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Why Isn’t There More Collaboration Between Islamic Finance And SRI
By Usman Hayat, CFA Islamic finance and the forms of finance generally referred to as sustainable and responsible investing (SRI) are yet to actively collaborate with each other. One would think that to strengthen their position in a market dominated by conventional finance, Islamic finance and SRI would be sharing their successes and failures, coming together for joint ventures, and supporting each other on issues for which they have similar views. But such collaboration has not occurred. Building bridges between the two remains an opportunity that is waiting to be seized upon by the industry leaders from the two sides. Islamic finance and SRI share some obvious similarities in their objectives (do good; avoid harm), methods (e.g., exclusionary screening) and claims (such as emphasis on ethics). Both seem to trigger similar expectations among their proponents of being ethically different from conventional finance. They also face similar criticism of not being able to live to up to these expectations as shown by the “form versus substance” debate in Islamic finance and “greenwashing” debate in SRI. Although SRI is older and larger than Islamic finance, which is estimated between USD $1 to $2 trillion in terms of global assets, both are relatively small and growing segments. Why then are Islamic finance and SRI not actively collaborating? Some apparent reasons are different countries of concentration, differences in target markets, preoccupation with their own growth, perception and reputational concerns, cultural barriers, lack of initiative by industry leaders, and simply insufficient understanding of each other. But in the absence of survey data, it is difficult to get to the bottom of this lack of collaboration. Islamic finance is practiced by international financial institutions offering conventional finance, such as HSBC. It has also drawn increasing interest from other international organizations, such as the World Bank , which has organized an annual conference with the Islamic standard setter, Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI). Similarly, many conventional financial institutions are active in SRI. For instance, Goldman Sachs has participated in the first social impact bond in the United States, it has its 10,000 Women initiative , and its asset management arm is a signatory to UN Principles for Responsible Investment . If both Islamic finance and SRI can work with the leading and sometimes controversial faces of conventional finance, why can’t they work with each other? At times, we do observe financial products that meet some traditional Islamic and modern environmental, social, and governance (ESG) criteria . For instance, the Sustainable Resources Fund, which was launched in 2012, invests in a mix of agro-forestry, land, and sustainable agricultural sectors, and it is supposed to appeal to both Islamic and “green” investors. Similarly, there are increasing news reports about green sukuk — Islamic financial certificates that are also environmentally friendly — and just last year an Australian solar company tapped the huge Islamic finance market to fund projects in Indonesia . Other earlier examples include the Dow Jones Islamic Sustainability Index introduced in 2006. Nonetheless, such examples remain rare. The fields’ general lack of interaction can also be observed in professional education. For instance, the curricula for the Sustainable Investment Professional Certification Program (offered by the John Molson School of Business) and the Islamic Finance Qualification (offered by the Chartered Institute for Securities & Investment) have limited, if any, content about each other. The same trend is observed in industry reports, even in a country like the United Kingdom, which is home to both SRI and Islamic finance. For instance, a 2012 report on Islamic finance by TheCityUK does not talk about other forms of ethical finance, and the UK Sustainable Investment and Finance Association’s annual review does not talk about Islamic finance. Unsurprisingly, one sees the same trend of lack of interaction in industry conferences in Islamic finance and SRI. There are, of course, differences between Islamic finance and SRI. One significant difference is that the concerns about Islamic finance go beyond the purpose of financing and also cover its structure. This is because of Islamic prohibitions of riba and excessive gharar , which are generally interpreted to include lending money on interest and the trading of risk. Also, the exclusionary screening applied in Islamic finance goes beyond the usual suspects (such as alcohol, tobacco, and gambling) and covers conventional financial services because of prohibition of riba . However, the current form-oriented and legalistic compliance in Islamic finance that often has little effect on economic substance of transactions suggests that these prohibitions cannot explain the lack of collaboration with SRI. Recently, we had two experts, one on Islamic finance and one on impact investing, at CFA Institute Middle East Investment Conference . Speaking on Islamic finance in the global economy, Ibrahim Warde, professor at Tufts University, was clear that offering social value ought to be a part of Islamic finance . Talking about impact investing, Harry Hummels, professor at Maastricht University and a European liaison for Global Impact Investing Network (GIIN), said that it is intending and measuring a positive impact on society that defines impact investment , and by implication Islamic finance could be structured as impact investing. Listening to Warde and Hummels reinforced the idea that there is room for collaboration between Islamic finance and SRI, and at the core of expectations from them is the desire to see finance making a positive difference for society. In London this month, there are two significant events planned: one on impact investing and the other on Islamic finance. First is the GIIN Investor Forum on 10–11 Oct, to be held in partnership by the Global Impact Investing Network and the City of London Corporation (which also has an Islamic finance secretariat). Second is the World Islamic Economic Forum on 29–31 October , a mega Islamic finance event that will be hosted in a country without a Muslim majority for the first time. At this stage, the most likely scenario is that the two events will take place independently of each other with no planned interaction. Had Islamic finance and SRI actively collaborated, then these two events in London could have been a golden opportunity for further collaboration between and growth in both fields. With so much in common between Islamic finance and SRI, and so much to gain from active collaboration with each other, bringing the two sides together is an opportunity waiting to be taken up by the leaders from the two sides. Let’s see if this opportunity will indeed be realized, who those leaders will be, and most importantly what gains will be brought about by active collaboration. Continue reading
Q2 2013: Global House Price Boom Accelerating Further, Led By Asia Pacific
by LALAINE C. DELMENDO Sep 11, 2013 Global housing markets had their best performance since the boom years of 2006/7 during the year to the second quarter of 2013, based on the latest survey of house price statistics conducted by the Global Property Guide. Using inflation-adjusted figures, the Global Property Guide’s survey reveals that house prices rose in 30 of 42 housing markets which have so far published housing statistics. The more upbeat nominal figures, which are more familiar to the public, showed house prices rising in 34 countries, and falling in only 8 countries. Regional snapshots: Asian housing markets lead the world. In Taiwan, house prices soared by 14.52% during the year to Q2 2013. In Hong Kong, house prices surged 13.7%. In Beijing, China, the price index of second-hand residential buildings rose by 10.69%. In Makati CBD, Philippines, the average price of 3-bedroom condominium units rose 9.98%. In Tokyo, Japan, the average price of new condominium sales soared 9.02%. During the year to Q2 2013, house prices also increased in Indonesia (4.76%), Delhi, India (4.57%), Thailand (3.76%), and Singapore (2.38%). Middle Eastern housing markets buoyant. Dubai, UAE, maintains its spot as the world ‘s best performer in our survey. House prices in Dubai, UAE soared by 17.99% during the year to Q2 2013. Likewise in Israel, the average price of owner-occupied dwellings rose by 5.06% during the year to Q2 2013. U.S. housing market strong. In the United States, the S&P/Case-Shiller seasonally-adjusted national home price index soared by 8.51% during the year to end-Q2 2013, the biggest year-on-year increase since Q4 2005. All of the 20 U.S. major cities saw their house prices rise, with Las Vegas registering the biggest year-on-year increase of 21.7% in Q2 2013, followed by San Francisco (19.8%), Los Angeles (16.1%), San Diego (15.7%) and Phoenix (14.9%). Construction activity continues to increase, demand remains strong and the economy is beating expectations. Pacific housing markets strong. In New Zealand, median house prices rose by 5.24% during the year to end-Q2 2013. Likewise, house prices in the Australia’s eight major cities rose by 2.65% during the year to Q2 2013, the highest year-on-year growth since Q3 2010. Several European housing markets have improved sharply. In Denmark, the price index of owner-occupied flats rose by 7.76% during the year to end-Q2 2013, a sharp improvement from the decline of 4.12% year-on-year to the same quarter last year. In Turkey, house prices rose by 6.94% year-on-year to Q2 2013. Other strong European housing markets include Kiev, Ukraine, where house prices rose by 6.24% during the year to Q2 2013, Vienna, Austria (6.01%), Tallinn, Estonia (4.65%), Germany (3.83%), Switzerland (3.63%), Norway (3.37%), and Sweden (3.34%). All, except for Estonia, saw house prices rises during the latest quarter. In addition, some European countries saw their house price falls decelerate sharply in Q2 2013 compared to the same period last year. These countries included Warsaw, Poland (-3.84%), Portugal (-3.41%), UK (-1.56%), Slovak Republic (-1.35%) and Vilnius, Lithuania (-1.02%). Some European housing markets remain very depressed. The twelve weakest housing markets in our global survey were all in Europe. Cyprus was the world ‘s weakest housing market during the year to Q2 2013. In Nicosia, the capital of Cyprus, house prices plunged 12.74% during the year to Q2 2013. In Greece, house prices dropped 11.12% during the year to Q2 2013. In Romania, the average selling price of apartments plunged 10.2% during the year to end-Q2 2013. In Zagreb, Croatia, the average price of flats fell by 8.14% year-on-year in Q2 2013. In the Netherlands, house prices fell by 7.25% year-on-year to Q2 2013, the eleventh consecutive quarter of year-on-year house price falls. In Russia, the house price index in the secondary market dropped 5.27% during the year to Q2 2013, the biggest year-on-year decline seen since Q4 2010. The average market price of dwellings in Bulgaria fell 4.6% year-on-year in Q2 2013, the country’s eighteenth consecutive quarter of annual house price falls. Momentum: 28 housing markets showed better performance in the second quarter of 2013, in momentum terms, than the same period last year, while only 14 housing markets showed weaker momentum. Conclusion: The boom in the world ‘s housing markets, already powerful, continues to gather strength. House prices are rising in many more countries than not, and the momentum trend is strongly upwards. Source: Various series, data descriptions and sources here Asian housing markets are red-hot Five of the six best performers in our global housing market survey were all in Asia. All nine Asian markets for which figures are available saw their house prices rise during the year. Taiwan is now the star performer in Asia and had the second highest house price rises in our global survey. House prices soared by 14.52% during the year to Q2 2013, the biggest year-on-year increase since Q1 2011. House prices surged 7.33% quarter-on-quarter during the latest quarter. Demand remains strong in Taiwan. In July 2013, property sales in Taipei rose by 20% to 4,043 units from the previous month while transactions in New Taipei City increased by 13.7% to 8,066 units, according to Huang Shu-wei of Yung Ching Realty . Likewise, property sales in Taichung rose by 17% to 5,198 units in July 2013 from a month earlier while in Tainan, sales increased by 12% to 2,163 units over the same period, according to Sinyi Real Estate Planning and Research . Construction activity is also up. Housing permits, an indicator of the condition of the residential construction sector, increased by 3.7% to 34,861 houses in the first half of 2013 from the same period last year, based on figures from the Ministry of Interior . The Taiwanese economy is projected to grow by 2.31% this year, after real GDP growth rates of 1.3% in 2012, 4.1% in 2011 and 10.8% in 2010. Hong Kong had the third highest house price rises in our survey, with house prices surging 13.7% year-on-year in Q2 2013, far higher than the 5.19% annual increase seen during the year to Q2 2012. However, house prices rose by just 0.2% quarter-on-quarter during the latest quarter, Q2 2013. Hong Kong’s economy expanded by a healthy 3.3% in Q2 2013 from a year earlier, following an annualized GDP growth of 2.9% in Q1 2013. Economic growth is expected at a range of between 2.5% and 3.5% in 2013, from 1.4% in 2012, 4.9% in 2011 and 6.8% in 2010. China ‘s housing market performance has also been spectacular. In Beijing, China, the price index of second-hand residential buildings rose by 10.69% during the year to Q2 2013, in sharp contrast with the 4.97% year-on-year decline during the year to Q2 2012. On a quarterly basis, house prices in Beijing increased 5.98% during the latest quarter. China’s economy expanded by 7.5% year-on-year in Q2 2013, after an annual GDP growth of 7.7% the previous quarter. The Chinese economy is expected to grow by 7.5% in 2013, impressive by world standards, but the country’s slowest rate of growth in more than two decades. The Philippine housing market remains buoyant. In Makati CBD, Philippines , the average price of 3-bedroom condominium units rose 9.98% during the year to Q2 2013, the highest year-on-year increase since Q4 2007. Quarter-on-quarter, property prices rose by 6.25% in Q2 2013. In the second quarter of 2013, the Philippine economy expanded by 7.5% from a year earlier, after an annual growth rate of 6.3% in the previous quarter. The real GDP growth rate of the Philippines in 2013 is projected to breach the 7% mark. Japan saw the world ‘s sixth highest house price rises during the year to Q2 2013. In Tokyo, Japan, the average price of new condominium sales soared 9.02% year-on-year to end-Q2 2013, in sharp contrast with the 1.98% annual decline seen in Q2 2012. House prices increased 1.67% quarter-on-quarter during the latest quarter. The Japanese economy grew by an annualized rate of 2.6% in Q2 2013, from a growth rate of 3.8% in the previous quarter. The economy is expected to expand by about 2.8% for the whole year of 2013. The performance of the other Asian housing markets is also noteworthy. These included Indonesia , where house prices rose by 4.76% during the year to Q2 2013; Delhi, India (4.57%), Thailand (3.76%), and Singapore (2.38%). All of these nine Asian housing markets, except India, showed improved performance during the year to end-Q2 2013 than the previous year. Pacific housing markets strong New Zealand ‘s housing market remains strong, with the median house prices rising by 5.24% during the year to end-Q2 2013, an improvement from the year-on-year rise of 2.36% in Q2 2013. Demand continues to rise. In July 2013, the total number of dwellings sold in New Zealand soared by 14.7% year-on-year to 6,777 units, according to the Real Estate Institute of New Zealand (REINZ). Median-days-to-sale dropped to 35 days in July 2013, from 38 in the same period last year. New Zealand’s economy is expected to expand by 2.5% in 2013, from 2.5% in 2012, 1.4% in 2011 and 1.8% in 2010, according to the IMF. In August 2013, the Reserve Bank of New Zealand (RBNZ) kept its official cash rate (OCR) at a record low of 2.5%, in place since March 2011. Australia ‘s housing market has already fully-recovered, after two quarters of meagre growth and seven consecutive quarters of house price falls. House prices in the country’s eight major cities rose by 2.65% during the year to Q2 2013, its highest year-on-year growth since Q3 2010. Residential construction activity is now picking up. The total number of dwelling units approved increased by 6.7% to 13,868 units in July 2013 from a year earlier, according to the Australian Bureau of Statistics (ABS). In the second quarter of 2013, the Australian economy expanded by an annualized rate of 2.6%, after growing by 2.5% in the previous quarter. The economy is expected to grow by 3% in 2013, from 3.6% in 2012, 2.4% in 2011 and 2.6% in 2010. In August 2013, the Reserve Bank of Australia (RBA) cut its cash rate by 25 basis points to a record low of 2.5%, matching NZ ‘s OCR for the first time in more than four years. The U.S. housing market remains strong In the United States , the S&P/Case-Shiller seasonally-adjusted national home price index soared by 8.51% during the year to end-Q2 2013, the biggest year-on-year increase since Q4 2005. Quarter-on-quarter, the national home price index rose by 1.76% in Q2 2013, from quarterly increases of 3.19%, 2.35% and 0.96% in the previous three quarters. All of the 20 U.S. major cities saw their house prices rise, with Las Vegas registering the biggest year-on-year increase of 21.7% in Q2 2013, followed by San Francisco (19.8%), Los Angeles (16.1%), San Diego (15.7%) and Phoenix (14.9%). As a reminder, these figures are adjusted for inflation, as are all subsequent figures, except those for the Ukraine. This optimistic picture is supported by the FHFA ‘s house price indices. The U.S. seasonally-adjusted purchase-only house price index rose by 5.75% year-on-year to Q2 2013, its fifth quarter of year-on-year gains. During the latest quarter the FHFA index rose by 1.59%, from quarterly increases of 1.63% in Q1 2013, 1.55% in Q4, and 0.86% in Q3 3012. Residential construction activity continues to increase. In the second quarter of 2013, the total number of new privately-owned housing units started in the U.S. rose by 15.2% to 174,000, based on figures from the U.S. Census Bureau . Likewise, the number of new residential completions also increased by 12.6% year-on-year in Q2 3013, to 134,000 units. In August 2013, U.S. home builder sentiment rose to the highest level since 2005, amidst rising demand despite mortgage rate increases, according to the National Association of Home Builders . Demand remains strong. The total number of new houses sold in the country soared by 30.1% year-on-year in Q2 2013, to 134,000 units. The U.S. economy grew more than expected in Q2 2013, with a real GDP growth rate of 2.5%, up from a 1.1% growth in the previous quarter, according to the Commerce Department. This signals that the largest economy is gaining momentum again as it overcomes the effects of the federal tax increases introduced in January 2013 and budget cuts in March 2013. The Fed has kept the fed funds rate near zero since 2008 to buoy the economy. Canada’s housing market continues to slow Canada ‘s housing market is slowing sharply, as the government continues to implement several rounds of housing market cooling measures. House prices in Canada’s eleven major cities rose by a meagre 0.63% during the year to end-Q2 2013, the lowest year-on-year increase seen since Q1 2011. However, house prices actually increased by 2.32% in Q2 2013 from the previous quarter. House prices in Canada surged by 49% from Q1 2000 to Q1 2009, mainly due to low interest rates and continuous economic growth. From Q2 2009 to Q3 2012, house prices increased by another 17%, despite efforts by the government to cool the housing market. In 2013, the country ‘s federal housing agency tightened mortgage lending again by limiting guarantees it offers to banks and other lending companies, in an attempt to strengthen its bid to slowdown the housing market. Nationwide, house prices in Canada are expected to increase by just 0.1% year-on-year during 2013, according to the Canadian Real Estate Association (CREA). In 2013, house prices are expected to rise by 4.9% in Ontario, 3.9% in Quebec, and 2.8% in Alberta. On the other hand, a year-on-year house price fall of 8.3% is expected in British Columbia over the same period. Moreover, sales activity in Canada is also projected to fall by 2.5% to 443,400 in 2013, from a year earlier, according to CREA. The country ‘s real GDP growth rate was 0.4% in the second quarter of 2013, following a 0.5% growth in the first quarter, according to Statistics Canada . Canada ‘s economic growth is projected to slow to 1.7% in 2013, from real GDP growth rates of 1.8% in 2012, 2.6% in 2011 and 3.2% in 2010, according to the Bank of Canada (BoC). The BoC kept its key interest rate steady at 1% in August 2013. Recovery remains weak in Europe Europe ‘s housing markets recovery remains weak during the second quarter of 2013, amidst the region ‘s debt crisis. Of the twenty-five European housing markets included in our global housing market survey, fourteen performed better in Q2 2013 than the previous year while eleven showed poorer performance. Denmark saw the highest house price rises in Europe and was the eighth best performer in our global survey, despite weak economic growth. The price index of owner-occupied flats rose by 7.76% during the year to end-Q2 2013, a sharp improvement from a year-on-year decline of 4.12% in the same quarter last year. House prices increased by 1.94% during the latest quarter. The Danish economy is expected to grow by just 0.2% in 2013, after a contraction of 0.57% in 2012 and growth of 1.1% in 2011 and 1.6% in 2010. Turkey ‘s house prices are also rising strongly. House prices in the country rose by 6.94% year-on-year in Q2 2013, after annual growth rates of 8.13% in Q1 2013, 10.55% in Q4 2012, 6.57% in Q3 2012 and 1.67% in Q2 2012. Quarter-on-quarter, house prices rose by 1.55% in Q2 2013. Both Denmark and Turkey performed better during the year to Q2 2013, compared to a year earlier. Other strong European housing markets included Kiev, Ukraine with house prices rising by 6.24% during the year to Q2 2013, Vienna, Austria (6.01%), Tallinn, Estonia (4.65%), Germany (3.83%), Switzerland (3.63%), Norway (3.37%), and Sweden (3.34%). All, except for Estonia, saw house prices rises during the latest quarter�1.86% for Ukraine, 2.66% for Austria, 4.62% for Germany, 0.63% for Switzerland, 1.62% for Norway and 1.25% for Sweden. Some European housing markets also saw minimal house price rises. This group included Iceland , with house prices rising by 1.51% year-on-year in Q2 2013, Finland (0.58%), Ireland (0.53%), and Riga, Latvia (0.40%). Quarter-on-quarter, house prices increased by 2.70% in Iceland, 0.33% in Finland, and 2.34% in Ireland while Latvia saw a house price fall of 0.03% in Q2 2013. Despite this improvement, several European housing markets remain in the doldrums. In fact, the twelve weakest housing markets in our global survey were all in Europe. Cyprus is now the world ‘s weakest housing market in Q2 2013. In Nicosia, the capital, house prices plunged 12.74% during the year to Q2 2013, the country ‘s biggest house price fall in recent years. House prices fell by 4.15% during the latest quarter. Cyprus ‘ economy is projected to contract by double-digit figures in 2013, as a result of swingeing cuts adopted by the government in return for a �10 billion EU-IMF bailout, according to the Cypriot Finance Minister Haris Georgiade. Greece comes second on the list of the world ‘s worst performers. House prices dropped 11.12% during the year to Q2 2013, a slight improvement from the 12.73% year-on-year drop seen in Q2 2012. Greek house prices fell by 4.08% quarter-on-quarter in Q2 2013. The Greek economy is now in its sixth year of recession, amidst falling consumption and investment, exacerbated by the government’s austerity measures. The economy is expected to contract further by 4.2% in 2013, after shrinking 6.4% in 2012, 7.1% in 2011, 4.9% in 2010, 3.1% in 2009 and 0.2% in 2008. In Q2 2013, the economy shrank by 4.6% from a year earlier, after an annual decline of 5.6% in the previous quarter. Romania ‘s housing market performance remains miserable, despite a slowly improving economy. The average selling price of apartments plunged 10.2% during the year to end-Q2 2013, from year-on-year falls of 9.25% in Q1 2013, 5.96% in Q4 2012 and 12.76% in Q3 2012. House prices dropped 2.84% quarter-on-quarter during the latest quarter. Romania ‘s economy expanded by 0.5% quarter-on-quarter and 1.5% year-on-year in Q2 2013. The economy is expected to grow by 2% for the whole year of 2013, after annual growth rates of 0.3% in 2012 and 2.2% in 2011 and declines of 1.1% in 2010 and 6.6% in 2009. Croatia had the fourth biggest house price falls in our global survey. The average price of flats in Zagreb fell by 8.14% year-on-year in Q2 2013. During the latest quarter, house prices dropped 1.78%. Croatia is now suffering from a prolonged recession. The economy is expected to contract by another 0.3% in 2013, from annual declines of 2% in 2012, 0.05% in 2011, 2.3% in 2010, 6.9% in 2009. The Netherland ‘s housing market downturn continues. House prices fell by 7.25% year-on-year to Q2 2013, its eleventh consecutive quarter of year-on-year house price falls. On a quarterly basis, house prices fell 1.04% in Q2. Russia also remains depressed. The house price index in the secondary market dropped 5.27% during the year to Q2 2013, the biggest year-on-year decline seen since Q4 2010. Quarter-on-quarter, house prices dropped 0.94% in Q2. After four years of house price falls, Bulgaria ‘s housing market remains weak. The average market price of dwellings in Bulgaria fell 4.6% year-on-year in Q2 2013, its eighteenth consecutive quarter of annual house price falls. On a quarterly basis, house prices increased 0.95% during the latest quarter. All seven worst-performing housing markets, except Greece and The Netherlands, saw bigger house price falls in Q2 2013 compared to the previous year. European countries and capital cities with moderate house price falls during the year to Q2 2013 included Warsaw, Poland (-3.84%), Portugal (-3.41%), UK (-1.56%), Slovak Republic (-1.35%) and Vilnius, Lithuania (-1.02%). The good news is that all of these five European countries saw their house price falls decelerate sharply in Q2 2013 compared to the same period last year. Robust growth for the Middle East Dubai, UAE, was the best performer in our global house price survey. House prices soared by 17.99% during the year to Q2 2013, after annual rises of 17.91% in Q1 2013, 21.64% in Q4 2012, 14.43% in Q3 2012 and 12.17% in Q2 2012. Dubai started to recover in Q2 2012, after a severe crisis during which house prices fell by 53% between Q3 2008 and Q3 2011, due to the global financial and economic meltdown. The strength of Dubai ‘s housing market has supported by the emirate’s robust economic growth, bolstered by several other factors, including the availability of finance, the city ‘s status as a safe haven, an exchange rate pegged to the U.S. dollar, and improved consumer and investor confidence. However, the continuous double-digit rise in house prices in Dubai is now raising concern of a new bubble forming. �It ‘s too early to speak of a bubble now, but if prices increase at this pace, over time there ‘s certainly a risk that there would be a new bubble forming,� said Harald Finger of the International Monetary Fund (IMF). The UAE ‘s economy is expected to expand by 3.4% in 2013, after real GDP growth rates of 3.9% in 2012, 5.2% in 2011 and 1.3% in 2010. In Israel, the average price of owner-occupied dwellings rose by 5.06% during the year to Q2 2013, in sharp contrast with the decline of 0.46% year-on-year to Q2 2012. Despite this, house prices declined by 2.1% during the latest quarter. Demand is rising sharply. In July 2013, the total number of dwellings sold rose by 12.1% year-on-year to 2,225 units, according to the Central Bureau of Statistics (CBS). On the other hand, the number of dwellings for sale in Israel dropped by 6.2% in July 2013 from a year earlier, to 20,553 units. In Q2 2013, the total number of dwelling starts fell by 19.8% year-on-year to 8,797 units, while the number of dwellings completed rose by 15.1% year-on-year to 11,088 units, according to the CBS. Israel’s economy is expected to grow by 3.6% in 2013, after registering annual GDP growth rates of 3.3% in 2012, 4.6% in 2011, 5% in 2010 and 1.1% in 2009. Brazil in the midst of a housing bubble? After four years of double-digit house price rises, Brazil ‘s house prices continue to rise, albeit at a slower pace, amidst a slowing economy. In Sao Paulo, Brazil, house prices rose by 6.79% during the year to Q2 2013, far lower than the 14.23% year-on-year increase seen in Q2 2012. House prices in Sao Paulo were up 2.01% during the latest quarter. Economist Robert Shiller thinks that Brazil is in the midst of a dangerous housing bubble, with house prices in Sao Paulo up 181%, and those in Rio De Janeiro up 225% since 2008. If an abrupt bubble burst does hit Brazil, it could be disastrous for the economy, which is already beset with a lot of problems, including high inflation. The central bank raised the Selic rate to 9% in August 2013, to rein in inflationary pressures. However, the interest rate hike is depressing the economy further. In an effort to boost the economy, President Dilma Rousseff has been recently pouring money into the housing market, using federal subsidies and state bank loans. Rouseff has nearly doubled spending on the country’s plan to build two million affordable homes by 2014. The economy grew by an annualized 3.3% in Q2 2013, from 2.2% in Q1 2013 and 2.6% in Q4 2012. The Brazilian economy is expected to grow by 2.24% in 2013, after registering real GDP growth rates of 0.9% in 2012 and 2.7% in 2011. South Africa’s housing market stable South Africa ‘s housing market was stable during the year to Q2 2013. The price index for medium-sized apartments rose by just 0.2% year-on-year to Q2 2013, down from annual growth rates of 2.86% in Q1 2013 and 3.33% in Q4 2012. House prices in South Africa declined by 15.5% during the global financial crisis from Q4 2007 to Q2 2009. After a short-lived recovery in 2010, house prices dropped again by 7% from Q1 2011 to Q2 2012. Total mortgages rose by 1.8% year-on-year in July 2013, to ZAR1.1 trillion (US$109.3 billion), according to the South African Reserve Bank (SARB). Construction activity is up. The total number of residential building plans approved increased by 10.4% year-on-year to 25,512 in the first half of 2013, based on figures from Statistics South Africa (Stats SA). Likewise, the number of buildings completed also increased by 5.2% to 20,876 over the same period. The South African economy is expected to grow by 2.4% in 2013, and 3.5% in 2014, according to the SARB. The central bank has recently kept its benchmark interest rate on hold at 5%, where it has been since July 2012. The economy grew by 3% quarter-on-quarter in Q2 2013, from 0.9% growth in Q1 2013, mainly due to the growth in the manufacturing sector, according to Stats SA. Source: Various series, data descriptions and sources here Continue reading
What Happened To Biofuels?
Energy technology: Making large amounts of fuel from organic matter has proved to be more difficult and costly than expected Sep 7th 2013 SCIENTISTS have long known how to convert various kinds of organic material into liquid fuel. Trees, shrubs, grasses, seeds, fungi, seaweed, algae and animal fats have all been turned into biofuels to power cars, ships and even planes. As well as being available to countries without tar sands, shale fields or gushers, biofuels can help reduce greenhouse-gas emissions by providing an alternative to releasing fossil-fuel carbon into the atmosphere. Frustratingly, however, making biofuels in large quantities has always been more expensive and less convenient than simply drilling a little deeper for oil. Ethanol, for instance, is an alcoholic biofuel easily distilled from sugary or starchy plants. It has been used to power cars since Ford’s Model T and, blended into conventional petrol, constitutes about 10% of the fuel burned by America’s vehicles today. Biodiesel made from vegetable fats is similarly mixed (at a lower proportion of 5%) into conventional diesel in Europe. But these “first generation” biofuels have drawbacks. They are made from plants rich in sugar, starch or oil that might otherwise be eaten by people or livestock. Ethanol production already consumes 40% of America’s maize (corn) harvest and a single new ethanol plant in Hull is about to become Britain’s largest buyer of wheat, using 1.1m tonnes a year. Ethanol and biodiesel also have limitations as vehicle fuels, performing poorly in cold weather and capable of damaging unmodified engines. In an effort to overcome these limitations, dozens of start-up companies emerged over the past decade with the aim of developing second-generation biofuels. They hoped to avoid the “food versus fuel” debate by making fuel from biomass feedstocks with no nutritional value, such as agricultural waste or fast-growing trees and grasses grown on otherwise unproductive land. Other firms planned to make “drop in” biofuels that could replace conventional fossil fuels directly, rather than having to be blended in. Governments also jumped on the biofuels bandwagon. George Bush saw biofuels as a route to energy independence, signing into law rules that set minimum prices and required refiners and importers to sell increasing amounts of biofuel each year. By 2013, America was supposed to be burning nearly 3,800m litres a year of “cellulosic” biofuels made from woody plants. Toil and trouble But instead of roaring into life, the biofuels industry stalled. Start-ups went bust, surviving companies scaled back their plans and, as prices of first-generation biofuels rose, consumer interest waned. The spread of fracking, meanwhile, unlocked new oil and gas reserves and provided an alternative path to energy independence. By 2012 America’s Environmental Protection Agency (EPA) had slashed the 2013 target for cellulosic biofuels to just 53m litres. What went wrong? “Even if processes can be economically scaled up, that might in turn highlight a further problem.” Making a second-generation biofuel means overcoming three challenges. The first is to break down woody cellulose and lignin polymers into simple plant sugars. The second is to convert those sugars into drop-in fuels to suit existing vehicles, via a thermochemical process (using catalysts, extreme temperatures and high pressures) or a biochemical process (using enzymes, natural or synthetic bacteria, or algae). The third and largest challenge is to find ways to do all this cheaply and on a large scale. In 2008 Shell, an energy giant, was working on ten advanced biofuels projects. It has now shut most of them down, and none of those that remain is ready for commercialisation. “All the technologies we looked at worked,” says Matthew Tipper, Shell’s vice-president for alternative energy. “We could get each to produce fuels at a lab scale and a demonstration scale.” But bringing biofuels to market proved to be slower and more costly than expected. The optimism of five years ago may have waned, but efforts to develop second-generation biofuels continue. Half a dozen companies are now putting the final touches to industrial-scale plants and several are already producing small quantities of second-generation biofuels. Some even claim to be making money doing so. Consider Shell. Raizen, its joint venture with Cosan of Brazil, produces more than 2,000m litres of first-generation ethanol annually from sugarcane juice. Usually the fibrous stalks left over are burned for power or turned into paper, but next year Raizen will start turning them into second-generation bioethanol, using a cocktail of designer enzymes from Iogen, a Canadian biotechnology firm. Raizen hopes to produce 40m litres of cellulosic ethanol a year, cutting costs and boosting yield by co-locating its cellulosic operation with a traditional ethanol plant. Under this model, second-generation biofuels complement and enhance first-generation processes, rather than replacing them outright. Three plants in America are expected to start producing cellulosic ethanol from waste corn cobs, leaves and husks in 2014: POET-DSM Advanced Biofuels (75m litres) and Dupont (110m litres), both in Iowa, and Abengoa (95m litres) in Kansas. But the first company to produce ethanol using enzymes on an industrial scale is Beta Renewables, a spin-off from Chemtex, an Italian chemical giant. An 80m-litre cellulosic ethanol plant in Crescentino, near Turin, has been running at half capacity over the summer, using straw from nearby farms. It will run on corn waste in the autumn, rice straw in the winter and then perennial eucalyptus in the spring. Beta Renewables has already licensed its technology for use in Brazil and Malaysia, and expects to sell several more licences by the end of the year. All Beta’s plants can already make biofuels at a profit, albeit only in areas with very cheap feedstocks, says the firm’s boss, Guido Ghisolfi. Just as this cellulosic ethanol comes on to the market, however, demand for fuel is waning in many developed countries due to improvements in fuel efficiency and lingering economic weakness. As a result, demand for ethanol for blending is falling, too. In America, petrol containing up to 15% ethanol, while permitted by the EPA and promoted by ethanol producers, is still a rare sight on station forecourts. Other biofuels companies are continuing to pursue drop-in fuels. One attraction is that compared with ethanol, the demand for which depends to a large extent on government mandates that it be blended into conventional fuels, drop-in fuels are less susceptible to changing political whims. Another is that drop-in fuels are commonly made with sugar as a feedstock, either conventionally sourced or cellulosic, and sugar is widely available and easily transported. Stepping on the gas Amyris, based in California, genetically engineers yeasts and other microbes to ferment sugar into a long-chain hydrocarbon molecule called farnesene. This can then be processed into a range of chemicals and fuels. After a few rocky years when it over-promised and under-delivered, Amyris is now producing limited quantities of renewable diesel for public buses in Brazil and is trying to get its renewable jet fuel certified for commercial use. Solazyme, another firm based in California, is also focusing on renewable diesel and jet fuels, in its case derived from algae. Microscopic algae in open-air ponds can use natural sunlight and atmospheric or industrial-waste carbon dioxide to produce oils. But harvesting the fuel, which is present in only very small proportions, is expensive and difficult. Solazyme instead grows algae in sealed fermenting vessels with sugar as an energy source. The US Navy has used tens of thousands of litres of its algal fuels in exercises, and Propel, an American chain of filling stations, recently became the first to offer algal diesel. But although its technology clearly works, Solazyme remains cagey about the economics. A 110m-litre algae plant in Brazil, due to be up and running by the end of the year, may clarify Solazyme’s commercial potential. If drop-in biofuels are going to have an impact worldwide, they will have to be economic away from the tropical climes of South America, where sugar can be grown cheaply. The only commercial facility currently making drop-in fuels directly from woody biomass is operated by a start-up called KiOR. Its 50m-litre plant in Columbus, Mississippi, turns pine-tree chips into drop-in petrol and diesel for customers including FedEx, a logistics firm, and Chevron, an oil giant. KiOR uses a thermochemical process called fluid-catalytic cracking that borrows many technologies from conventional oil refineries and, unlike fussier biochemical systems, should scale up easily. KiOR is planning a 150m-litre facility in nearby Natchez. However, the Columbus plant is not yet running at anywhere near full capacity, and KiOR has a lot of debt and is still losing money. In August disgruntled investors launched a class-action lawsuit. Some observers doubt whether even the most sophisticated biofuels can compete with fossil fuels in the near future. Daniel Klein-Marcuschamer, a researcher at the Australian Institute for Bioengineering and Nanotechnology, conducted a comprehensive analysis of renewable aviation fuels. He concluded that producing first-generation bio-jet fuel from sugarcane would require oil prices of at least $168 a barrel to be competitive, and that some second-generation algae technologies would require crude oil to soar above $1,000 a barrel (the current price is around $110) to break even. Mr Klein-Marcuschamer has made his model open-source in an effort to help the industry find ways to make biofuels more competitive. Even if second-generation processes can be economically scaled up, however, that might in turn highlight a further problem. To make a significant dent in the 2,500m litres of conventional oil that American refineries churn through each day, biofuel factories would have to be able to get hold of a staggering quantity of feedstock. Mr Ghisolfi of Beta Renewables points out that a factory with an annual output of 140m litres needs 350,000 tonnes of biomass a year to operate. “There are only certain areas, in Brazil and some parts of the US and Asia, where you can locate this much biomass within a close radius,” says Mr Ghisolfi. “I am sceptical of scaling to ten times that size, because getting 3.5m tonnes of biomass to a single collection point is going to be a very big undertaking.” Billions of tonnes of agricultural waste are produced worldwide each year, but such material is thinly spread, making it expensive to collect and transport. Moreover, farms use such waste to condition the soil, feed animals or burn for power. Diverting existing sources of wood to make biofuels will annoy builders and paper-makers, and planting fuel crops on undeveloped land is hardly without controversy: one man’s wasteland is another’s pristine ecosystem. Dozens of environmental groups have protested against the EPA’s recent decision to permit plantations of fast-growing giant reed for biofuels, calling it a noxious and highly invasive weed. Just as the food-versus-fuel argument has proved controversial for today’s biofuels, flora-versus-fuel could be an equally tough struggle for tomorrow’s. Continue reading
