More On European Housing Slump [Housing Tracker]

UK, France and Spain Housing Markets Struggle

Spain Banks Cut Outlooks on Profits. “Citing a dramatic change in Spain's economic environment, Banco Popular Español SA became the first local bank to scrap its profit target after loan defaults soared in Q2. Two smaller Spanish banks, Banco de Sabadell SA and Bankinter SA, also said asset quality deteriorated and loan growth eased, in the latest sign that banks are feeling the heat from a rapidly deteriorating domestic housing market. Popular said second-quarter net profit rose 8% to €352.2 million ($552.6M) from €325.3M a year earlier, as asset sales offset higher provisions. The sale of several real-estate assets and its French unit brought in capital gains of €240M.” (Wall St. Journal, July 25^th) 

French Construction Group Plans 4,000 Job Cuts. “French construction group Saint-Gobain said Thursday it would cut 4,000 jobs this year, mostly in Britain, Spain and the US, as part of a cost-cutting drive in the face of a sharp downturn in the housing market... In total, these programs will lead to additional full-year workforce reductions of 6,000, including 4,000 in 2008, and generate savings of €435 million ($682M), of which €300M for 2008." (AFP, July 24^th) 

Britons Caught In Costa Del Sol Housing Collapse Launch Legal Battle. “Lawyers specializing in real estate report a surge in the number of British buyers contacting them for advice after the developers they bought from have gone under. Spain is suffering similar economic jitters and rising prices as the United Kingdom. Thousands of buyers who have not yet taken ownership of their properties on what has become known as the "Costa del Crash" could lose everything. Others who have paid in full now own homes on resorts that may never be completed. They are seeking to recoup their losses to salvage what remains of their dream move abroad or hope of a perfect holiday home.” (UK Telegraph, July 24^th)

Developers To Get €9m Housing Grants. “Property developers are to be given €9 million to build houses that are at least 30% more energy efficient than required by building regulations, Minister for Energy Eamon Ryan announced yesterday. Developers will have to achieve a minimum building energy rating of "A2" to secure grants of up to €15,000 per home, or 40% of the total cost of the energy-saving measures, under the Low Carbon Homes Programme launched Tuesday… New building regulations introduced last year set energy-efficient standards that were 40% higher than 2005 standards. Mr Ryan proposes to increase standards by a further 20% in 2010.”  (Irish Times, July 23^rd)

U.K. House Builders Bought With Debt Face Default, Fitch Says. “Fitch Ratings: U.K. homebuilders bought through debt-fuelled takeovers face “considerable” risk of defaulting in the next year as a result of the country's housing slump.  Builders acquired in leveraged buyouts, purchases usually financed by borrowing against the target company, may run out of cash and be liquidated as lenders seek to recover their investment. The lowest level of mortgage lending in over a decade is keeping potential buyers out of Britain's £19 billion ($38B) housing market, pushing down prices and leaving builders with unsold properties and depleted cash reserves. A “significant proportion” of homebuilders bought in leveraged deals are at risk of defaulting on their debt, Fitch said.” (Bloomberg, July 23^rd)

Trump Jr. Plans $1 Billion Fund for Indian Property. “Donald Trump's son aims to set up a fund of as much as $1 billion to buy property in India, betting on the nation's growing wealth. Donald Trump Jr. may create the privately held fund with investors including an Indian family, he said... Deutsche Bank AG and Lehman Brothers Holdings Inc. have already amassed funds to invest in India, a market that recorded the world's highest growth in millionaires last year, fueling demand for luxury homes. The highest borrowing costs since 2002 have ended India's five-year property boom, curbing valuations of projects and developers.” (Bloomberg, July 22^nd)

 

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Comments

[housing crash]

Housing values will fall until they reach or even dip below their equilibrium value - which can be determined by their P/E Ratio. There is a neat After-The-Crash home value price estimator tool based upon P/E Ratio at this site:
www.howtosellyourhouse...

[CLH]

Good post Judy. Europe is following the US housing deflation but the US will bottom first. This is the reason for the dollar turning.

[Charlie Stromeyer Jr]

CLH's first two sentences are correct. IIRC, it was the Belgian economist Daniel Gros who discovered that European housing tends to follow U.S. housing by an average of 18-24 months.

I honestly don't know if CLH's third sentence is correct or not.