Tag Archives: intervention
UK mortgage lenders braced for further interventions despite market growth cooling
Mortgage lenders and brokers expect further interventions by the Bank of England’s Financial Policy Committee (FPC) despite market growth cooling, according to new research. According to the latest survey by the Intermediary Mortgage Lenders Association (IMLA) some 55% of intermediary mortgage lenders and 40% of brokers are expecting further intervention. The findings come as the first FPC recommendations; the interest rate stress test against a 3% base rate increase for borrowers, and a 15% cap for lenders on the volume of new loans above 4.5 times loan to income (LTI ), take effect across the mortgage market this month. IMLA’s research reveals lenders and brokers are in agreement that the 3% stress test will have the biggest impact of the two measures. Some 54% of brokers and 26% of lenders believe this will have a high impact, compared with just 34% of brokers and 11% of lenders who feel the same about the cap on high LTI loans. Following the implementation of the Mortgage Market Review (MMR) in April and the FPC recommendations in its Financial Stability Report in June, IMLA’s research found that industry optimism over the mortgage market recovery has cooled. Just 44% of lenders and 41% of brokers feel market conditions were improving in the third quarter of 2014, down from 100% of lenders and 90% of brokers in the first quarter of 2014. Just 3% of brokers felt conditions were worsening in Q1, but 45% took this view in the third quarter and the proportion that felt lending volumes were growing faster than expected dropped from 87% to 31% among lenders from the first to the third quarters and from 60% to 45% among brokers. Concerns remained over the housing market with the latest findings showing 31% of lenders and 38% of brokers believing house price growth was unsustainable, up from 13% and 25% in the first quarter. However, subsequent data from national house price indices show that the monthly growth of house prices has since slowed. ‘These findings show the industry is well aware that its recovery will be closely monitored in the interests of maintaining economic and financial stability. The announcement that the FPC is considering loan to value (LTV) limits shows it remains vigilant,’ said Peter Williams, executive director for the IMLA. ‘But recent changes, including MMR, have already had a calming effect on activity and the full effects are still to emerge. IMLA’s research has clearly shown that some would-be borrowers are not passing initial broker checks which have been tightened to fully reflect the lender assessments that follow,’ he explained. ‘While caution is needed for the good of consumers and the economy, this applies to regulation as well as lending. Market interventions have been reasonable to date, but an immediate push for further regulation would be excessive, especially when house price growth appears to be slowing,’ he added. Using credit policies to compensate for weak supply in the housing market can have a major impact on who can… Continue reading
After Failed Attempt in April, Europe Approves Emissions Trading System
Ina Fassbender/Reuters Wind turbines and a coal power plant in Germany. Europe approved a measure aimed at raising carbon permit prices. By STANLEY REED Published: July 3, 2013 LONDON — The European Parliament approved on Wednesday a measure intended to revive sagging prices and confidence in the European Union’s emissions trading system, the centerpiece of Europe’s effort to cut greenhouse gases and a model for similar systems around the world. The vote had taken on symbolic importance because Parliament had rejected a similar proposal in April. That vote threatened the carbon trading system, which has been emulated globally as a way of using markets to curb greenhouse gases. The measure passed on Wednesday in Strasbourg, France, by a vote of 344 to 311 after intense lobbying by the European Commission and some national governments, including those of France, Denmark and Finland. It also gained stronger backing from liberal and socialist groups. Among those opposed were the governments of Poland and the Czech Republic, which were wary of the plan’s impact on their energy-intensive industries. A large moderate group, the European People’s Party , was divided, leading many of its members to abstain. “This was to some extent a symbolic vote indicating support more broadly for Europe’s carbon policies,” said Stig Schjolset, an analyst at Reuters Point Carbon, a market research firm based in Oslo. A negative vote would have meant “that European policy makers did not want to fix the carbon market and use it as a key tool to combat climate change,” he said. Richard Seeber, an Austrian and spokesman on the environment for the European People’s Party, voted in favor of Wednesday’s legislation after voting ‘no’ in April. He said he was persuaded by an amendment ensuring that the intervention in the market was “a one-off” and by a requirement that an assessment be made about “carbon leakage,” the extent to which businesses would leave the European Union to avoid the higher permit price. “It is essential to keep the E.T.S. as the main market-based instrument to fight against climate change,” said Mr. Seeber, referring to the emissions trading system. The market for carbon credits reacted positively, rising to about 4.70 euros, or $6.13, per ton, a 9 percent increase for the day, on heavy volume. The approved proposal will try to shore up prices for permits to emit greenhouse gases by delaying the auctioning of some of these allowances in the coming years through what is called backloading. Carbon permits are licenses for companies to release greenhouse gases. The idea behind the European cap-and-trade system is to tighten the amount of permits available each year so as to make polluting more costly, forcing companies to switch to greener technologies. But Europe’s prolonged economic downturn and generous allocations of allowances have created a glut of permits that cut the price to as low as about 2.75 euros a ton after the negative April vote. In a sense, the system is working by providing relief at a time of economic stress. But analysts say that a price of 30 euros a ton or higher is needed to persuade companies to switch to cleaner fuels like natural gas, the main alternative to coal for generating electric power. Coal use in Europe boomed last year. Analysts caution that the number of allowances that will be held off the market, about 900 million, is estimated to be only about half of the surplus of permits that would otherwise have built up by 2020, so it will not by itself shift the carbon market from bear to bull mode. “I think the backloading itself will have limited impact on prices because the market remains significantly oversupplied,” said Roland Vetter, head of research at CF Partners, a carbon trading firm based in London. In addition, there are still negotiations with Europe’s national governments and other hurdles to clear before the changes are put into effect, perhaps in the early part of next year. “This is a marathon, not a sprint, so today is not the end of the story,” said Miles Austin, the executive director of the Climate Markets and Investment Association, an industry group based in London. Business groups, some of which had lobbied against the measure, were critical of what they described as interference in a market system. “Even a one-off intervention undermines the principles of the emissions trading system and will make it more difficult for businesses to produce cost-effectively in the E.U.,” Arnaldo Abruzzini, secretary general of Eurochambres, which represents European chambers of commerce, said in a statement. But the world’s pioneering carbon market has a pulse again. Among supporters of carbon trading there is now hope that Europe will in a couple of years adopt structural changes that would lead to permanently higher prices. Connie Hedegaard, the European Union’s commissioner for climate action, said the purpose of the backloading measure was to “stop the bleeding with the drop in the carbon price while we were discussing more challenging issues.” The simplest overall change that would raise the price would be to “reduce the cap,” or permanently reduce the number of allowances available, said Robert N. Stavins, director of the Harvard Environmental Economics Program. But such a move “is very difficult to do at a time like this,” he said. With Europe mired in recession, politicians do not want to saddle Europe-based companies with even higher costs, especially considering that their American competitors are benefiting from lower energy prices thanks to the discoveries of shale gas. Also, the United States seems to have more or less permanently rejected a cap-and-trade system after the House of Representatives passed one in 2009 that later failed in the Senate. For some businesses, that left the European system looking like yet another burdensome and costly regulatory initiative. “Europe thought it would take the lead and the U.S. would follow,” Mr. Stavins said. Instead, the United States rejected cap and trade and that is affecting the cost of carbon-intensive services in Europe, he said. Mr. Stavins said that countries like Australia, Japan and China were all experimenting to various degrees with systems like the one Europe adopted. A version of this article appeared in print on July 4, 2013, on page B3 of the New York edition with the headline: After Failed Attempt in April, Europe Approves Emissions Trading System. Continue reading
Agriculture Is On The Lips Of Everyone These Days In Romania
Simona Bazavan, Business Review – 28.05.2013 Average farmland prices have almost tripled in Romania since 2007 and the upward trend is showing no sign of slowing, especially in light of next year’s market liberalization. Buying Romanian farmland continues to be an attractive business opportunity for both locals and foreigners despite recent price hikes, but issues such as land fragmentation are slowing down investors. Agriculture is on the lips of everyone these days in Romania, be it businesspeople, entrepreneurs, investors, analysts, politicians, and of course, the farmers themselves. In the context of a struggling economy, farming is constantly mentioned as a source of growth, and with soaring food prices worldwide, farmland acquisition is proving to be a very lucrative business option. Fueled by increasing demand, prices have taken off in Romania. While back in 2007 the average price of a hectare of farmland was EUR 927, it had skyrocketed to EUR 1,972 by 2011 and this year has gone well beyond EUR 2,000 per hectare. Prices will remain on an upward trend and are forecast to reach an average of EUR 3,000 per hectare by 2015, according to a 2012 DTZ Echinox report. “The economic crisis has not significantly affected transactions in this sector and although prices have kept increasing – compared with 2008, prices per hectare have doubled – Romania continues to be attractive to investors, mainly because of prices, which are seven or even eight times lower than the rest of Europe,” Flavius Pop, consultant with the investments department of DTZ Echinox, told BR. Low prices combined with the high quality of the soil and large surfaces of available land have so far persuaded numerous local investors as well as many foreign companies and investment funds to buy farmland. Yet there are discrepancies between demand and offer and this has got worse lately. “Many investors have found that farmland properties which cover thousands of hectares in established regions such as southern and western Romania are increasingly scarce,” Pop added. Romania boasts a large stock of farmland but, ironically enough, this selling point also provides the main stumbling block for the farmland market. The 2010-2011 national agriculture census revealed that there are about 8.2 million hectares of arable land in Romania, placing it in fifth position in the EU, after France, Spain, Poland and Germany. However, about 25 percent of this is estimated to be divided into plots of under one hectare, making it difficult for buyers to consolidate larger plots. Most of them are looking to buy compact plots larger than 1,000 hectares, yet this might require as many as 900 individual transactions. The lack of cadastral documentation, the high costs of obtaining it and bureaucracy are the main challenges potential buyers have to deal with. And close to nothing has been done over the past few years by the authorities to address this issue. “Buyers are interested in large surfaces located in a single region with as high a consolidation level as possible, with access to the water supply and irrigation infrastructure, even if this not functional in the beginning but can be later reconditioned (…),” stressed Pop. All the procedures required to close a transaction involving large plots of farmland are hiking prices and often “complicate the process of negotiating and closing the deal because of the numerous interests involved,” Ana-Maria Goga, partner and coordinator of the real estate department of Pachiu & Associates, told BR. Essentially, land fragmentation, lack of cadastral documentation and legal uncertainty about the status of a large share of the existing farmland leads to delays, if not blockages, and additional costs incurred through intermediaries and legal clarifications, which in most cases have to be paid by the buyer, she explained. But even despite such setbacks, prices continue to rise and “today we can speak of growth rates of between 10 and 12 percent,” according to Pop. However, prices can vary greatly depending on the region. In the north-east and south-east of Romania, average sale prices are between EUR 2,000 and EUR 2,150 per hectare, while in areas near the capital, average prices reach EUR 2,700 per hectare, show DTZ Echinox data. There are even bigger differences between farmland prices in Romania and the situation in the rest of Europe. In England a hectare can be traded at EUR 24,000, while in Denmark prices reach EUR 33,000 per hectare. Going east, a hectare costs as little as EUR 700 in Ukraine. The upward trend will be maintained over the coming years, “and prices will most likely stabilize the moment Romanian agriculture reaches a degree of maturity characterized by the productive exploitation of a significant number of compact plots with a clarified legal and cadastral status by entities able to provide the necessary infrastructure to cultivate the land in a continuous and sustained manner,” said Goga. This would also help limit speculation and the intervention of intermediaries in farmland transactions. Fears of market liberalization From January 1, 2014, non-resident foreign citizens are set to be able to buy Romanian farmland, under Romania’s Treaty of Accession to the EU, and the chances of stopping this from happening are very slim. The topic has often been debated over the past couple of years and continues to be so, with politicians and especially local farmers arguing that Romania must find ways to restrict the purchase of local farmland by non-resident foreign citizens beyond the 2014 deadline. Their argument is that land prices continue to be much cheaper in Romania than throughout the rest of the EU and local farmers will be facing unfair competition from international players who have far greater financial power. Come 2014, there will be massive farmland acquisitions made by foreigners, farmers complain. Most recently, President Traian Basescu suggested that farmland acquisitions by foreigners risk endangering Romania’s agricultural production and advised owners not to sell their plots. “If we like to believe that we don’t sell our country, then I would like to see Romanians not selling their land. This is the first condition to prevent the land from being sold,” he said during the annual meeting of the Romanian Agricultural Producers’ League (LAPAR), two weeks ago. Basescu stressed that the matter depends both on farmers and the government, which he said should set up an agency with the right of first buyer when owners want to sell. Others argue that most of the damage has already been done. Under Law 312/2005 foreign citizens and companies registered outside Romania will not obtain the right to own land in Romania until seven years after Romania’s EU accession, which is 2014. However, foreign investors can, and many have, circumvented this legislative restriction by purchasing land through locally registered companies. Of the country’s 14 million hectares of farmland, nearly 1 million hectares has been purchased by companies with foreign ownership over recent years. This means an estimated 7 percent of the country’s total farmland, which makes Romania the European country with the largest share of national farmland owned by foreigners. Given that many foreigners have already bought local farmland via locally established companies, it is unlikely that lifting the ban in 2014 will cause demand to explode, argued Pop. Goga, too, stresses that no significant change can be expected following market liberalization. Nevertheless, “at present there are several foreign companies from Europe as well as the Middle East which are testing the local market. Some of these companies have been active locally for a long time and they are familiar with local working procedures and will continue to invest in order to expand their portfolio,” said the real estate consultant. Prolonging the period during which Romania can restrict farmland acquisition by foreigners after 2014 could only have been achieved if the accession treaty had been changed, an almost impossible endeavor. Instead, the authorities said they would find solutions to limit transactions made by foreigners such as such as allowing land purchases only up to a specified maximum amount or allowing acquisition only for individuals who can prove they have a background in agriculture. Agriculture minister Daniel Constantin said last week that Romania must reach a balance between limiting farmland acquisitions by foreigners and encouraging foreign investments in local agriculture. A solution he mentioned could be to stimulate local owners, especially those who own small surfaces, to lease their land rather than sell it. This could be done by increasing the EU subsidy they receive by 20 percent to those who choose to lease for the long run. The measure is included in the proposed reform of the Common Agricultural Policy (2014-2020). Yet, despite any such initiatives, Romanian farmland is set to cultivate future growth over the coming years – be the buyers locals or foreigners – based on both global trends and local availability, making it a valuable and sought after asset and a safe alternative investment option. Source: Businessreview.ro Continue reading
