Negative equity is still affecting more than one in 10 home owners in the United States five years after the nation’s housing market recovery began, new research shows. Home owners who owe more than their homes are worth are nearly equally dispersed among urban and suburban communities in most metros across the country, says the latest report from real estate firm Zillow. But the numbers are falling. Nationally, some 12.1% of mortgaged home owners were underwater in the second quarter of 2016, down from 12.7% in the first three months of the year and below the 14.4% recorded a year ago. A breakdown of the figures show that 13.7% of owners in urban regions are underwater and 11.2% of those in suburban regions while Cleveland and Detroit have the greatest difference between urban and suburban negative equity rates. After the housing bubble burst, nearly a third of home owners in the United States were underwater on their mortgages. As the market recovered, many home owners have gained back the lost value on their homes, freeing them to sell or refinance. In most areas of the country, negative equity is nearly equally spread across urban and suburban areas. In 13 of the nation’s largest metros, the share of urban and suburban homeowners who are underwater is within two percentage points. But some metros are seeing notable gaps in the share of underwater homeowners between urban and suburban areas. Cleveland and Detroit have the biggest difference between negative equity rates in urban and suburban neighbourhoods at 13.6% and 10.8% respectively. In these metros, home values in the main urban centres are trailing behind the overall region’s recovery, and are still well off from their peak levels. By contrast, negative equity is equally common among urban and suburban areas in the Seattle area, where a more balanced recovery and strong economic growth have led to home values near or exceeding their bubble peak levels in urban and suburban areas alike. ‘At its worst, negative equity touched all kinds of home owners in all kinds of markets. The type of community a given home was in, urban or suburban, mattered little. Fast forward a few years, and the relative vibrancy of a given community and how it has performed over the past few years, and not necessarily its location in the city or suburbs, matters a great deal,’ said Zillow chief economist Svenja Gudell. For the first time, all of the largest markets in the country now have negative equity rates below 20% and the data shows that Western metros with strong job and housing markets have the lowest rates of negative equity. Less than 5% of mortgaged home owners in San Jose, San Francisco, Portland, Denver, and Dallas are underwater. Source link

Rising house prices in Scottish cities has led to a further deterioration in affordability with average values up 3% from £176,009 in 2015 to £181,077 in 2016. This has resulted in average affordability in Scotland’s cities worsening in the last 12 months from 5.25 to 5.36 times gross average annual earnings, the third successive annual decline in affordability. The data from the Bank of Scotland Affordable Cities Review also shows that on average, affordability in Scottish cities is now at its lowest level since 2009 but is still 12% lower than the peak of 6.12 times earnings in 2008 at the height of the last housing market boom. The overall improvement in affordability across Scottish cities as a whole over the past eight years has been driven by a combination of an increase of 10% in the gross average annual earnings and an average house price decline 3%. Edinburgh is Scotland’s least affordable city where the average house price is 6.12 times the gross average earnings in the city. With an average price of £220,099, houses in Edinburgh are more expensive compared with average earnings than in any other Scottish city. Inverness at 6.03, Aberdeen at 5.72, Dundee at 5.38 and Perth at 5.24 make up the top five least affordable cities in Scotland while Stirling is the most affordable city and the second most affordable in the UK with an average property price of £165,658 which is 4.11 times the gross average annual earnings. Glasgow is the second most affordable city in Scotland and 10th in the UK, with an average house price of £159,580, which is 5.07 times the gross average annual earnings in the city. House price growth has been highest in Aberdeen over the past decade and since 2011 Aberdeen has recorded the biggest price rise of any Scottish city over the past decade and with a gain of 58%, is the only Scottish city to appear in the top 10 UK cities with highest house price growth in fifth place. The report explains that this is as a result of rising housing demand due to the strong performance of the oil and gas sector over most of the period. More recently, Aberdeen has seen a 22% rise since 2011 but prices are not declining due to a decline in the resources sector. ‘The rising house prices over the past three years have resulted in a deterioration in home affordability in Scotland’s cities. Although affordability is at the lowest level since 2009, it is still much lower than the height of the last housing market boom in 2008,’ said Nicola Noble, mortgages director at Bank of Scotland. ‘Aberdeen has recorded Scotland’s highest house price growth over the past decade and more recently during the economic recovery, due to strong performance in the oil and gas sector,’ she added. BOOKMARK THIS PAGE (What is this?)      Source link

September 19, 2016 by: Alex Barker in Brussels and Rochelle Toplensky in London Brussels has opened an investigation into Luxembourg’s tax arrangements with Engie, the French utility, as it expands its state-aid clampdown on “sweetheart” tax deals. The European Commission probe comes shortly after it hit Apple with a €13bn bill for back taxes in Ireland, a record-breaking penalty that has enraged Washington and corporate America. The Engie case opens up a new front by targeting the treatment of intra-group financial transactions, which accounts show ran to more than €1bn. The commission alleges that Engie, formerly known as GDF Suez, enjoyed “double non-taxation” because the loans were treated as both debt and equity for tax purposes. Margrethe Vestager, the EU’s competition commissioner, said: “Financial transactions can be taxed differently depending on the type of transaction, equity or debt — but a single company cannot have the best of two worlds for one and the same transaction. “Therefore, we will look carefully at tax rulings issued by Luxembourg to GDF Suez. They seem to contradict national taxation rules and allow GDF Suez to pay less tax than other companies.” The decision to confront a big European champion over its tax dealings in Europe is symbolically important for Ms Vestager as she begins a three-day tour of the US. Apart from showing that she is determined to press on with more investigations, the Engie probe will be used to counter claims that the commission is targeting American multinationals. Engie, which is 33 per cent owned by the French state, said it was co-operating with the probe. Engie has had operations in Luxembourg since 1933 and employs about 300 people in the country, said a spokesperson. Ms Vestager’s drive against tax avoidance has triggered an angry response from Apple, the US administration and corporate America. Some 185 US chief executives described the decision last week as a “grievous self-inflicted wound” for Europe’s economy. As well as ordering Ireland to recover €13bn from Apple, the commission has hit Fiat in Luxembourg, Starbucks in the Netherlands and a number of companies in Belgium. There are also investigations into Luxembourg’s tax arrangements with Amazon and McDonald’s. Jean-Claude Juncker, the European Commission president who was Luxembourg’s premier when the tax deals were struck, has strongly backed the probes into “illegal backroom deals”. “Very often, bank robbers and poachers are among the very best police forces,” he said last week. Margrethe Vestager: © Reuters Brussels’ Luxembourg-Engie investigation turns on several tax rulings — letters confirming the interpretation of tax laws — regarding financial transactions in 2009 and 2011 between four companies in the Engie group. The loans can be converted to equity and bear zero interest for the lender. An FT review of company accounts shows the first 2009 loan to be worth around €1.3bn at the end of 2014. The size of the second 2011 loan is not disclosed in public records. By allowing the loans to be treated as both debt and equity, the investigators argue ”a significant proportion” of profits on the arrangements recorded by Engie in Luxembourg “are not taxed at all”. “This is because the borrowers can significantly reduce their taxable profits in Luxembourg by deducting the (provisioned) interest payments of the transaction as expenses,” the commission said. “At the same time, the lenders avoid paying any tax on the profits the transactions generate for them, because Luxembourg tax rules exempt income from equity investments from taxation.” Sample the FT’s top stories for a week You select the topic, we deliver the news. Source link