In fact, when the couple bought the place in 1965, it was a bare-bones retreat, a touchstone for a growing family as it hopscotched from Singapore to Hong Kong to Australia and, finally, to just south of Fort Worth, Tex., where Tim and Judith Sear now live as naturalized American citizens.
“It’s been a constant for more than 40 years,” said Mrs. Sear, the mother of four and grandmother of five. Even now, all three generations return as often as possible, traveling from their homes in the United States to the town of Builth Wells, about 60 miles north of Cardiff, the Welsh capital.
“We think Nantyfarddu means ‘the stream of the black bard,’ ” Mrs. Sear said, “but we can’t be sure.” The name came with the three acres of land, a “gently crumbling farmhouse” (as eldest son Adam, now 43, described it) and two dilapidated stone barns, all of which date to at least 1810 and embody stone construction traditional to the region.
The farmstead now has two carefully restored and modernized structures. The original main dwelling, Mr. Sear recalled, “was a classic little house with three tiny rooms upstairs.”
“It hadn’t been lived in for 20 to 30 years,” he added. “There was no electricity, no running water, no kitchen; only a salting slab, a bread oven and a big old fireplace. There were also the two stone barns, one of which fell down subsequently.”
For plumbing, the Sears ran a hose from a nearby creek to a 600-gallon concrete tank that they installed in the hillside above the farmhouse. “You’d have to suck on one end of the hose to get the water started,” said Mr. Sear, now retired as chief executive of Alcon Laboratories, an eye-care products company based in Fort Worth. “I tied a tea strainer to the one end to stop the leaves getting in and, once we had the tank filled, we gravity-fed the water into the tap.” A local builder then fashioned a basic bathroom and kitchen.
Over the past 10 years, the Sears converted the remaining barn into their primary living quarters with three bedrooms, two and a half baths, a modern kitchen and spacious family areas. Then they refurbished the farmhouse as a guest cottage, with three bedrooms and one bath. Geoff Jones, a local architect, navigated the strict zoning dictates of the Powys County Council to create designs for both structures, maintaining the regional vernacular and, whenever possible, reusing materials.
“Because planning restrictions in Britain are terribly strict,” Mrs. Sear said, “getting permission to renovate — particularly a traditional barn — is difficult. And rightly so; these buildings really are a part of the landscape.”
Of the barn-cum-house, Mr. Jones said: “Naturally, it was pretty dilapidated. The roof was corrugated metal sheeting that had gone rusty and was leaking.”
Once that was taken off, the beams were raised. “It was very tricky, but it gave us 15 inches more headroom upstairs,” Mrs. Sear said.
Mr. Jones added: “The first thing we did was to stabilize the walls. We kept a lot of the old features, of course. The old timbers, some of them we rebuilt, and others we stabilized with reinforced concrete.
“We put new slates in the roof. Then, the outside has lancet openings, windows used in barns for ventilating the hay, that are only about four inches wide. So we put in new windows that the planners approved.”
Next Mr. Jones tackled the farmhouse renovation, a less complex project.
Now the two homes accommodate all 15 of the Sears’ immediate family and have all the modern amenities: electricity, plumbing and, more recently, a telephone — whose introduction caused spirited family debate. The idea of television at Nantyfarddu is anathema to most of the clan, who spend their time there reading, playing games, hiking the hills or watching local sheepdog trials, often convening in evenings at a pub in a 13th-century building three miles across the fields.
This isolated region has a particular appeal for Mrs. Sear. “I grew up in South Wales, from the age of 7 until the time I was married at 21,” she explained, “so it’s really my home. My parents were English and, after my father died, we moved down there to stay with an aunt. I developed a great love for Wales, so when we had an opportunity to buy something there, we jumped at it.”
But Mrs. Sear laughed in near-embarrassment when she revealed the 1965 cost of Nantyfarddu: 1,200 pounds (about $3,360 at the time).
Today it is virtually impossible to find even a crumbling barn for sale, let alone something so cheap, said Mr. Jones, who has spent his nearly 50-year career in Mid Wales. “These places are disappearing,” he said. “People who live in the cities — in London, in particular — want sort of a second home, and what they’re looking for is remote locations, and Wales is known for that.”
“Just one with a little bit of space around it, maybe an acre, would cost probably 180,000 pounds ($361,500). And that could be a barn that’s falling apart.”
For the Sears, however, no amount of money could buy the peace and quiet of this rustic family retreat.
“Over the years, we have developed very close friendships in the local farming community,” Mr. Sear said. “And they take their vacations in places like Spain, where it’s warm. They’re slightly bemused that we’d want to spend our holiday on a rainy Welsh hillside. But we do.”

Perched just off Kintyre on Scotland’s western coast, Gigha (pronounced GHEE-a) is that kind of place; one where celebrity and status do not count for much.
What lured Mr. Dennis to Scotland was Achamore House, home of the lairds (Scottish for lord) of the island since it was built in 1884 for a colorfully named Capt. James Scarlett. The house, whitewashed, turreted and with a bell tower, was exactly what Mr. Dennis had pictured as his Scottish dream home but had almost given up on finding.
Mr. Dennis, who is from California, tells of his frustration in finding a house large enough to be his home, a bed and breakfast and a base for his flower essences company. “I spent three days combing Scottish real estate sites on the Net, and pretty rapidly came to the conclusion that I couldn’t afford anything that was suitable,” he said. “So I gave up. And a month later, I came across a newspaper article about the sale of Achamore.”
It was 2003, and the timing was perfect. The 11-square-mile island had recently been purchased by 98 members of the community, a practice gaining popularity in many isolated areas in Scotland, and Mr. Dennis's plans suited their ideals of sustainable and sympathetic development. These, and an offer of 665,000 pounds (then $1 million) won him a new home.
The baronial frontage of Achamore House rises to greet approaching visitors, while banks of camellias and rhododendrons along the drive hint at the historic garden surrounding the manor. Gigha’s position at the edge of the Gulf Stream provides temperate conditions, and exotic plants thrive throughout the 52 acres of sheltered garden, the brainchild of Sir James Horlick, laird of Achamore from 1944 to 1972. Horlick’s passion for rhododendrons is obvious: spectacular specimens tower over a visitor’s head.
Mr. Dennis calls the setting a windfall. “The sale included the house, four acres of land, a patch of land that had once been a tennis court and a 10-acre island, Craro,” he said. “But the gardens remain the property of the community, who employ three full-time gardeners. All I have to do is enjoy it.”
Inside, the scale of the 14,000-square-foot two-story house is impressive, but not overly grand. Golden oak paneling lines the walls of the entryway and leads a visitor’s eye toward the central staircase. The stairs and balustrade, both of oak, softly reflect the light filtering from outside through the wide leaded windows behind.
The house was designed by James Honeyman, a Glasgow architect, but parts of it, most notably the heart-shaped window leading and curves in the wood paneling, are known to have been the work of Charles Rennie Mackintosh, one of his firm’s young recruits who would later find international fame as a leading exponent of the Art Nouveau style.
The billiards room is Victorian, with its vaulted ceiling glowing with elaborate dark woodwork. “I spent quite some time in here when I first moved in,” Mr. Dennis said. “No TV, no heating, no girlfriend.”

We did not have a housing bubble, according to Charles Laven, President of Forsyth Street Advisors. We had a credit bubble. Five years after the Great Recession, we have gained some perspective on what happened. What can we do to make sure it does not happen again?

The current recovery, especially related to jobs and job growth, has been painfully slow. Compared to the last four recessions, job losses were considerably greater during the Great Recession. As the graph below from REIS Inc. clearly shows, the recovery period since the recession ended in 2008 has also been significantly longer.



[See a collection of political cartoons on the economy.]

Normally, the housing sector helps to spur job growth and lead the United States out of a recession. It is one sector of the economy that provides lots of jobs and is not subject to significant foreign competition. Housing also creates many related jobs in building supplies and real estate services.

As Table A below shows, once prior recessions ended, housing construction usually picked up. In the four years following the end of the recession in1974, 1981 and 2001, construction of new houses averaged 5.7 percent, 40.5 percent and 23.4 percent more than during the last year of the recession. It was a major engine generating economic growth and jobs.

The exception was the recession of 1990. As chart A shows, the housing market in the four years after the end of the recession stayed relatively flat. In fact, it averaged 6.5 percent less construction. However, at 665,300 units, it was not a drag on the economy.

When we look at the Great Recession, we see a very different picture: the drop in housing construction was severe. In 2008, housing under construction was 780,900 units. The following year it dropped to 495,400 and during the next four years averaged 40.56 percent less than in 2008. The pronounced lack of housing construction has been a setback to the economic recovery and an important reason that jobs were lost and job growth is limping along so slowly.



[Read the U.S. News Debate: Should the Government Help Homeowners With underwater Mortgages?]

After the Great Recession, many commentators talked about the "housing bubble" and how problems in the economy were the result of the unprecedented run up in housing prices. For eight years, housing prices in the United States increased at double digit rates, fueling vast amounts of speculative buying and the psychology that housing was a great investment and could only go up. Describing the problem in that way makes it very difficult to construct a solution. How do you change human nature to eliminate bubbles? How do you prevent developers from building too much housing?

On the other hand, if we view the problem as a credit bubble, we might be able to protect ourselves and speed up the recovery time after future recessions. While no one can predict when the housing market will crash or how far it will fall, the loosening of credit standards for mortgages is easy to gauge. For example, in December 2007, the New York Times reported, "Fed officials noticed the drop in standards as well. The Fed's survey of bank lenders showed a steep plunge in standards that began in 2004 and continued until the housing boom fizzled."

The housing market resembles an elephant doing a handstand. It is a highly unnatural position and when it topples over, it’s going to make a thundering crash and destroy whatever is underneath.
May 28 opened with news that the S&P/Case-Shiller index, which supposedly measures price gyrations of the nation’s single family home market, smartly advanced 11 percent in March from the same period a year ago and completed a three month hat trick of escalating prices. Lemmings initially rushed to push stock markets into record territory as if this number was a Grail, an ultimate reflector of our nation’s economic health. A peek behind the curtain reveals a shaky edifice with mortar made of bubblegum. Since then the stock market has been on shaky ground, retreating over 3 percent, as recurrent confabulations now express alarm that Dr. Ben over at the Fed will stop writing low interest rate inducing QE III steroid prescriptions sooner rather than later. It may not matter much; the patient is already showing signs of resistance that the efficacy of all the drugs is showing fewer and fewer salutary benefits.
The ten year Treasury note, the primary indicator of mortgage rates, has risen nearly 60 basis points over the past six months and mortgage rates have followed. Steroids or not, the much heralded housing boom is suddenly in danger. Mortgage applications for week ended May 31 were down 11.5 percent and 30 year fixed mortgage rates soared 17 basis points to 4.07 percent the highest in over a year.

In 1949 Lillian Disney telephoned Harold Janss about purchasing a parcel of property in his new subdivision. Janss, building upon the work of his father-in-law Arthur Letts Sr., was developing a large tract of Los Angeles land called Holmby Hills. Soon after, Lillian and her  Hollywood husband Walt acquired a parcel on Carolwood Drive and built their dream home.
In the new estate’s backyard Walt Disney built a one-eighth-scale steam railroad, inspired by the ones his company’s animators (Ward Kimball and Ollie Johnston) had implemented on their own properties. He erected a standalone barn housing a control room and carved out a half-mile worth of track including overpasses, a 46-foot-long trestle and an s-shaped subterranean tunnel hidden underneath his wife’s flower beds. The train would famously come to be known as the Carolwood Pacific Railroad and it would serve as part of the inspiration to create Disneyland, the first of his eponymous theme parks.
Now, more than six decades after the Disney family laid claim to the property, the remnants of that Carolwood Pacific Railroad are up for grabs. The former Disney estate, better known now as the Carolwood Estate, is on the market. The official asking price: $90 million.
The Carolwood Estate’s current owner is Gabriel Brener, chief executive of private investment firm Brener International Group and co-owner of the Houston Dynamo soccer team. He  purchased the property from the Disney estate for $8.45 million in 1998, a year after Lillian Disney’s death. Brener razed the original house, reportedly replete with asbestos, and erected a brand new 35,000-square foot  mansion in 2001. He also acquired the lot next door, adding more acreage.

The Federal Trade Commission (FTC) today announced a huge crackdown of the type of travel and timeshare resale scams I wrote about in December, when they showed up for the first time in the Top 10 Consumer Complaints report by the Consumer Federation of America and the North American Consumer Protection Investigators. (That survey lumped these schemes together with grievances about retirement communities and assisted-living facilities under the heading of “Real Estate,” which came in at No. 9.)
In today’s dragnet, the FTC — along with law enforcement agencies in 28 states and 10 countries — announced 191 actions to stop fraudulent operations hawking timeshare property resale services and travel prizes. More than 184 individuals face criminal prosecution.
Victims, many of them elderly or in financial distress, were defrauded out of more than $14 million, according to Wilfredo A. Ferrer, U.S. Attorney for the Southern District of Florida.
“Con artists take advantage of timeshare owners who have been in tough financial straits and are desperate to sell their timeshares,” Charles A. Harwood, Acting Director of the FTC’s Bureau of Consumer Protection, said at a Miami press conference. “They persuade owners to pay fat up-front fees by saying they have someone ready to buy the property, but that’s a lie.”
Timeshare gripes were the fastest-growing category of complaints last year, according to consumer protection investigators around the country. And, as Next Avenue explained in “Shaky Finances of Continuing Care Retirement Communities,” the financial health of some retirement communities has raised cause for concern.

I don’t golf. If you’ve ever met me in real life, you’d know this in a matter of minutes. I don’t have the patience for it. I can’t sit nicely and wait my turn. I’m a bit loud. Also, I look terrible in polo shirts.
So I’m not really your target audience for golf. But I, like many in America, will still be watching to see what happens when golfing luminaries Tiger Woods, Rory McIlroy, Bubba Watson, Matt Kuchar and Masters winner Adam Scott tee off at the Merion Golf Club to compete for the $8 million purse at the PGA U.S. Open. Even if you don’t golf, it’s a huge event. Kind of like the Super Bowl. Only much more quiet.
You know who else will likely be watching? The Internal Revenue Service. You see, it’s not just Woods and Watson looking to benefit from the U.S. Open this month: ordinary folks are looking to make a few dollars, too.
Take rentals. For months now, those who live near the Merion Golf Club have been offering spots in their homes, driveways and garages for those traveling to the Open. And those spots don’t come cheap. A quick search on the internet reveals that there are still rentals available: a one week rental that sleeps 6 can be had for $11,000. Yes, $11,000. A parking space located about a mile away from the course is available for $1,500. And even my husband thought about opening up our Manayunk home for guests when he heard that a twin in neighboring Ardmore was being offered up for a whopping $3,500 per day.
That’s a lot of cash. Funds that you receive for the use of real estate – even if it’s your personal residence – are usually taxable to you as rental income. So if those folks in Ardmore manage to get paid nearly $25,000 for the use of their home for the week (God bless ‘em) it may be reportable as taxable income.

As pollution concerns rise in China, Liu Chunlei is boosting environmental awareness among the nation’s 564 million Internet users with help from the charitable arm of Alibaba Group Holding Ltd (ALIBABZ).
Danger Maps, a website Liu started last year, allows people to look up sites such as toxic-waste treatment facilities, oil refineries and power plants. Liu has plotted about 6,000 pollution sources based on government data and user input on Baidu Map, China’s equivalent of Google Maps.
“Real-estate agents and websites who want to boost transactions won’t tell you this kind of information,” said Liu, 35, who created Danger Maps after learning that the Shanghai apartment he bought in 2007 was near a landfill -- something he wasn’t informed of when negotiating the purchase.
Inspired by “crowd-mapping” efforts in Kenya and Japan, the site taps the knowledge of China’s masses to draw attention to environmental risks in a nation where public information is often scattered and incomplete. Now, Liu is expanding his site by letting users add information to maps with other themes such as missing people and child abuse.
“More Internet users are starting to understand how important information and data can be for sustainable social activism,” said Isaac Mao, director of the Social Brain Foundation, a social incubator for Chinese grassroots culture. “Visual sites are very helpful for the public to understand the big picture.”
Pollution has become a particularly delicate subject, displacing land disputes as the main cause of China’s 30,000 to 50,000 annual incidents of civil unrest, according to Chen Jiping, a member of the top political advisory body to China’s National People’s Congress.

Garbage Dumps

“It would be really interesting to see where incinerators and garbage dumps and such are placed in Chinese cities, and whether that will lead more communities to activism,” said Ethan Zuckerman, Director of the Center for Civic Media at Massachusetts Institute of Technology. “There are likely a lot of issues where there isn’t a set of necessary government data.”

Midtown Manhattan office-building price gains have outpaced those in London’s West End as investor demand for New York properties sends values above the highs before the financial crisis. Office prices in Midtown have more than doubled since their trough in the fourth quarter of 2009, Moody’s Investors Service said in a report today. West End prices climbed 65 percent from their low in the third quarter of that year, according to the report. The West End, which includes the districts of Mayfair and St. James’s, has the most expensive office rents in the U.K. and is home to Europe’sLondon counterpart, the West End,” Moody’s said in the report today. “New York’s comparatively stronger post-crisis employment growth has contributed to its stronger office price growth.”
Recent deals for Midtown skyscrapers have approached or exceeded peak levels reached in 2007, before the credit crisis caused values to plummet. In the past two weeks, buyers agreed to pay about $2,100 a square foot, a record, for 650 Madison Ave., and a 40 percent stake in the General Motors Building was acquired at about $1,700 a square foot. RXR Realty agreed to buy a 49 percent share of Worldwide Plaza for $660 million, more than its owners paid for the entire tower in 2009, two people briefed on the deal said last week.
Office prices in Midtown are now 19 percent more than their highs before the market crash, while prices in the West End are 6 percent higher than the peak, Moody’s said in the report.
The New York area has returned to its pre-crisis level of 8.6 million jobs, while London is about 250,000 positions short of its peak of 7.8 million, according to the report.

New Zealand’s central bank expects to keep borrowing costs at a record low this year to avoid re-igniting demand for the currency, which it said remains overvalued. The kiwi declined.
“Despite having fallen over the past few weeks, the New Zealand dollar remains overvalued and continues to be a headwind for the tradables sector,” Governor Graeme Wheeler said in a statement in Wellington today after leaving the Official Cash Rate at 2.5 percent. The bank cut its growth forecast for the year through March 2014 to 3 percent from 3.3 percent, and left its projection for the following year at 2.8 percent.
Confronted with a surging housing market that threatens financial stability and an elevated currency that dents exports, Wheeler has kept interest rates steady and turned instead to other policy tools. He reiterated today the RBNZ will seek to intervene in the foreign-exchange market where appropriate.
“If we see the opportunity to try for example to take the tops off any exchange-rate peak, then we may exercise intervention,” he said. “If there were very strong capital flows, we wouldn’t try to become engaged and try to offset those in any substantive way.”

Dollar Weakens

New Zealand’s dollar dropped to 79.54 U.S. cents at 10:55 a.m. in Wellington from 79.90 cents before the decision. Traders pared bets the RBNZ will lift rates in December to a 30 percent chance from 54 percent late yesterday, according to swaps data compiled by Bloomberg.
“The governor was seen as not hawkish enough,” Annette Beacher, Singapore-based head of Asia-Pacific research for TD Securities, said in an e-mailed note. Wheeler today reiterated the Reserve Bank of New Zealand expects to keep the OCR unchanged through the end of the year, and it seems currency traders “wanted this dropped or altered,” she said.
The currency has declined about 6 percent against the greenback since Wheeler first said on May 8 he was intervening to weaken it. He sold a net NZ$256 million ($203 million) in April, according to central bank data. In a May 30 speech, Wheeler said he was prepared to step up his efforts.

Actis LLP, a private-equity company, will lead investment of as much as $1.5 billion in African commercial property to meet rising demand from international companies targeting a growing middle class.
“We are seeing a shift in interest from South African brands to European retailers” seeking opportunities in fast-growing economies such as Nigeria, Ghana and Kenya, Kevin Teeroovengadum, 39, director of Actis’ sub-Saharan Africa real estate unit, said in an interview in Johannesburg on June 11. “They want to tap into the emerging middle class.”
Actis, which is based in London, plans to invest in projects including shopping centers, office towers and industrial parks that will come to fruition over the next five years, Teeroovengadum said. The company will use the proceeds of its second African real estate fund that raised $280 million in October, while the rest of the investment will come from commercial partners and loans.
Africa’s economy, excluding Libya and Somalia, is forecast to expand 4.5 percent in 2013 and 5.2 percent next year amid a rise in oil and mining projects and direct investment from foreign companies, according to the Tunis-based African Development Bank’s annual outlook. Nigeria, the continent’s most populous country, grew 6.6 percent in the first quarter while South Africa, the continent’s biggest economy, expanded by an annualized 0.9 percent.

Africa Foothold

Africa is home to the world’s youngest and fastest-growing population, McKinsey & Co. said in a 2010 report. Household expenditure in the continent is forecast to expand 63 percent to $1.4 trillion by 2020, the report said. Shantayanan Devarajan, the World Bank’s chief economist for Africa, said in May last year that “this is a very good time for retailers to get a foothold in Africa.”
Actis has already invested the proceeds of an initial $155 million fund in malls and office buildings in Ghana, Nigeria, Kenya, Botswana and Mauritius, Teeroovengadum said. The company has partnered with Mauritian investment company GML to invest in Port Louis-based Indian Ocean Real Estate Co., which is developing a $1.5 billion town in the island nation.
“We have leapfrogged to shopping centers of 25,000 square meters from existing small shops” in Nigeria and Ghana, Teeroovengadum said. “The idea was when you go into Africa, you benefit from middle-class growth.”

Hopewell Hong Kong Properties Ltd., the owner of buildings in the Wan Chai business area including Hopewell Centre, scrapped a $780 million initial public offering in the city after stock markets tumbled.
The company, a unit of Gordon Wu’s Hopewell Holdings, cited “significant deterioration in market sentiment” and “volatile market conditions” as reasons for pulling the IPO in a statement today. Hopewell Hong Kong had planned to raise as much as $780 million and start trading on June 19, according to its share-sale prospectus.
Hopewell Hong Kong’s IPO is the biggest to be scrapped in the city since May last year, suggesting a rebound in first-time share sales is losing steam as stock markets across Asia decline. Hong Kong’s benchmark Hang Seng Index has lost 9.5 percent in the past month, curbing demand for new equity.
Companies have raised $5 billion through initial offers in Hong Kong this year, up from $1.4 billion in the same period in 2012, according to data compiled by Bloomberg. The 20 companies that completed IPOs on Hong Kong’s bourse since Jan. 1 are down on average 2.2 percent from their offer prices, the data show.
China Harmony Auto Holding Ltd. (3836), which raised $215 million in an IPO last week, fell 15 percent at 10:13 a.m., heading for the worst Hong Kong debut since February 2012. Sinopec Engineering (Group) Co., which raised $1.8 billion last month in the biggest Hong Kong IPO this year, has fallen 2.9 percent from its offer price.
BOC International Holdings Ltd., Credit Suisse Group AG, Citigroup Inc., HSBC Holdings Plc and Citigroup Inc. were managing the IPO for Hopewell Hong Kong.
Philippine Casino operator Travellers International, which operates Resorts World Manila, started gauging investor demand for an IPO today, according to a term sheet obtained by Bloomberg. The company, a venture of Alliance Global Group Inc. and Genting Hong Kong Ltd., is seeking as much as 34.8 billion pesos ($806 million) from the offering in Manila, according to a regulatory filing last month.

Blackstone Group LP (BX), the world’s biggest manager of alternative assets, has $1.5 billion of capital commitments for its first Asian property fund, targeted at $4 billion, according to a letter sent to investors.
Blackstone held a first close on the Asia real estate fund on June 7, according to the letter sent yesterday. The New York-based company said it plans to begin investing the money immediately. The firm will focus on China, India, Australia and Japan, a person with knowledge of its plans said in December.
The Asia-Pacific region’s economic growth and decline in property values have attracted private-equity investors. In the U.S., Blackstone has been the biggest buyer of commercial real estate since prices bottomed more than three years ago. The company last year completed the largest-ever private real estate fund, with $13.3 billion of pledges.
There’s “a pretty sharp contrast” in growth in Asia compared with Europe and the U.S., Jonathan Gray, Blackstone’s global head of real estate, said at the firm’s May 3 investor day. “And yet, there’s not a lot of capital.”
Blackstone Real Estate Partners Asia is the largest private property fund being raised for the region, followed by the $1 billion Alpha Asia Macro Trends Fund II, according to Preqin, a London-based research firm.
Christine Anderson, a spokeswoman for Blackstone, declined to comment on the fundraising.

China’s economy is proving less responsive to credit, escalating pressure on Premier Li Keqiang to strengthen the role of private enterprise.
The diminishing returns to lending heighten focus on the need for what the International Monetary Fund said yesterday are “decisive” policy changes in the world’s second-largest economy. Without a refocus away from state-approved projects, Li and President Xi Jinping risk overseeing both a further slowdown in growth and an increase in non-performing loans.
“Less efficient and more highly leveraged borrowers have been kept afloat, tying up credit that could be used to generate more growth,” said David Loevinger, former senior coordinator for China affairs at the U.S. Treasury Department. “To boost growth, China needs to channel more financing to its private enterprises, which are both more profitable and less leveraged than their state-owned counterparts.”
State enterprises have seen their return on equity fall to 5.9 percent last year from 10.2 percent in 2010, according to the Ministry of Finance. The biggest concern from China’s credit surge is the money going to companies and state-run enterprises whose performance is deteriorating, Francis Cheung, head of China-Hong Kong strategy at CLSA Asia-Pacific Markets, wrote in a May 9 report.

Bond Market

Signals from China’s bond market, which has expanded 39 percent so far this year compared with the same period in 2012, indicate businesses are struggling to improve profitability even with greater access to credit.
Borrowing in the debt market by the biggest Chinese companies is more than five times a measure of their operating earnings, twice the leverage ratio in 2007, according to data compiled by Bloomberg. State-owned enterprises in energy and power production are among the biggest borrowers, including China National Petroleum Corp., the nation’s largest oil producer, and China State Grid Corp., the country’s largest power distributor.

Norway revealed it’s tapping cash to subsidize its overheated housing market after proposing a 50 percent increase in mortgage lending to government employees.
The plans to spend more on a market already showing signs of imbalance, revealed in this month’s revised budget, come as the International Monetary Fund urges the government to rein in spending.
The government will use money that “is inside the parameters of the deviations we expected when we drew up our financing plan,” Sigurd Klakeg, deputy director general at the Finance Ministry, said in a telephone interview from Oslo. “We have ample liquidity and there are cash reserves with the central bank.”
The comments put an end to speculation that Norway would need to sell bonds to finance the lending, which it said this month will reach 33.5 billion ($5.7 billion) in 2013. The step increases Norway’s total funding need by 19 percent, or 16 billion kroner, to 98 billion kroner, Nordea Bank AB (NDA) estimates.
Norway, which relies on the world’s largest sovereign wealth fund to keep it debt free, has in the past sold bonds to fund government lending programs while tapping the $740 billion wealth fund to plug budget deficits. The government this month unveiled its most expansionary budget since the height of the financial crisis in 2009, as it boosted spending by 19 percent ahead of an election in September.

IMF Warning

On a visit to Norway last week, the IMF warned that excessive spending is imperiling the economy as record oil investments push up labor costs and harm competitiveness. Western Europe’s largest crude producer has struggled to stop property prices and credit growth accelerating from all-time highs as record-low global interest rates drag down borrowing costs in Europe’s second-richest nation per capita.
“Ratcheting down a bit more would make sense,” Thomas Dorsey, part of an IMF mission to Norway, said in an interview in Oslo. Lower spending would help ease “competitive pressures on the non-oil parts of the mainland economy.”
Investors have treated Norway as a haven from the debt crisis in Europe, driving down borrowing costs. Norway’s benchmark 10-year bond yield has fallen about 40 basis points since mid-February. The difference in yield relative to similar-maturity German bunds has narrowed to about 74 basis points from 101 basis points in the same period, according to data compiled by Bloomberg.

Langham Hospitality Investments Ltd. (1270), a trust backed by Great Eagle Holdings Ltd. (41) hotels, fell 9.2 percent in Hong Kong in the worst debut for an initial public offering of least $500 million in Asia this year.
The shares closed at HK$4.54. The benchmark Hang Seng Index slid 0.3 percent. Langham Hospitality, based in Hong Kong, raised HK$4.26 billion ($549 million) last week selling units at HK$5.00 each, near the midpoint of its price range, according to data compiled by Bloomberg. Asian Pay Television Trust (APTT) sank 5.2 percent in Singapore yesterday on the second-worst debut after  Keppel REIT (KREIT) and Parkway Life Real Estate Investment led property trusts lower.
“There could be some knee-jerk reaction to rising U.S. bond yields, which is not good for yield stocks such as REITs,” said Ng Soo Nam, Singapore-based chief investment officer at Nikko Asset Management Asia Ltd., whose Japan-based parent oversees about $165 billion.
The trust is backed by hotels including The Langham, Langham Place Hotel and Eaton, all located in Hong Kong’s Kowloon district, according to a filing to the Hong Kong stock exchange. The hotels have a combined 1,629 guest rooms, the document showed.
Citigroup Inc., Deutsche Bank AG and HSBC Holdings Plc managed the offering for Langham Hospitality, according to a prospectus. Langham Hospitality boosted operating profit by 14.5 percent to HK$504.8 million last year, while revenue increased 8.9 percent to HK$1.6 billion as occupancy rates improved, the prospectus shows.

Tribeca Holdings Ltd. is close to buying London’s Old Spitalfields Market on behalf of an undisclosed party in what would be the city’s largest retail investment this year, according to two people with knowledge of the talks. The buyer will pay more than 100 million pounds ($152 million) for the property, said one of the people. Both of them asked not to be identified because the information is private. Tribeca, managed by Irish investor Aidan Brooks, advises high-net-worth family offices in New York and London.

The Spitalfields area, formerly a slum, has seen rising values and renovations in last several years because of its proximity to the City of London financial district, the technology hub known as Silicon Roundabout and the nightlife of the Shoreditch neighborhood. Old Spitalfields Market is one of London’s top 10 visitor attractions, according to its website.
“It’s more innovative than the general high street or other core markets that you might find elsewhere,” Honor Westnedge, a senior retail analyst at Verdict Research Ltd., said by phone. “Spitalfields is a very good mix of accessories, fashion and food.”
Retailers that sell to more-affluent customers including Barbour, Agnes B and Hackett now have stores at the market where goods have changed hands since the 1200s, according to the City of London borough.
The fruit, vegetable and flower market was taken over by the borough in 1920 and was relocated to Leyton in east London in 1991, according to the financial district’s website. Old Spitalfields Market was developed by Ballymore in 2006 to include stores, restaurants and traditional market stalls.

Fewer Americans than forecast signed contracts in April to buy previously owned homes, indicating limited inventory is holding back further progress in the housing market.
The index of pending home sales rose 0.3 percent after a 1.5 percent gain in March, figures from the National Association of Realtors showed today in Washington. Economists forecast April contract signings would match the prior month’s increase, according to the median estimate in a Bloomberg survey.
Growth in the labor market and cheaper borrowing costs have helped sustain housing demand, showing residential real estate will remain a source of strength for the economy. Rising property values may encourage more Americans to put their homes on the market and boost the number of available dwellings.
“We’ve got pent-up demand out there from people who put off purchasing a home, affordability remains very high,” Gus Faucher, a senior economist at PNC Financial Services Group Inc. in Pittsburgh, said before the report. “Housing is, and will be, an important driver of overall economic growth through the rest of 2013 and into 2014.”
Estimates for pending home sales ranged from a decline of 1.1 percent to an increase of 5.5 percent, according to 42 economists surveyed by Bloomberg.

Mortgage Rates

At the same time, mortgage rates that have been fueling home sales are starting to increase and may work to limit further gains in the industry. The average rate for a 30-year fixed mortgage climbed to 3.81 percent in the week ending today from 3.59 percent last week, Freddie Mac figures showed today. In November, the rate reached an all-time low of 3.31 percent.
Economists consider pending home sales a leading indicator because they track contract signings. Existing homes sales are tabulated when a contract closes, usually a month or two later.
Today’s Realtors’ report showed pending home sales increased 13.9 percent from April 2012 on an unadjusted basis.
Two of four regions showed an increase in contract signings from a month earlier, reflecting an 11.5 percent gain in the Northeast and a 3.2 percent advance in the Midwest. Pending home sales slumped 7.6 percent in the West and fell 1.1 percent in the South.
The index level for pending home sales was 106 on a seasonally-adjusted basis, the highest since April 2010, which was prior to the deadline for a homebuyer tax credit. A reading of 100 coincides with the average level of contract activity in 2001 and “historically healthy” home-buying traffic, according to the NAR.

William Pulte says the only way to truly save Detroit and get the housing market functioning properly again is to destroy large swaths of the city as quickly as possible.
“We’re trying to do total blight elimination,” Pulte said, standing in the middle of the blocks his group cleared in February. “You can go tear down one home here and then tear down one in another area, but if you go into one area and take down everything, that’s what really makes a difference.”
Housing markets in Detroit and other rustbelt cities such as Cleveland and Buffalo are hampered by decaying, vacant homes even as sales of existing homes hover around a three-year high nationally. Pilfering of vacant units in urban areas cut the number of U.S. homes with complete plumbing by about 10.4 percent from 2008 to 2011, according to U.S. Census data compiled by Bloomberg, including 66,722 such homes alone in Detroit.

Unmanageable City

Blight has made Detroit unmanageable. As the tax base shrinks, the cost of municipal services such as police and fire protection, bus service and garbage collection, stays the same or even rises. Sparsely populated neighborhoods see increases in crime and fires, including arsons. The state has appointed bankruptcy attorneyKevyn Orr as emergency financial manager to take over the city finances and he has said bankruptcy is an option to lessen the burden of about $15 billion in debt.
“We have a city built for 2 million and only 700,000 people living here,” said John George, who has run the grassroots Motor City Blight Busters organization for the last quarter century, tearing down about 300 dwellings mostly by hand in the city’s impoverished Brightmoor neighborhood. “We have to get rid of what we don’t want, don’t need and can’t use.”

Tokyo, the world’s most populated metropolis, is building defenses for a once-in-200-year flood that could dwarf the damage superstorm Sandy wrought on the U.S. East Coast.
Japan’s capital, flanked by rivers to the east and west, as well as running through it, faces 33 trillion yen ($322 billion) in damages should the banks break on the Arakawa River that bisects Tokyo, according to That’s more than five times the $60.2 billion aid package for Sandy that slammed into the U.S. northeast last October.
“Japan hasn’t prepared enough,” said Toru Sueoka, president of the an organization of engineers, consultants and researchers. “Weather patterns have changed and we are getting unusual conditions. We need upgrades or else our cities won’t be able to cope with floods.”
In 2008, for the first time in human history, half of the world’s population lived in urban ard Flooding. The report says that trend combined wit means the world’s cities will bear the biggest loss of life and the largest economic costs from flooding.
Should the Arakawa River break its banks, about 2,000 people in Tokyo may lose their lives and around 860,000 will be stranded, according to the government. The waters would flood subway and regular train lines, crippling 97 stations.

Flood Defenses

The capital’s Edogawa City, one of Tokyo’s largest wards that is sandwiched by two major rivers, predicts it will cost 1.7 trillion yen to strengthen and rebuild the banks of the Arakawa and Edogawa rivers to prevent breaching during a flood, said Naomasa Tachihara, director of Edogawa’s department of public works planning.
Floods are the world’s most frequent destructive natural event and the costs of economic damage have surged, according to the 2012 World Bank report, citing examples in Pakistan, Australia, the Mississippi in the U.S., and Bangkok in Thailand in 2010 and 2011.
London’s effort to prevent flooding is a barrier spanning the River Thames completed in 1982; a three-decade project started after a flood in 1953 that killed 300 people.
The Thames barrier across a 520-meter stretch of the river was closed four times in the 1980s, 35 times in the 1990s and more than 80 times since, according to the Environment Agency.

Foseco India Ltd. and Bombay Rayon Fashions Ltd. (BRFL) are among 29 Indian companies that need to sell 25 billion rupees ($442 million) of shares before a deadline to meet the minimum public holding rule expires in two days.
Company founders must trim their stakes to 75 percent by June 3 to ensure a public float of least 25 percent or face “severe consequences,” U.K. Sinha, chairman of the Securities and Exchange Board of India, said May 20.
The last-minute rush to meet the government rule announced in June 2010 has led to equity sales of about $1 billion this month from at least 22 firms including DLF Ltd., the largest developer, and JSW Energy Ltd. (JSW), owned by the billionaire Jindal family, data compiled by Bloomberg show. With the offers set to end next week, foreign flows to the stock market may increase, helping the S&P BSE Sensex (SENSEX) extend the best gain this year in the group of emerging-market nations known as the BRICs.
“The market has held up pretty well so far despite having to absorb this paper as foreign funds have committed $2 billion -to-$3 billion” to the sales, Taher Badshah, senior vice president and co-head equities at Motilal Oswal AMC Ltd., which manages about $300 million in assets, said by phone yesterday. “Funds would be freed up after this offer-related over-hang is gone.”
Overseas funds have bought a net $14.9 billion of Indian shares in 2013, a record for the period and the second-largest among 10 Asian markets tracked by Bloomberg, behind Japan. The Sensex has risen 4.1 percent this year, climbing to its highest level in more than two years on May 17. The Ibovespa, Brazil’s main equity gauge, has slid 10.4 percent in 2013, while Russia’s Micex Index has lost 7.7 percent. China’s Shanghai Composite Index has risen 2.1 percent so far this year.

Jet, Novartis

Jet Airways (India) Ltd. (JETIN), the nation’s largest publicly traded carrier, received bids for 2.99 million shares versus 4.3 million offered, according to an exchange filing yesterday. The stock declined 1.6 percent to 528.45 rupees. Jet had set a floor price of 510 rupees apeice for the sale that will cause the founder holding to shrink from about 80 percent.
Jet was one among nine companies, including Novartis India Ltd. (HCBA), that sold shares yesterday. Novartis sold 454,205 shares at a floor price of 375 rupees apiece, according to a filing to pare the parent’s stake from 76.42 percent.
Sun TV Network Ltd.’s (SUNTV) offer to sell 7.88 million shares was fully subscribed, according to a May 29 filing. The shares fell 1.7 percent to 421.05 rupees yesterday, compared with the floor price of 403 rupees each set for the sale. Billionaire founder Kalanithi Maran’s stake will fall from 77 percent.