Life is about to get tougher for property investors as the Reserve Bank considers clamping down further on their access to credit to buy houses.
Auckland’s housing market has refused to buckle under Reserve Bank pressure aimed at reining in house price growth, which is starting to accelerate again.
And it’s not the only region where house prices are gathering pace.
Reserve Bank governor Graeme Wheeler openly concedes that puts the health of the financial system at risk.
But he’s not giving up yet.
Speaking at the Finance and Expenditure Select Committee today, he told Labour Party finance spokesperson Grant Robertson that the central bank was exploring further measures to tighten the credit noose for investors.
“In Auckland, investors account for 46 percent of the transactions, for the rest of the country it’s around 40 [percent] or a bit more, so it’s very significant,” Mr Wheeler said.
“It’s providing a lot of impetus in the market. So that’s one area we’re looking at around the LVR [loan to value ratios] around investor activity [though] we’re still doing the analysis.”
Measures to introduce loan limits based on income levels – called debt to income ratios – are also in the pipeline.
Reserve Bank deputy governor Grant Spencer acknowledged they were complex and difficult to implement.
But he insisted first-time home buyers would not be the hardest hit.
“If you look at the lending that is high debt to income, a much bigger proportion of that is investor lending than is owner-occupied lending,” Mr Spencer said.
“So, a debt to income ratio, the appropriate threshold in terms of the hurdle, will tend to impact investors more than owner-occupiers.”
Mr Wheeler said tougher controls for investors could be introduced before the end of the year, though debt to income limits were some time off.
He declined to outline what changes he was considering.
At present, the Reserve Bank’s measures are limited to Auckland property investors, who cannot borrow more than 70 percent of the value of a property.
ASB Bank chief economist Nick Tuffley said the limit could be lowered, and a wider net could be cast to capture investors nationwide.
“One option for the Reserve Bank is increasing the size of the deposit needed in Auckland for investment properties. They could look at expanding that investor deposit restriction elsewhere round the country, given there’s a degree of spillover coming through.”
But Mr Tuffley warned these tools had limits.
“The challenge with all of these tools is that the impact on the housing market at least does wear off after a period. So up to six months is all we can hope for with some of the tools that are coming through,” Mr Tuffley said.
“But there are aspects these tools do have which are longer lasting. For example, banks’ share of loans with low deposits has actually reduced as a result. So you’ve had changes in the banking system.
“The impacts on the housing market, however, have been temporary.”
Building and Housing Minister Nick Smith was coy about the Reserve Bank’s plans to target investors.
But he admitted investors had crowded out first-time buyers.
“I’ve been quite open about the fact that the government wants to screw the scrum in favour of the first-home buyer relative to the investor,” Dr Smith said.
“That’s why we’ve introduced the home start scheme – $430 million – that’s why we’ve increased the tax obligation on those that are investing in properties. That’s why we supported the Reserve Bank governor when he put tougher LVR rules on investors as compared with owner-occupiers of houses.”
But Mr Robertson said the government could solve this crisis easily by building affordable houses itself.
And he said their failure to do that was what was putting the financial stability of the country at risk.
SEC To Ban Unregistered CMOs From Operating By Month End
The Securities and Exchange Commission (SEC) says it will stop operations of Capital Market Operators (CMOs) that are yet to renew their registration on May 31, 2021.
This was contained in a circular signed by the management of SEC in Abuja on Monday.
On March 23, SEC had informed the general public and CMOs on the reintroduction of the periodic renewal of registration by operators.
The commission noted that the reintroduction of the registration renewal was due to the need to have a reliable data bank of all the CMOs registered and active in the country’s capital market.
“To provide updated information on operators in the Nigerian Capital Market for reference and other official purposes by local and foreign investors, other regulatory agencies and the general public, to increasingly reduce incidences of unethical practices by CMOs such as may affect investors’ confidence and impact negatively on the Nigerian Capital Market and to strengthen supervision and monitoring of CMOs by the Commission,” SEC explained.
According to the circular, the commission said CMOs yet to renew their registration at the expiration of late filing on May 31, would not be eligible to operate in the capital market.
It explained that CMOs were required to have completed the renewal process on or before April 30, however, the commission said late filing for renewal of registration would only be entertained from May 1 to May 31.
SEC also said that asides from barring the CMOs who failed to comply accordingly, their names would be published on its website and national dailies.
It added that names of eligible CMOs would be communicated to the relevant securities exchanges and trade associations.
A Threat to Revenue As Nigeria’s Largest Importer of Crude, India slash Imports By $39.5B
Nigeria’s revenue earning capacity has come under threat following the reduction of importation of crude oil by India.
India, Nigeria’s largest crude oil importer, reduced crude oil imports by $39.5bn in April, compared to the same time the previous year, data from India’s Petroleum Planning & Analysis Cell showed.
According to the Indian High Commission in Nigeria, India’s crude oil imports from Nigeria in 2020 amounted to $10.03bn.
This represented 17 percent of Nigeria’s total crude exports for the year according to the Nigerian National Petroleum Corporation, as quoted by OilPrice.com.
As Nigeria’s largest importer of crude oil, lockdowns in India’s major cities from the COVID-19 surge in April had ripple effects on Nigeria’s oil sales.
The NNPC was prompted to drop the official standard price of its main export streams, Bonny Light, Brass River, Erha, and Qua Iboe, by 61-62 cents per barrel below its April 2021 prices. They traded at $0.9, $0.8, $0.65, $0.97 per barrel respectively, below dated Brent, the international benchmark, as Oilprice.com showed.
India had been buying the not-too-light and not-too-heavy Nigerian crudes that suited its refiners.
Reuters reported that the Indian Oil Corporation’s owned refineries were operating at 95 percent capacity in April, down from 100 percent at the same time the previous month.
An official at the IOC was quoted as saying, “If cases continue to rise and curbs are intensified, we may see cuts in refinery runs and lower demand after a month.” Hundreds of seafarers risked being stuck at sea beyond the expiry of their contracts, a large independent crude ship owner reportedly told Bloomberg.
India reportedly bought more American and Canadian oil at the expense of Africa and the Middle East, reducing purchases from members of the Organisation of the Petroleum Exporting Countries to around 2.86 million barrels per day.
This squeezed the group’s share of imports to 72 percent from around 80 percent previously, as India’s refiners were diversifying purchases to boost margins, according to Reuters.
India also plans to increase local crude oil production and reduce import expenses as its population swells, according to Bloomberg.
A deregulation plan by the Narendra Modi-led government to boost national production to 40 million tonnes of crude oil by 2023/2024, an increase of almost eight million tonnes, had already been initiated.
According to Business Today, an Indian paper, the country currently imports 82 percent of its oil needs, which amounted to $87bn in 2019.
Invest Africa and DLA Piper Partner to Support ESG Best Practice in African Renewable Energy Projects
The global law firm, DLA Piper, has partnered with Invest Africa, the leading trade and investment platform for African markets, to support the development of ESG best practice in African renewable energy projects.
Clear Environmental, Social and Governance (ESG) targets and measurements have become an increasingly important part of fundraising as investors seek to align their portfolios with sustainable growth. For a continent boasting ample natural resources, this presents a significant opportunity for Africa’s green energy sector. However, renewable does not always equal sustainable and developing and articulating ESG metrics can pose a significant challenge to projects as they prepare investment rounds.
The project will assemble experts from the worlds of impact investment, development finance and law. Across a series of online meetings, participants will discuss strategies to improve ESG practices in African renewable projects from both a fundraising and operational perspective.
Amongst those speaking in the inaugural session on Thursday 13th May are Cathy Oxby, Chief Commercial Officer, Africa Greenco, Dr. Valeria Biurrun-Zaumm, Senior Investment Manager, DEG, Orli Arav, Managing Director – Facility For Energy Inclusion (FEI) – Lion’s Head Global Partners, Beatrice Nyabira, Partner, DLA Piper Africa, Kenya (IKM Advocates) and Natasha Luther-Jones, Partner, Global Co-Chair of Energy and Natural Resources, International Co-Head, Sustainability and ESG, DLA Piper.
Veronica Bolton-Smith, COO of Invest Africa said, “Africa is particularly vulnerable to the impact of climate change despite contributing very little to global emissions. As the price of renewables fall, they will form an ever more important part of Africa’s electrification. In this context, it is essential that projects be given the tools to apply best practice in ESG not only from an environmental perspective but also in terms of good governance, fair working conditions and contribution to social inclusion. I look forward to working closely with DLA Piper on this important topic.”
Natasha Luther-Jones, Global Co-Chair Energy and Natural Resources and International Co-Head Sustainability and ESG at DLA Piper also commented, “Climate change is one of the biggest challenges companies, and people, face today and when we look at its reduction – whether that be in how we power our devices, what we eat or how we dress, where we live or how we work – all roads come back to the need to increase the amount of accessible, and affordable, clean energy. However, renewable energy companies are not automatically sustainable as sustainability is a focus on all ESG factors, not just environmental. We know the need for renewable energy is only going to continue to rise, and therefore so will the number and size of renewable energy companies. The additional challenge is to make sure they are truly sustainable organisations and that’s what we’re excited about discussing during the webinar.”
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