The Chinese government has raised the deposit requirement to 50 per cent (from 40) on purchases of second homes, in an apparent bid to dampen enthusiasm for property speculation. First-time buyers will also need bigger deposits – a minimum of 30 per cent, up from 20 per cent – where the property covers more than 90 square metres.
Reuters also reports that banks must set mortgage rates on second homes at a minimum of 1.1 times the central bank’s benchmark rate. At the moment, banks can charge rates they deem appropriate.
European house prices are more sensitive than American house prices to credit supply shocks. But there is a stronger role for housing in the transmission of monetary policy shocks in the US than in Europe.
These are the main findings of an ECB working paper just out that compares housing, consumption and monetary policy in the US and EU.
Is Norway calling the bottom of global property markets? Its central bank has given approval for its oil-funded sovereign wealth fund to invest up to 5 per cent ($22bn) in the asset class. “Investments will principally be made in well-developed markets and within traditional types of real estate,” Finance Minister Sigbjoern Johnsen told Reuters. “We must be prepared for real estate prices to fluctuate a good deal.”
Norway has form calling turning points. Last year the fund was allowed to increase its proportion of equity holdings to 60 per cent. During that year, major indices rose about 50 per cent. The fund made 13.5 per cent in Q3 alone. I wonder if they’re planning to reduce the equity proportion now (Bloomberg).
“Investors view this as shockingly bad news”: one assessment of Dubai’s request for a freeze on all financing to Dubai World, the government’s heavily indebted flagship holding company. The requested freeze would last till May 30, and would cover DW’s troubled property unit Nakheel, which is due to pay back $4bn on an Islamic bond on December 14. Dubai sovereign CDS spreads rose 130bps from an overnight level of 318 and LSE shares fell – the exchange has a 20 per cent stake in Borse Dubai.
Meanwhile the “gold up, dollar down” trends continue. Sri Lanka has bought 10 tonnes of gold from the IMF
Capital control, anyone? Emerging markets are taking action to curb currency appreciation. Brazil – whose economy is recovering well – introduced a 2% tax on foreign capital inflows last month, and has just announced a further measure, effective today: there will be a tax on American depositary receipts, which allow foreigners to invest easily in Brazilian stocks. Meanwhile Indonesia has announced possible capital controls, sending its currency sharply lower.
The flight to gold continues,
Forget carry trades, forget risk appetite: “Changes in the dollar correlate more closely to changes in international reserves than any other variable since 1999.” So China has “far more control over the price of the dollar than the US.” The US has little control over the dollar, especially treasury secretary Tim Geithner, in spite of his oft-stated desire for a strong dollar, agrees The Economist: “Yeah, right. I have a “strong man” policy under which I intend to become world heavyweight champion. I’m just not planning to do anything about it, like train or fight someone.”
China, India and Australia should all consider tightening monetary policy, says the IMF. Emerging economies show healthy signs, as US legislators fight to keep the house market moving, against falling prices, credit warnings and reduced mortgage applications
Some consensus among the American media that extending the US housing tax credit is a bad idea. And a conflict between those who think banks should be made smaller, and legislators, who are currently pursuing a strategy of better monitoring and increased powers over big banks