiman said that while authorities needed to curb excessive debt more broadly by “improv[ing] the effectiveness of the constraint mechanism on debt financing”, the matter would be dealt with properly.

Once China’s top real estate developer, Evergrande had accumulated approximately USD305 billion in liabilities, two per cent of the Chinese gross national product, after “dwindling resources” cut its value by 80%, according to Reuters. September data revealed Chinese home sales by value fell by nearly 17% year-on-year, according to The Guardian, and fears over its default led to a slowdown in China’s third quarter GDP growth to a year low of 4.9%. Two sale negotiations with rival developers Hopson Development and Yuexiu, valued at USD2.6 billion and USD1.7 billion, respectively, were suspended, reportedly due to a lack of consent by the government of Guangdong province currently overseeing Evergrande’s restructuring.

News of Evergrande’s remittance caused its shares to rise by as much as 7.8% this morning after a two-week pause in trading for the anticipated sale of 50.1% in Evergrande Property Services Group, and offering some reprieve for bondholders, according to Reuters. Portfolio manager at GaoTeng Global Asset Management James Wong, interviewed by The Guardian, called the news “a positive surprise”, adding “[i]f Evergrande pays this time, I don’t see why it won’t pay the next time.” Jun Rong Yeap for IG Asia pte., interviewed by Bloomberg, said the report “overturned” the narrative “that Evergrande will face difficulty in securing cash ahead”.

Further missed payments are due October 29 and November 11 after similar 30-day grace periods; including yesterday’s USD83.5 million, nearly USD280 million is owed to bondholders.

Stocks have been down for many major Chinese developers: Reuters Wednesday reported year-to-date stock prices fell 87.8% for Sinic Holdings, currently in Fitch Ratings’ ‘restricted default’ after failing to make an October 18 bond payment valued, according to The Guardian, at USD246 million; 80.2% for Evergrande itself; 78.3% for E-House, 58.5% for Fantasia Holdings and 54.6% for Kaisa Group, which defaulted in 2015 and had bonds reach record lows.

Estimates of the Chinese real estate market’s size range from 16 to 25% of the Chinese gross domestic product, according to The Guardian. Chinese President Xi Jinping’s aim to transform the country’s economy from one of debt-fuelled “inflated” growth to one of improved “quality and returns” included imposing regulations on developers that limited their capacity to borrow. A Guardian comment piece from economist George Magnus published on October 15 made reference to China’s “ghost cities” and “rampant credit creation” that has given rise to high vacancy rates and the “financialisaton of housing”.