Abn Amro "won't Touch This", Comparison of UK and US housing markets / pdf

i disagree with the optimistic abn ambro view about the us houisng market. but i think they a correct view on the uk market. ugly!

ich stimme sicher nicht mit der zu optimistischen abn sichtweise in sachen us immobilienmarkt überien, baer ich denke das sie den uk markt extrem gut treffen. sieht übel aus!

thanks to "bobsta"

U can’t touch this
Dario keeps handing us sticks to beat him with. After telling us about his pink mountain bike last week, he recently revealed his most recent music purchase: MC Hammer. This makes his criticism of Rob’s musical tastes (the Pet Shop Boys and Abba) look pitiable. Obviously, this has very little to do with the subject of today’s Overnight Report, which focuses on the US and UK housing markets. Except that markets clearly believe it’s ‘Hammer time’ for US housing, while UK housing is ‘Too Legit to Quit’. But if you ask me, it’s UK homeowners who need to Pray’ (Perkins tells me these are MC Hammer song titles – we’ve hit a new low).

i can´t stand mc hammer so i´ve taken the "family guy" version :-)

Tim has outlined our view on the US housing market in previous Overnight Reports,so there’s little point in repeating the analysis. In short, we remain optimistic that the economy will prove resilient to problems in housing and the worst could already be behind us.

> very optimistic...i disagree

> extrem optimistisch. ich denke wir sehen gerade erst den anfang

Yet despite our upbeat view, we recognize why investors are concerned. If problems in sub-prime cause a broader credit crunch across the economy, we could end up looking pretty silly (a feeling familiar to some of us – Ed). Still, there seems to be an inconsistency here. Markets appear relatively relaxed about the UK housing market, which looks more vulnerable to a correction.

At this stage, I should probably clarify something. We don’t deny that US housing is overvalued. House prices will need to fall in real terms over the medium term. Yet given solid employment growth, rising incomes and – most importantly - unusually low long-term interest rates, it seems possible to rationalize where we are now.

>i think they left out speculation, excess, fraud, lax lending, creative financing ......

> denke die unterschlagen hier galanterweise spekulation, betrug, keine kreditstandtarts, kreative finanzierungsformen,......

In contrast, developments in the UK look harder to explain. Still, it hasn’t stopped some from trying. We are told the lack of spare land, rising immigration and demographic factors justify the premium on UK housing. But I’m yet to be convinced. These factors should boost prices and rents by a similar amount, as marginal buyers are forced into the rental market. Yet prices have risen far more quickly than rents over the last decade. The ratio of house prices to rents is now almost 50% higher than its long-run trend, compared with around 25% in the US. In fact, prices have risen so much faster than rents that rental yields are now below mortgage rates. In other words, property ‘investment’ is generating a negative cashflow. It’s only the expectation of further capital gains that is sustaining demand.

With house prices appearing more detached from fundamentals, the UK housing market could be more vulnerable to a correction than the US. There are also reasons to believe this could be more problematic for the wider economy. Owing to the lack of supply flexibility (economists call it an ‘inelastic’ supply curve), the burden of adjustment would fall on prices rather than quantities, the opposite to what we have seen in the US (see the illustration on page 2). This is how ‘spillover’ effects could occur. Falling house prices would depress household wealth and spending, especially as UK consumers hold a larger share of their wealth in housing than in the US. And given the concentration of default risk and sharper increases in household debt, the banking sector could also be exposed. While the latest RICS survey shows UK housing is still ‘Gaining Momentum’, we all know ‘This is the Way We Roll’: a housing market collapse will undermine confidence in sterling, preventing the Bank of England from cutting rates and prolonging the downturn.

It seems puzzling that markets worry about excesses in the US, but remain relatively unconcerned about the situation in the UK. The UK has experienced much sharper increases in house prices than nearly all other developed economies in recent years (Chart 1). Is this justified? We think not.

Numerous attempts have been made to rationalize the premium on UK housing. These arguments generally highlight the shortage of supply or a sustained increase in demand (due to immigration or demographics). Yet these trends arenot exclusive to the UK. The Netherlands and Japan have more acute land shortages, but have experienced less rapid increases in house prices

More significant, an increase in housing demand or shortage of supply should put upward pressure on rents, as well as on prices. Over the long-term, rents and house prices should grow in line with each other. Yet this has not been the case. Prices have risen much more rapidly than rents in recent years, suggesting UK housing is overvalued by nearly 50% compared with about 25% in the US (Chart 2).

Rather than fundamentals supporting the housing market, expectations of future gains and speculative activity seem to be driving prices higher. The level of rental yields is perhaps the clearest evidence of this. In the UK, rental yields have fallen below mortgage rates (Chart 3). This implies that housing ‘investment’ is generating a negative cashflow. With buy-to-let demand now accounting for 25% of all new mortgages, this illustrates how fragile demand could be to a shock to expectations.

This greater degree of overvaluation makes UK housing more vulnerable to acorrection than the US. It could also have more significant implications for the wider economy. Owing to the lack of land and inelastic supply, the burden of an adjustment would fall on prices rather than quantities. A given change in demand will generate a larger drop in prices (Chart 4). In regions where land is more abundant, such as the US, the adjustment primarily comes through quantities (i.e. construction output). A fall in UK house prices would depress household wealth, hurting consumer spending. It could also leave the banking sector exposed. If sterling then collapses, the Bank of England could find itself unable to respond.

lets hope abn is allowed to "stay" with their view after their takeover from the british barclays.......

bleibt zu hoffen das abn die selbe sichtweise auch nach der übernahme durch die britische barclays beibehalten "darf"

Canada: Housing Trend Has Started to Chill / pdf

almost numbers like in the us.... but i think that fundamentals in canada are much better and the financing was not so suicidal in the past.

sieht fast wie in den usa aus.....ich denke aber das die fundamentaldaten in kanada wesentlich stärker sind und es in der vergangenheit nicht so selbtmörderische finanzierungen gegeben hat.


Housing starts rose 7.6% in March to an annual rate of 210,900 units, following a sharp 21.3% decline in February. On a year-over-year basis, first-quarter starts were down 10.5%.
Today’s figures corroborate last week’s building permit data which showed a 17.3% decline in February. The number of permits issued in February (195,300) was the lowest recorded rate since December 2001, and suggests that the market has yet to stabilize.

red line building permits authorized / rote linie baugenehmigungen
The latest data are consistent with the consensus view that the Canadian housing market will cool in 2007 as past rate hikes and higher prices begin to affect demand. The booming housing market has been a key driver of economic growth in recent years and has acted as a major contributor to inflation (housing-related costs account for more than a quarter of the CPI basket).

Amid a strong employment environment and with still-favorable interest rates, the Canadian housing market is likely to gradually correct itself throughout 2007, escaping the sharper pitfalls of its southern neighbor. Should the slowdown prove sharper than expected, however, we maintain our view that ample room remains for interest rate cuts.

>have heard this in the us back in 2005.../ dasselbe hat man auch 2005 aus den usa gehört...

if anybody knows a good canadian bubble blog please leave the link in the comments or email me.

update: please check the comments. some canada links including good charts.

India's Mortgage Borrowers Face the Big Squeeze / at least one central bank isn´t kidding.....

when you read news like this one you know that the central banks has to do something.... http://tinyurl.com/2p3e44

wenn immer man solche meldungen liest ist es nur ne frage der zeit bis die notenbanken eingreifen....

Shares of Unitech Ltd., India's largest real-estate developer by market value, soared 26,869 percent during the past three years. Anant Raj Industries Ltd., a competitor, leapt 39,548 percent

April 3 (Bloomberg) -- The Indian central bank's monetary shock therapy has left the country's newly leveraged middle class gasping for breath.

Last weekend, ICICI Bank Ltd., which commands a 30 percent share of retail lending in India, raised the benchmark interest rate on all floating-rate loans, including mortgages, by 1 percentage point to 12.75 percent.

This move came on top of a similar increase in February, and a half-percentage-point one in December. Each time, the trigger was an unexpected preemption of financial-system liquidity by the central bank.

This steep escalation in the cost of home finance is deeply unsettling. Any monetary policy that causes real, long-term rates to move so drastically can't be called a successful one.

Will it reduce demand for new mortgages? Of course it will. And once that happens, the Reserve Bank of India might even pat itself on the back for containing runaway growth in bank credit. Goldman Sachs Group Inc. yesterday said the rate of expansion in unsubsidized commercial credit in India will slow to about 20 percent from 30 percent at present.

größer/bigger http://tinyurl.com/2ljmum

Yet, the victory will come at a heavy price. ( better than a bubble.....)

A new homeowner who took out a 2 million-rupee ($46,200), 15-year variable-rate mortgage, say, two months ago was better off as a tenant. His loan's maturity, according to ICICI Bank's ``impact calculator,'' has increased by about eight years.

> why take no fixed rate?

> warum keinen festzins?

Punishment for Homeowners
To the extent the large increase in home-loan rates are a direct result of monetary tightening, one wonders why the central bank is punishing homeowners even as the government is rewarding them with juicy tax exemptions.

>same could be said to almost any other country. even in germay we have tax breaks etc.

>das argument zieht nicht. gleiches gilt für fas jedes andere land.

There ought to be a better way to contain credit growth in the economy rather than by bulldozing the hapless middle class, which doesn't have the stomach for this kind of volatility.

Mortgage lending, which accounts for about 14 percent of the total unsubsidized commercial credit, is growing at an annual rate of about 32 percent, according to the latest available data. Some Indian banks have significantly more exposure to mortgage lending than others. Home Loans account for 51 percent of ICICI Bank's $27 billion in retail assets.

Credit growth, whose pace has barely slackened from about 33 percent a year ago, has prompted the central bank to bring out the heavy artillery.

In the past four months, the Reserve Bank has mandated as many as three increases in the cash-reserve ratio, or the proportion of deposits that commercial lenders must keep with the central bank as cash. Between December and now, the reserve requirement has risen 1.5 percentage points, with the most recent 50-basis-point increase announced on March 30.

>it has worked! india is underperforming almost every other index by a wide margin.

>es hat gewirkt. indien schneidet seitdem mit am schlechtesten weltweit ab.

Removal of Liquidity
This preemption of cash has removed about $10 billion of liquidity from the banking system. As a result, lenders such as ICICI are now scurrying to woo depositors by promising them higher interest rates. The rising cost of attracting deposits is, in turn, passed on to the retail borrowers, who are getting squeezed.

Better coordination between fiscal and monetary policy could have avoided the discomfort. The Indian government gives tax breaks that knock off a significant chunk of the effective borrowing cost on home loans.

By scrapping, reducing, or at the very least, suspending the tax breaks for new mortgages, the government could have curbed demand for fresh loans without hurting existing borrowers. A 200-basis-point increase in a mortgage rate in less than two months is unbearable even in a high-wage-growth country such as India. It translates into a 20 percent jump in what a family has to pay the bank every month, according to Credit Suisse Group research.

thanks to http://www.coxandforkum.com/

No Relief
The other option, equally unpleasant, is for borrowers to increase their own equity. According to a report last month by Credit Suisse Group's Mumbai-based analyst Aditya Singhania, a prospective homebuyer who was expecting to make a 20 percent initial payment must come up with an additional 15 percent of the loan value to keep the monthly payout unchanged from what he had budgeted for before a 200-basis-point surge in the cost of capital.

To that end, they have held monthly repayments constant for existing variable-rate borrowers and increased the duration of the loans. This strategy is now reaching its limit.

With monthly installments unable to cover interest costs, banks will have to seek more cash from the borrowers, who will have to curb other household expenditure to find the extra money.

No Rate Cuts
``We estimate that the current policy-tightening cycle is likely to reduce consumer demand considerably,'' Goldman Sachs economists Tushar Poddar and Mark Tan said in their report. Even then, there's very little chance of the Reserve Bank easing up on its hawkish stance in a hurry.

>finally there is at least one central bank that isn´t kidding......

>letztendlich gibt es zumindest eine zentralbank mit der nicht zu spaßen ist......

Domestic tight-money conditions may not dissuade investments by large Indian companies, which have easy recourse to cheaper overseas borrowings. As a result, the Indian economy may grow about 9 percent for a third straight year, almost ruling out interest-rate cuts in 2007.

The end to leveraged homeowners' woes may not come soon.

here is more from bill cara http://tinyurl.com/2ytm5p and http://tinyurl.com/35nzmd via http://housingdoom.com/

uk subprime / deja vu - economist

wow! isn't it amazing that just after the implosion in the us uk is speeding up in the subprime direction with creative financing, higher ltv, stated income tec.

us reloaded or groundhog day/deja vu all over again..........

die haben nerven. obwohl in den usa nun gerade der laden implodieren ist geht uk genau verstärkt in die gleiche richtung. man kann sich fast wie bill murray in täglich gr+ßt das murmeltier fühlen......




Rising house prices have hidden a multitude of sins

IT SHOULD have been a warning sign to Britain's mortgage lenders, but news of the meltdown in America's subprime market has prompted only self-congratulation. With straight faces, lenders, rating agencies and investors have counted the reasons why mortgage lending in Britain is as neat and orderly as the terraced Victorian houses it often finances.

One sign of confidence was the bond sale last week by Kensington Group, a British mortgage lender, to people with dubious credit records. While New Century, America's second-biggest such mortgage lender, was shuttering its offices as clients defaulted on their loans, in Britain investors queued to throw cash at Kensington. Bond buyers wanted twice as much as the £800m-worth ($1.5 billion) of mortgage-backed bonds on offer and blithely accepted a lower rate of interest than they had demanded on similar bonds sold by the firm last June.

update:

Shares of U.K. subprime lender Kensington tumble http://tinyurl.com/2k4c2s

At first glance, such enthusiasm for subprime lending in Britain (where it is tastefully called “non-conforming” or “adverse-credit” lending) looks justifiable. This is a profitable market that has grown from about 6% of all new mortgage lending in 2005 to as much as 10% last year (though estimates differ). Interest rates on such loans are usually at least 50% higher than those charged to lenders' best customers. Bond buyers in turn receive yields about 0.2 percentage higher than those on Treasury debt.

Despite these rewards, zeal for subprime lending ought, surely, to be tempered by prudence. It is not, because the boom in British house prices has helped drive repossessions to unusually low levels. Even feckless homeowners have made paper gains on their homes and are thus more inclined to pay off their mortgages than to walk away from them. When they have been unable to keep up with their payments, banks have often convinced them to sell their homes, thus avoiding seizure.

Kensington Group, for instance, says that although 9% of its loans were more than three months in arrears last year—slightly less than a year earlier—it had to write off only 0.7% of them.


Emboldened mainstream lenders, too, are extending mortgages on looser terms these days. Around 8% of new home loans are “self-certified”—ie, borrowers do not have to prove what their income is—compared with 6% of all existing mortgages.

Increasing even faster are interest-only mortgages, which make up almost a third of the total issued to first-time buyers. They are not automatically cause for concern, especially if borrowers have made other plans to repay the capital. But a recent study by the Financial Services Authority, Britain's financial regulator, makes for worrying reading. It suggests that these loans are gaining popularity because people entering the housing market are ever more financially stretched (see chart).

i´m not sure what to make of the chart from the economist. i have here another chart from the same source that looks much more realistic. especially when you see at all the advertising from banks like this one "Five-times-salary mortgage offer" http://tinyurl.com/2fshdp

weiß nicht genau was ich von den economist chart halten soll. habe hier einen von der gleichen quelle der mir realistischer erscheint. besonders wenn man sich die angebote der banken ansieht (s.link oben)

About a fifth of interest-only mortgage borrowers said they could not have afforded to repay both capital and interest. Nearly a third said they would struggle to meet all their obligations if interest rates went up by a percentage point. And according to a study for the Council of Mortgage Lenders (CML), a trade body, last year, those taking out interest-only mortgages are more likely to be borrowing over 90% of the value of their homes and to have poor credit records than those signing conventional capital-repayment mortgages.

Buy-to-let mortgages are another fast-growing sort of lending that raises eyebrows. These account now for about a tenth of new mortgages. But house prices have climbed faster than rents, so new buyers pay more to service their mortgages than they receive in rental income. As long as prices keep rising landlords can hope for profits in the form of capital gains, and those who run into cash-flow problems can usually sell their way out of trouble. But what happens if the music stops?

pimco has one answer / pimco hat ne antwort http://tinyurl.com/2a2vk3

Michael Saunders, an economist at Citigroup, a bank, says that taken together these riskier lending practices are cause for worry. Repossessions, though still low by historical standards, rose by 65% in 2006. And many Britons carry a heavy burden of consumer debt as well as their mortgages.

Lenders and rating agencies are heartened by their models, which show that it would take a combination of higher interest rates and falling house prices to make a worrying number of mortgage loans go bad. But this is the exact confluence of events that is causing such woe in America.

you should relax less....

A little less complacency and a little more prudence are in order.

The trouble with the housing market / anti spin from the economist

a very good summary not only on the us but also on the bubbles in spain, irland and uk. not a pretty picture. ( the cover is just the opposite! )

to read more about the bubble in ireland, spain, uk, australia etc. http://tinyurl.com/2ddjun

ne gute zusammenfassung die neben den usa eneballs die probleme in spanien, irland und uk beschreibt. sieht überall nicht sonderlich gut aus. (ganz im gegesatz zum cover)

mehr zum bubble in den einzelnen ländern http://tinyurl.com/2ddjun

After the great global housing binge, the hangover is kicking in. Especially in America

JUNE is National Homeownership Month in America. National Foreclosure Month would be more apt. Some corners of the mortgage market—notably “subprime” loans aimed at those with poor credit records—have a nasty case of dry rot. One subprime borrower in eight is behind with the payments. As the introductory “teaser” rates on more loans expire and monthly payments outrun the means of more borrowers, hundreds of thousands of Americans are set to be thrown onto the street. http://tinyurl.com/ypn6ve

Only a few weeks ago you could find voices ( edit: mainly cheerleaders from wall street, lereah etc......)claiming that the worst was over for America's sagging housing market. That is harder now. Although it is too soon to be truly gloomy about the broader economy, any structural surveyor would spot tightening credit and a glut of housing supply. The foundations are not much better: falling house prices are no good for consumer spending, which has been propping the economy up.

Other countries may also be looking nervously at America. And about time. An American recession would scarcely be welcome—even if for the moment Asian and European economies seem to be doing nicely on their own account. However, the true cause for concern is that just as America's housing boom was part of a synchronised global binge on cheap money, its bust may be part of a global story too.


thanks to http://www.wallstreetfollies.com/

After a long, long night on the tiles
Listen around the world and you can hear echoes of America's difficulties—even if prices have not yet started to tumble.

Start with subprime borrowers. In America these people are, not surprisingly, poorer (and less likely to be white) than those who can obtain mortgages at lower, usually fixed rates. They tended to join the great housing-market party late, when prices were already sky-high. Many appear to have been encouraged to take out loans by brokers more bothered about their fees than their clients' ability to repay their debts. And the lenders who advanced the money—dozens of which have had to shut up shop—underestimated the rate of default. Generously, you could ascribe this to the relative youth of the subprime market.

Less generously, you might point to the effect of “securitisation” on lenders' incentives: knowing that loans could be lumped together and sold, and then chopped, repackaged and sold again, made for slack judgment. ( i go with the secound.../ ich glaube an die 2. option...)

To Britons, much of this will sound alarmingly familiar. “Self-certification” mortgages (translation for Americans: “undocumented” or “liar” loans) and interest-only loans have become more common as borrowers, especially young ones hoping to buy their first home or neophyte landlords who think that a string of properties will be their pensions, stretch their budgets. http://tinyurl.com/264bmn

In Spain lenders are courting the country's army of young immigrants, who often have short or patchy credit histories—and often, it seems, work on building sites themselves.

The other American theme is that homebuyers and lenders are reaping the consequences of loose monetary policy. When the Federal Reserve cut interest rates after the tech bubble burst, it inflated another, in housing. In Europe you can see a similar story. The single currency has brought the euro area's star performers, Spain and Ireland, unsuitably low interest rates—and house-price increases of 180% and 250% respectively in the past decade. Now both look too dependent on housing.

In Spain, where the rate of house-price inflation has eased—eased—to 9% or so, housing investment now accounts for 7.5% of GDP. Were this ratio to fall to, say, 6%, still above the average for the rest of the euro area, job losses in building could cut employment growth by a percentage point a year. here a very good story on the problems in spain http://tinyurl.com/2h7jym

Ireland looks rockier still. Housebuilding accounts directly for a staggering 15% of national income and 12% of employment. Whereas prices have soared, rents have stagnated in recent years and, at 4%, rental yields in Dublin do not cover even the cost of borrowing. Now prices are flattening too. According to Morgan Kelly, of University College, Dublin, to return the ratio of prices to rents to where it was around 2000, real prices will need to fall by 40-60% in the next eight or nine years.

What next?
Americans and others may be tempted to take heart from apparent soft landings in Britain and Australia. That would be a mistake. Admittedly Britain's housing market has had a second wind since a surprise interest-rate cut in 2005. But the effects of rate increases since may not have come through yet. And Australian prices have undergone huge regional variations. Buy-to-let investors in Sydney flats, who saw prices drop, may think their landing rather bumpy.

Inevitably, Americans will ask what policymakers can do. It is too late to unwind monetary policy of a few years ago; cutting rates now risks compounding the error. The Fed's main worry is inflation—and rightly so. ( really?/wirklich?)

Given the slackness of lending standards, especially in the subprime market, there is an argument for tighter oversight of non-bank mortgage companies, and at the federal rather than state level. It is tempting to blame securitisation for much of the mess. But the technique has been a boon, by and large, making credit markets of all sorts more liquid. And despite the arrears and foreclosures, subprime lending has been part of what Alan Greenspan once called a democratisation of credit. More Americans are able to borrow and buy houses. Most manage.

The economic consequences may yet be large; so may the political ones. Most of the gains from America's recent economic success have been scooped by those at the top of the pile—not least in the financial industry. Now many lower down face unpayable debts and the loss of their homes.

Populist politicians may well make much of the contrast between a second house in the Hamptons and no house at all. Instead, they should stop making a fetish of homeownership. That people are free to borrow to buy their own home, should they wish, is fine. That politicians should encourage homeownership for its own sake is not. That they foster it with tax breaks, as they do in America, is daft.

bubble world tour / spain ready to bust ?

wow! when you read this it looks like you can eliminate the questionmark from the headline.......


denke man kann nach lesen des artikels das fragezeichen aus der überschrift streichen......
Vacation Homes Boom in Spain May Bust as Banks Recoil

March 20 (Bloomberg) -- Vacation home prices in Spain, a leading indicator of Europe's property market, may face a slump that's worse than the real estate decline in the U.S., based on the loan terms banks are imposing on developers.

Property magnate Fernando Martin, the former Real Madrid soccer chairman, and Barcelona-based Promociones Habitat SA are paying five times more to borrow than U.S. developers such as Centex Corp. Even UAL Corp.'s United Airlines, which was bankrupt last year, pays a lower risk premium on its loans.

``Banks are imposing terms on real-estate firms similar to those for defaulted loans,'' said David Malpica, who helps manage $5.6 billion of real-estate and distressed debt assets in Europe and the U.S. for CarVal Investor in London. ``It reflects the high volatility of real-estate assets.''



Property agents in Spain, Europe's hottest housing market this decade, are likely to cut vacation home prices by as much as 10 percent this year, according to RR de Acuna & Associates in Madrid, which values real estate for about 40 percent of mortgages. ...

Spanish house prices averaged 276,300 euros ($368,000) in December, according to Sociedad de Tasacion, a Spanish property company. They're twice as expensive today as in 2000, beating growth rates in the U.K. and Ireland, according to figures from the European Mortgage Federation and Irish Life & Permanent Plc.

British, Irish and German vacationers and retirees fueled sales of 4 million homes to foreigners, according to the Vacation Homes Agency, an organization in Madrid funded by developers. Construction made Spain the biggest driver of economic growth in the euro region this decade.

Higher Rates
Real estate spending by foreigners dropped 11 percent during 2006 to 4.9 billion euros, according to the Bank of Spain figures released last week. New mortgages sold to Spanish families fell by 10 percent, according to the Spanish Mortgage Association. Applications declined as the European Central Bank raised interest rates seven times in the past 16 months to 3.75 percent.

``Opening a sales office and hiring an attractive woman is no longer enough to sell houses,'' said James Stuart, who has marketed vacation homes since the 1980s in Marbella on the Costa del Sol, and is the local agent for Savills Plc, the largest publicly traded commercial real-estate broker in the U.K. ``I don't know any project in default, but banks are asking for more guarantees and more sales to be agreed before lending any money.'' The Costa del Sol is on Spain's southern coastline, just across the Mediterranean Sea from Africa.

More Vulnerable
Spanish homeowners may be more vulnerable than Americans to defaults as interest rates rise because about 98 percent of mortgages in Spain have floating rates, according to the central bank. In the U.S., most mortgages have fixed rates. ( but no creative financing / in spanien feht aber der gesamte bereich der kreativen finanzierungen )

The Organization for Economic Cooperation and Development in January said house prices in Spain may be overvalued by as much as 30 percent. A sudden acceleration in interest rates could cause an ``abrupt adjustment in which prices would plunge,'' the Paris-based OECD said. A 30 percent slump could reduce Spain's economic growth by as much as 1.8 percentage points, according to Deutsche Bank's Just.

Bank Risks
Re/Max International Inc., the second-largest U.S. real- estate broker, says it cut prices as much as 26 percent on more than 5,000 homes in Spain in January. Overall in the country, prices rose at an annual rate of 9.1 percent in the fourth quarter, slowing from 9.8 percent the previous quarter and 12.6 percent a year earlier, Housing Ministry figures show. Home prices in the U.S. fell 2.7 percent last year, according to the National Association of Realtors.

``When sales slow the first area to suffer is vacation homes and then first homes are next to get hit,'' said Dani Alvarez, former head of international sales at Don Piso, a Spanish real-estate broker.

A slump may hurt Spain's banks. Santander Central Hispano SA and Banco Bilbao Vizcaya Argentaria SA lead banks owed 1.3 trillion euros by developers, builders and mortgage holders, according to the Spanish Mortgage Association. The 379 billion euros of loans to property firms is equal to about half of all corporate loans, Bank of Spain data show.

bank santander has bought to diversify one of the biggest uk lender "abby national". other spanish banks have also bought recently stakes in the us (compass)...... both also very frothy......

die bank santander hat zur diversifikation eine der bedeutensten britischen banken "abby" gekauft. andere spanische institute habe sich erst kürzlich in den usa eingekauft. beide länder bekanntlich ebenfalls leicht überhitzt.......

Property developers pay a premium over other industries to borrow. Fernando Martin's Madrid-based Grupo Martinsa is paying Morgan Stanley, Caja Madrid and Caja de Ahorros de Barcelona an interest premium as high as 2.5 percentage points over interbank rates, according to regulatory filings.

The 4.1 billion-euro loan will help finance Martinsa's acquisition of Fadesa Inmobiliaria SA, Spain's second-largest real estate company, based in La Coruna. Fadesa has built properties ranging from vacation homes in the Canary Islands to golf courses near the Spanish city of Malaga.

Loan Guarantees
By contrast, Metrovacesa SA, Spain's biggest real estate company, paid an interest margin of only 60 basis points last year for a loan to refinance debt from its purchase of Paris- based developer Gecina SA.

United Airlines paid 50 basis points less than Martinsa on its loan last month, a year after the Elk Grove Village, Illinois-based company exited bankruptcy.

``Spanish banks have been lending a lot of money to buy and build houses,'' said Giuliano Giovanetti, head of sales for mortgage insurance company PMI Group Inc. ``The market is now asking a premium for debt related to Spanish real estate.''

Martinsa had to guarantee lenders it would reduce debt by selling equity within 15 months, company filings show. It also must purchase derivatives to fix its borrowing rate, said a banker involved in the deal, who declined to be identified.

Debt Syndicate
Promociones Habitat is paying the same interest premium as Martinsa to borrow 1.7 billion euros for its acquisition of Grupo Ferrovial SA's real-estate unit in Madrid. Habitat must reduce debt by selling equity within six months under its contract with lenders led by La Caixa, Spain's biggest savings bank. Martinsa and Habitat spokesmen declined to comment.

``Banks are demanding real-estate companies cut debt or increase equity,'' said Antonio Hernandez Chao, deputy head of syndication at Ahorro Corporacion Financiera in Madrid, Spain's biggest issuer of bonds backed by mortgages.

Banks are turning to fund managers and regional lenders to underwrite debt sales as a way of reducing their risk. London- based fund manager European Credit Management is helping Santander and Caja Madrid arrange a 3.8 billion-euro loan for Construcciones Reyal SUA, the first time a non-bank institution has underwritten a loan in Spain, Bloomberg data show.

Mortgage Arrears
European Credit Management, which controls 20 billion euros of debt investments, will receive an interest margin as high as 195 basis points over Euribor in addition to undisclosed underwriting fees, Bloomberg data show.

Spanish homeowners and developers show few symptoms of distress. Housing starts are rising at the fastest pace in three years, with planning approvals up 18 percent last year to 864,000 homes, according to construction trade union Seopan. France, with a larger population, had 561,737 planning approvals.

The biggest shareholders of real-estate companies, including Astroc Mediterraneo SA Chairman Enrique Banuelos and Grupo Inmocaral SA Chairman Luis Portillo, entered the Forbes billionaire list this year after selling shares in their real- estate companies and buying larger rivals.

i wanted to ad this chart from 2 of the biggest construction companies in spain that have benifited also from the building boom in infrastructure etc. they are now spreading their business at a record pace to europe and also to other sectors. ferrovial has bought British Airports Authority (BAA) fo almost $20 billion! and other companies have bought reits in france etc or bought stakes in repsol (oil), endesa (utility), gamesa (wind energy) etc, the list goes on and on........looks like a smart move. by the way from the 35 members in the ibex 5 are construction companies.......

dieses ist ein chart von 2 der großen baufirmen in spanien die zusätzlich besonders von dem bauboom im infrastrukturbereich profitiert haben. diese firmen nutzen jede gelegenheit sich entweder in europa einzukaufen oder sogar die branchen zu wechslen. ich erinnere nur an die 15 mrd € übernahme der britischen baa (flughäfen) durch ferrovial. zudem werden reits in frankreich aufgekauft, eon kann ein lied davon singen das sich acconia bei endesa (strom) einkauft, ähnliches gilt für repsol (öl) und gamesa (windkraft). es gibt noch dutzende weitere beispiele. bei den bauaussichten in spanien keine schlechte strategie.....übrigens sind satte 5 der 35 mitfglieder im ibex baufirmen (oder sollte man sagen ehemalige...)



Bank of Spain chief economist Jose Luis Malo de Molina last week predicted ``a gradual normalization'' of the property market that wouldn't destabilize Spain's economy or financial sector. The slowdown in house price increases would lead to ``gradual absorption'' of the effects of excess valuations, he said.

Corruption Charges
BBVA, Spain's second-largest lender, expects real estate prices to rise by at least 3 percent this year. Prices in the province of Malaga rose 8.6 percent last year, accelerating from 8.2 percent in 2005, according to the government.

``The second homes market is more vulnerable to a slowdown,'' said Oliver Gilmartin, senior economist at the Royal Institution of Chartered Surveyors in London. ``I don't think the slowdown is a necessarily a harbinger of wider problems.''

Corruption charges brought against some of the country's biggest realtors are adding to concern about prices. At least 75 people have been arrested as part of the investigation, including the mayor of Marbella, Marisol Yague.

`Economic Impact'
...``For companies that are exposed to the vacation home market, what's happening there may be a sign to slow things down,'' said Mark Stucklin, the author of ``Buying Property in Spain'' who runs Spanish Property Insight Web site and writes a column on the market in Spain for the Sunday Times in London. ``If sales to foreigners are slowing, that means there's less building to be done and that will have an economic impact.''

to me the heavy dependence on foreigners etc makes me feel like spain could be something like florida for the us.

für mich fühl es sich so an als wenn die extreme abhängigkeit von ausländern spanien zu etwas ähnlichen wie florida in den usa macht

UPDATE:

today a spanish construction company "acs" bought 25% of the biggest german construction company "hochtief" at 72 €. of course an all time high! the pe for hochtief is close to 40! the biggest assets are turner in the us and leighton in australia.

passend zum thema hat heute acs bekanntgegeben sich bei hochtief einzukaufen. selbstreden zu spitzenpreisen. nebenbei bemerkt notiert hochtief bei einem kgv von um die 40. die größten asstes liegen passenderweise in den usa und australien.

ACS Spends EU1.26 Billion on 25% Stake in Hochtief http://tinyurl.com/248gkz

Unternehmensbereiche	Außenumsätze		Innenumsätze
(In Tsd. EURO)	2005	2004	2005	2004
Airport	4.108	1.259	130	183
Development	924.855	723.826	18.205	14.537
Construction Services Americas	5.934.248	5.605.202	-	-
Construction Services Asia Pacific	4.577.899	3.446.387	585	349
Construction Services Europe	2.109.726	2.086.920	204.407	127.857
Unternehmenszentrale/ Konsolidierung	102.359	80.066	32.702	27.830
	13.653.195	11.943.660	256.029

bubble humor from ireland! / property pin

thanks to "Open Window" from http://www.thepropertypin.com/forum/index.php

when you look at the irish bubble it is no wonder that you need lots of humor to deal with the mania.

wenn man sich die ausmaße des irischen bubble ansieht braucht man ne gehörige portion humor.

thanks also to john flemming for the find.

click on the labels to read more about ireland

bubble world tour / economist

looks like germany is a weird place to start a "immobilienblasen"/housingbubble blog............. :-)
the bubble in the usa has popped. it is no question if it is a question when it will deflate in the rest of the world.
more on the bubble worldwide http://immobilienblasen.blogspot.com/2006/09/bubble-goes-global.html#links


schon komisch das ich als deutscher ein immobilienblasen blog gestartet habe..... :-)
in den usa ist die blase bereits geplatzt. beim rets ist frage eher wann und nicht ob sie platzen wird. mehr zum weltweiten bubble http://immobilienblasen.blogspot.com/2006/09/bubble-goes-global.html#links


While America's housing market cools, property elsewhere is still hot http://www.economist.com/finance/displaystory.cfm?story_id=8381960

IN MANY countries, people are showing little sign of losing their appetite for residential property. Although the pace in several of the raciest markets around the world has eased a bit in the last quarter, prices have risen by more than 10% in the past year in eight of the countries in our table. ....





However, in America the steam has come out of the housing market. .......


A huge number of homes is awaiting sale: 7.4 months' supply of both existing and new properties.


David Rosenberg, an economist at Merrill Lynch, points out that inventories of new homes are 40% above their historical norm. The number of new properties completed but not yet sold has risen by 50% in the past year, to 166,000. America's builders are cutting back hurriedly. In October alone private residential-construction spending fell by 1.9%; it was 9.4% lower than a year before.

Although America's bubble is deflating, other markets are still looking decidedly frothy. Denmark tops our property-inflation table; elsewhere in Europe, house prices in France, Spain and Ireland are still simmering. In Australia and Britain, where it once seemed that property markets had levelled off, prices have picked up again, rising by 9.5% and 9.6% respectively to November of this year.

The Australian figure disguises marked regional variations. Prices in Sydney rose rapidly in 2003, fell in late 2004 and 2005 and are (just) increasing again. In sizzling Perth prices rose by 46% in the year to the third quarter. In Britain too the pace varies from one area to another: in the year to the third quarter, prices in Northern Ireland rose by a third, ....., while those in the north of England rose by less than 1%. But the renewed pep in the national pattern has revived talk of a housing bubble.

In a thoughtful recent study David Miles, of Morgan Stanley, tries to explain the doubling of real British house prices in the past decade. Some of the increase, he says, can be ascribed to rising real incomes; a smaller share can be explained by increases in population; some can be put down to lower real interest rates (including the keener pricing of mortgages by lenders). However, a lot of it is speculative.(quite an understatement chart!/ lerichte untertreibung chart)

Between one-third and one-half is due to increased expectations of house-price inflation. These amplify the effects of other factors. Faster increases in prices foster the belief that future increases will also be stronger, so that higher prices fuel demand rather than dampen it.



The need to explain so much of Britain's house-price inflation by a change in expectations, writes Mr Miles, “suggests that the current level of house prices may be rather unstable.” Once those expectations come down, real house prices are likely to fall. The trouble, of course, is predicting when. (coming sooner than most people think, kommt schenller als die meisten denken....)