
Bond Bulls Are Waiting for the Next Housing Market to Crack
For bond investors looking to bet big on a rally this year, signs of distress in the world’s highly-leveraged housing markets are only adding to their conviction.
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For bond investors looking to bet big on a rally this year, signs of distress in the world’s highly-leveraged housing markets are only adding to their conviction.
UK house prices fell for a fifth month in January, the longest string of declines since the financial crisis more than a decade ago, Nationwide Building Society said Wednesday.
A surge in Chinese spending last month has spurred more optimism about the country’s economic rebound, though weakness among manufacturers and sales of cars and homes still suggest the recovery isn’t yet on sure footing.
The number of Swedish bankruptcies reached the highest level in at least a decade in January, as defaults in the construction industry rose in the wake of an ongoing housing market rout.
Local governments in China are looking for new uses for the makeshift quarantine facilities built during the pandemic, after years of strict Covid Zero rules left many authorities strapped for cash.
Mar 31, 2021
Bloomberg News
,The Bank of Canada is seeing “worrying” signs that some Canadians are taking on too much debt to buy into the nation’s hot housing market.
In an interview with the Financial Post, Governor Tiff Macklem said there is evidence that loan levels relative to home values are growing -- an indication that some borrowers could be overextending. He also warned people have begun to make purchases based on the belief prices will continue rising.
“Canadians are stretching and that is worrying.” Macklem said. “If Canadians are basing their decisions on the kinds of price increases that we’ve seen recently are going to continue indefinitely, that would be a mistake. They’re not sustainable.”
At the same time, Macklem indicated the central bank can do little given interest rates need to stay low to support the recovery.
His comments come amid increasingly urgent calls from economists for policy makers to cool the market. Over the past week, the Bank of Montreal’s Robert Kavcic and Robert Hogue at Royal Bank of Canada have issued reports warning officials they need to take steps to break the psychology of expecting continued gains in real estate. The ultimate concern is that rapid price appreciation could be destabilizing.
Among policies being suggested are taxes targeting speculators like the one implemented in New Zealand this month, or an end to the longstanding and popular tax exemption for capital gains on primary residences. Another idea getting attention is the elimination of blind bidding for homes that some analysts say unnecessarily inflates prices.
Both Kavcic and Hogue also identified a lack of housing supply as a major driver of the recent run up in home values.
Prime Minister Justin Trudeau’s government plans to introduce a tax on foreign non-resident home owners. Finance Minister Chrystia Freeland said last week she is watching the market closely, without detailing any specific intent to take additional action.
Last week, Canada’s national housing agency added three more cities to its list of markets highly vulnerable to a sharp price drop, including Toronto. Canada Mortgage and Housing Corp. also said the recent broad-based price appreciation means overheating risks are now a national phenomenon, rather than isolated to a few major metropolitan areas.