05 Dec 2019

Irish Economy/homebuilders: CBI leaves mortgage measures unchanged

The Central Bank of Ireland (CBI) yesterday announced that it was leaving its mortgage lending measures unchanged.

Commenting that the measures which were first introduced in 2015 continue to meet their objectives, the CBI said that both the LTI and LTV limits, and the allowances above the limits, would remain in their present guise for 2020. Acknowledging that the rules are acting as a constraint on residential price growth, the CBI estimates that prices would have been 26% higher by March this year in the absence of such rules. It would have been a surprise to see any other decision, particularly given recent comments and research emanating from CBI HQ. That said, this was the first review of the measures that Governor Makhlouf had presided over so there was always the possibility of a left-field decision, however unlikely this seemed.

Although residential price growth has slowed markedly in the past year, we continue to believe that prices in the medium-term will increase broadly in line with earnings in the absence of macroeconomic shocks in the domestic economy and we expect 3% price growth next year. 

Yew Grove REIT: Successful placing

Yew Grove announced late yesterday the successful placing of 26.6m new shares, raising €25.8m at a price of 97c per share.

On 22 November, Yew Grove announced a proposed placing of approximately 20m new shares representing the second tranche of its 100m share issuance programme. The proceeds would be used to fund acquisitions from a near-term pipeline of eight properties costing €72m. Raising 33% above its guided amount is a clear vote of confidence from shareholders in the REIT’s management and its strategy of assembling a high-yielding, well-tenanted portfolio in locations outside of Dublin’s CBD where it faces much less competition in securing attractive assets.

Sterling hits multi-month highs

Sterling has hit nearly 30 month highs against the single currency this morning as FX markets continue to price in a comfortable Tory victory at next Thursday’s UK general election. Coincidentally, the last time the EUR/GBP rate was at these levels, the UK was in the throes of its previous general election campaign back in May of 2017. Tory confidence is so high that last night UK PM, Boris Johnson, put forward his plans for his first 100 days in office should he win the election. 

In summary, much of the plan centred on delivering the Tory Party slogan of “Get Brexit done”, that involves a planned Queen’s Speech on 19 December, which would be followed by an initial vote on the Withdrawal Agreement Bill (WAB) sometime before Christmas. The aim thereafter would be for all the necessary Brexit legislation to be approved in Parliament allowing the UK to leave the European Union on 31 January and for the UK to enter the transition period until the end of 2020. The plans also allows for a February Budget which would see the Tories act on their election promises such as raising the National Insurance Contributions threshold to £9.5k.

German factory orders disappoint

German manufacturing orders data released earlier this morning showed that Europe’s largest economy fell back into the red in October, disappointing hopes that the industrial downturn had bottomed out. Factory orders contracted 0.4% over the month of October, disappointing consensus expectations for a 0.4% rise even after factoring in the 0.2pp upward revision to September’s surge (now 1.5%). Adjusting for annual changes in working days, orders stood 5.5% down on the year. Later this morning, we’ll get to see the Euro area’s final October GDP print and October retail sales data. In the US we will be getting weekly jobless claims, October factory orders and trade balance data.

Economic Releases

EU 10.00 GDP

EU 10.00 Retail Sales

US 13.30 Trade balance