Home prices in the eurozone might be headed for a “disorderly” decline, as high mortgage rates make purchases unaffordable for households and unattractive for investors, the European Central Bank (ECB) said yesterday.
It was one of several risks flagged in the ECB’s Financial Stability Review, along with higher borrowing costs and slower growth hurting companies and households and, in turn, casting a shadow on traditional lenders and shadow banks.
The ECB has been raising interest rates from record lows since July last year in a bid to fight inflation, and looks set to continue doing so in coming months.
Photo: AFP
However, the impact of the steepest increase in decades is only beginning to be felt by the property market, which has boomed over a decade of easy credit.
“Looking ahead, a fall in prices could become disorderly as rising interest rates on new mortgage lending increasingly compromise affordability and increase the interest burden on existing mortgages, especially in countries where variable rate mortgages predominate,” the ECB said.
It did not list those countries, but ECB data showed that Portugal, Spain and the Baltic countries are among those where the proportion of mortgages with a floating rate is highest.
The ECB also said that regions, where institutional investors have taken large positions in the residential real-estate market, could take a bigger hit if capital is withdrawn.
These included Berlin, parts of western Germany, and some capitals like Paris, Madrid, Lisbon and Dublin.
On the upside, the ECB said households were benefiting from a strong labor market, meaning fewer people were likely to stop paying back their mortgages due to unemployment.
Eurozone inflation stood at 7 percent in April, still well above the ECB’s 2 percent target.
Another rate hike is expected this month.
Meanwhile, French inflation cooled more than expected last month to its lowest level in a year, as energy and food price increases moderated, preliminary official data showed yesterday.
Consumer prices dipped 0.1 percent over one month, giving an annual inflation of 6.0 percent after 6.9 percent in April, EU-harmonized data from the INSEE statistics agency showed.
That was the lowest since May last year and fell short of an average expectation for a reading of 6.4 percent in a Reuters poll of 17 economists.
Nvidia Corp earned its US$2.2 trillion market cap by producing artificial intelligence (AI) chips that have become the lifeblood powering the new era of generative AI developers from start-ups to Microsoft Corp, OpenAI and Google parent Alphabet Inc. Almost as important to its hardware is the company’s nearly 20 years’ worth of computer code, which helps make competition with the company nearly impossible. More than 4 million global developers rely on Nvidia’s CUDA software platform to build AI and other apps. Now a coalition of tech companies that includes Qualcomm Inc, Google and Intel Corp plans to loosen Nvidia’s chokehold by going
DECOUPLING? In a sign of deeper US-China technology decoupling, Apple has held initial talks about using Baidu’s generative AI technology in its iPhones, the Wall Street Journal said China has introduced guidelines to phase out US microprocessors from Intel Corp and Advanced Micro Devices Inc (AMD) from government PCs and servers, the Financial Times reported yesterday. The procurement guidance also seeks to sideline Microsoft Corp’s Windows operating system and foreign-made database software in favor of domestic options, the report said. Chinese officials have begun following the guidelines, which were unveiled in December last year, the report said. They order government agencies above the township level to include criteria requiring “safe and reliable” processors and operating systems when making purchases, the newspaper said. The US has been aiming to boost domestic semiconductor
ENERGY IMPACT: The electricity rate hike is expected to add about NT$4 billion to TSMC’s electricity bill a year and cut its annual earnings per share by about NT$0.154 Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) has left its long-term gross margin target unchanged despite the government deciding on Friday to raise electricity rates. One of the heaviest power consuming manufacturers in Taiwan, TSMC said it always respects the government’s energy policy and would continue to operate its fabs by making efforts in energy conservation. The chipmaker said it has left a long-term goal of more than 53 percent in gross margin unchanged. The Ministry of Economic Affairs concluded a power rate evaluation meeting on Friday, announcing electricity tariffs would go up by 11 percent on average to about NT$3.4518 per kilowatt-hour (kWh)
OPENING ADDRESS: The CEO is to give a speech on the future of high-performance computing and artificial intelligence at the trade show’s opening on June 3, TAITRA said Advanced Micro Devices Inc (AMD) chairperson and chief executive officer Lisa Su (蘇姿丰) is to deliver the opening keynote speech at Computex Taipei this year, the event’s organizer said in a statement yesterday. Su is to give a speech on the future of high-performance computing (HPC) in the artificial intelligence (AI) era to open Computex, one of the world’s largest computer and technology trade events, at 9:30am on June 3, the Taiwan External Trade Development Council (TAITRA) said. Su is to explore how AMD and the company’s strategic technology partners are pushing the limits of AI and HPC, from data centers to