Martin North – Page 1007 – Digital Finance Analytics (DFA) Blog

Net Stable Funding Ratio Disclosure Standards – BIS

The Bank for International Settlements has released the template to be used by banks to report their Net Stable Funding Ratio (NSFR). This is a further layer of regulation designed to bolster financial stability. Supervisors will give effect to the disclosure requirements set out in this standard by no later than 1 January 2018. Banks will be required to comply with these disclosure requirements from the date of the first reporting period after 1 January 2018. The disclosure requirements are applicable to all internationally active banks on a consolidated basis but may be used for other banks and on any subset of entities of internationally active banks to ensure greater consistency and a level playing field between domestic and cross-border banks. The disclosure of quantitative information about the NSFR should follow the common template developed by the Committee.

The fundamental role of banks in financial intermediation makes them inherently vulnerable to liquidity risk, of both an institution-specific and market nature. Financial market developments have increased the complexity of liquidity risk and its management. During the early “liquidity phase” of the financial crisis that began in 2007, many banks – despite meeting the capital requirements then in effect – experienced difficulties because they did not prudently manage their liquidity. The difficulties experienced by some banks arose from failures to observe the basic principles of liquidity risk measurement and management.

In 2008, the Basel Committee on Banking Supervision responded by publishing Principles for Sound Liquidity Risk Management and Supervision (the “Sound Principles”), which provide detailed guidance on the risk management and supervision of funding liquidity risk. The Committee has further strengthened its liquidity framework by developing two minimum standards for funding liquidity. These standards aim to achieve two separate but complementary objectives. The first objective is to promote the short-term resilience of a bank’s liquidity risk profile by ensuring that it has sufficient high-quality liquid assets (HQLA) to survive a significant stress scenario lasting for 30 days. To this end, the Committee published Basel III: The Liquidity Coverage Ratio and liquidity risk monitoring tools. The second objective is to reduce funding risk over a longer time horizon by requiring banks to fund their activities with sufficiently stable sources of funding in order to mitigate the risk of future funding stress. To achieve this objective, the Committee published Basel III: The Net Stable Funding Ratio. The NSFR will become a minimum standard by 1 January 2018. This ratio should be equal to at least 100% on an ongoing basis. These standards are an essential component of the set of reforms introduced by Basel III and together will increase banks’ resilience to liquidity shocks, promote a more stable funding profile and enhance overall liquidity risk management.

This disclosure framework is focused on disclosure requirements for the Net Stable Funding Ratio (NSFR). Similar to the LCR disclosure framework,4 this requirement will improve the transparency of regulatory funding requirements, reinforce the Sound Principles, enhance market discipline, and reduce uncertainty in the markets as the NSFR is implemented.

It is important that banks adopt a common public disclosure framework to help market participants consistently assess banks’ funding risk. To promote the consistency and usability of disclosures related to the NSFR, and to enhance market discipline, the Committee has agreed that internationally active banks across member jurisdictions will be required to publish their NSFRs according to a common template. There are, however, some challenges associated with disclosure of funding positions under certain circumstances, including the potential for undesirable dynamics during stress. The Committee has carefully considered this trade-off in formulating the disclosure framework contained in this document.

The disclosure requirements set out in this document are applicable to all internationally active banks on a consolidated basis but may be used for other banks and on any subset of entities of internationally active banks to ensure greater consistency and a level playing field between domestic and cross-border banks.

Banks must publish this disclosure with the same frequency as, and concurrently with, the publication of their financial statements (ie typically quarterly or semi-annually), irrespective of whether the financial statements are audited.

Banks must either include the disclosures required by this document in their published financial reports or, at a minimum, provide a direct and prominent link to the completed disclosure on their websites or in publicly available regulatory reports. Banks must also make available on their websites, or through publicly available regulatory reports, an archive (for a suitable retention period as determined by the relevant supervisors) of all templates relating to prior reporting periods. Irrespective of the location of the disclosure, the minimum disclosure requirements must be in the format required by this document (ie according to the requirements in Section 2).

Residential Property Now Worth A Record $5.5 Trillion

The ABS released their data on Residential Property Prices to March 2015. The total value of Australia’s 9.5 million residential dwellings increased to $5.5 trillion. The mean price of dwellings in Australia is now $576,100, an increase of $8,400 over the quarter. Sydney continues to drive residential property price increases with the Residential Property Price Index (RPPI) for Sydney rising 3.1 per cent in the March quarter 2015 and 13.1 per cent in the previous year. Established house prices for Sydney rose 3.8 per cent and attached dwelling prices rose 2.2 per cent.

The price index for residential properties for the weighted average of the eight capital cities rose 1.6% in the March quarter 2015. The index rose 6.9% through the year to the March quarter 2015. The capital city residential property price indexes rose in Sydney (+3.1%), Melbourne (+0.6%), Brisbane (+0.4%), Adelaide (+0.7%), Canberra (+1.1%) and Hobart (+0.5%) and fell in Darwin (-0.2%) and Perth (-0.1%). Annually, residential property prices rose in Sydney (+13.1%), Melbourne (+4.7%), Brisbane (+3.9%), Adelaide (+2.5%), Canberra (+3.0%) and Hobart (+1.9%) and fell in Darwin (-0.4%) and Perth (-0.3%).

We see how Sydney steamed ahead of other states in the last quarter.

We also see significant differences between the relative price of established houses and attached dwellings in Sydney compared with other centres, the rest of the states outside the capital cities.

A review of the Residential Property Price Indexes was undertaken in 2014 as a response to planned reductions to the ABS work program. The outcomes of the Review were released on the ABS website in a feature article in the September 2014 issue of Residential Property Price Indexes: Eight Capital Cities. The implementation of the review outcomes is occurring in this issue.

In summary, the changes in this issue are:

all Australian residential property sales data used to compile the price indexes and related statistics are now supplied to the ABS by CoreLogic RP Data;
from the March quarter 2015 the suite of residential property price indexes are considered final;
the method of calculating prices in the total value of the dwelling stock has been modified due to the change in timing of this release;
the unstratified median price and number of dwelling transfers series are now being published up to the current quarter.

Amazon shows Google tax can work, despite arguments against it

From the Conversation. In late May, Amazon announced it had started to pay tax on its sales in the UK rather than in Luxembourg. This came about after Amazon restructured its tax structure in Europe in response, at least in part, to the UK’s diverted profits tax (commonly known as the Google Tax) that came into effect in April.

Book publishing giant Amazon has responded to the UK’s Google tax by restructuring its European tax affairs. Image sourced from www.shutterstock.com

This development is important not only for the UK, but also for Australia. Treasurer Joe Hockey has announced that the government will introduce a similar Google Tax in 2016. It is especially important when some submissions to the draft legislation of our Google Tax have argued that it is not a good idea for Australia to introduce the tax.

The Law Council of Australia has argued in its submission that the proposed regime is:

…inconsistent with the design principle for a tax … system that tax rules should be applied to commerce in accordance with the structure and mechanisms by which commerce operates.

It basically argues that the tax law should respect the corporate structures of multinational enterprises even if they are tax driven. In other words, its submission does not support the idea that the Australian Taxation Office (ATO) should have the power to deem Google or Amazon to have a taxable presence in Australia.

That argument is questionable. The hard practical matter of fact is that multinationals at present are able to design their tax structures in such a way that substantial activities are being done in Australia but profits are booked in low or even no tax jurisdictions. And these structures are perfectly legal under the current tax law.

It is important to remember that the current international tax regime has been developed largely at a time when multinationals were much less integrated than today. The rules were designed primarily for a bilateral scenario in which, for example, a US company sells goods directly to Australia. None of these countries were tax havens.

However, the stories of Apple, Google and Microsoft have proved that the scenario is very different today. Multinational companies have been successfully converted this kind of bilateral transaction into multilateral transactions by inserting low-tax countries between Australia and the US.

If we believe that this outcome is not acceptable, the tax law has to be improved to address this issue. The general principle of “applying tax rules to commercial operations” should be premised on the assumption that the transactions are genuine with commercial substance. However, if a transaction is artificially created primarily for the purpose of generating low-taxed income, there is a good basis to argue that the tax law should empower the ATO to look through the legal form of the transaction and impose tax according to the economic substance. Therefore, a deeming provision is not only desirable but also necessary in these cases.

Some submissions have also argued that the proposed Google Tax should not apply to existing tax structures. For example, the Law Council suggested that the proposed rule “ought not to apply to existing, well understood and generally accepted business arrangements, particularly where many of the arrangements are longstanding … Existing arrangements ought to be quarantined from any application of the measure”.

If the government follows this suggestion, the proposed law will not apply to the existing tax avoidance structures of Google, Microsoft and Amazon. As most multinationals would presumably have been well served by their tax advisers and have their tax structures in place long before the government’s proposal, one would wonder whether this grandfather treatment will leave any major multinational subject to the proposed law at all.

To be fair, many submissions to the government have rightly pointed out that the draft legislation needs substantial improvements before the proposal can be effective as well as satisfying as far as possible the tax policy objectives of simplicity and fairness.

For example, the Law Council’s submission has highlighted the need to have clear definitions of some new concepts in the proposed law. The meaning of “no or low corporate tax jurisdiction” – which is one of the conditions before the proposed law will apply – should be stipulated explicitly in the legislation. This will not only provide certainty to both the ATO and multinational companies, but also serve more effectively as a clear signal of the level of tax that is not acceptable to the government.

The recent restructure of Amazon suggests that the government’s proposal to introduce a Google Tax in Australia is in the right direction. The experience of UK’s Google Tax shows that such a tax can change the behaviour of these large corporations.

Of course, more work has to be done to improve the drafting of the legislation before the tax can be an effective weapon to deal with aggressive tax avoidance structures used by multinationals.

Author: Antony Ting – Associate Professor at University of Sydney

Uber drivers stuck in legal limbo as US labor laws fail to keep up

From The Conversation. Uber’s arm’s-length relationship with its drivers just got a bit closer after the California Labor Commission ruled that one of the ride-hailing company’s motorists in San Francisco is an employee, not a contractor, as it contends.

re Uber drivers employees or just contractors? Reuters

This is a big deal because the rights of Uber drivers depend sharply on whether they are deemed employees or self-employed independent contractors hired for particular jobs. By extension, the success of Uber’s business model may hinge on the question as well, but that’s for another article.

If they are employees, a litany of rights and requirements go along with it. They have a right to form a union, they must be paid minimum wage, they must be paid extra for overtime hours, their federal taxes must be withheld, Uber is liable if they hit anyone or anything, and Uber may not discriminate among drivers on the basis of race, color, religion, sex, national origin, age or disability.

But if they are self-employed, Uber may owe them nothing, except what it explicitly promises in the contracts it drafts.

Courts have given mixed rulings on the issue as more workers have been labeled “self-employed contractors” by companies eager to cut costs, a trend accelerated by the rise of the on-demand economy of companies that quickly provide goods and services. Part of the problem is that independent contractors fall into a hole in labor laws, one that could be filled by taking a page from our northern neighbors and creating a new class of worker: dependent contractors.

Merely a facilitator

Uber maintains that it is merely a software company that facilitates deals between customers and drivers. While the courts have generally been skeptical on this point, if Uber manages to win this argument, it would not be an employer at all – at least as far as the drivers are concerned.

Uber would not have to recognize a drivers’ union. So-called unions in which independent contractors fix their compensation normally fall outside of current labor laws and violate antitrust laws. Nor, if drivers are self-employed, would Uber be liable for their accidents, or owe them any particular level of compensation.

Employers naturally like to claim that the individuals who perform services for them are self-employed. But courts have been pushing back against these claims.

Let a jury decide

In May, a judge refused to dismiss a class action by Uber and Lyft drivers in San Francisco complaining of Uber’s treatment of their tips, saying it should be up to a jury to determine whether the drivers were employees or self-employed.

A few weeks ago, a federal appeals court similarly argued the determination should be left to a jury when it reversed a lower court’s ruling that FedEx drivers are employees. The judges said it was unclear whether they were. Last year a different federal appeals court found instead that FedEx drivers are its employees.

Other courts have been more forceful in favor of certain classes of workers that have slipped between the cracks. A federal judge in New York found that production interns on the set of the movie Black Swan were actually employees of both the production company and of Fox Searchlight Pictures.

And most recently, the California Labor Commission ruled last week that an Uber driver was an employee, not a contractor. Uber, while insisting the ruling applied to only that individual driver, is appealing.

The commission found that Uber is “involved in every aspect of the operation,” a sharp turnaround from the same agency’s ruling in 2012 that deemed an Uber driver an independent contractor.

Who’s in control

Such rulings are normally highly fact-specific. The basic legal approach to the question of employee status looks to who controls the means and manner of work. There are some interesting variations among the states, but they all – including federal statutes – look mainly to this question of control.

This is not a very clear test, and it would be impossible to find any labor relations expert who would defend it as a general approach. The Supreme Court has noted that the line between employee and independent contractor “can be manipulated largely at the will of” the employer, and is often a “very poor proxy for the interests at stake.”

The two decisions that found that Uber is, or might be, its drivers’ employer, rested on the tech company’s control of hiring, rules of driver conduct, restrictions on drivers’ ability to solicit other work and ability to terminate drivers at will. In some other ways, however, Uber drivers do control their work; they own their own cars and pick their own hours, for example.

More legal wrangling ahead

The latest decisions are invitations for future litigation. They do not settle the legal question permanently.

If you were Uber, you would not immediately begin treating drivers as employees, withholding taxes, paying back taxes, purchasing employment practices liability insurance and filing W-2 forms. You would be more likely to relax your control of drivers in minor ways, and then invite them to litigate again.

Uber might, for example, drop its rules over which radio stations drivers can play in their cars, permit drivers to hand out business cards, and then insist that now the drivers were actually self-employed.

The labor laws of Canada, Sweden and some other countries recognize a category called “dependent contractors.” Such workers are self-employed for some purposes, say tax administration. But if their livelihood depends on the richer entity that hires them, then that entity is bound by labor laws when it administers tips, or compensation.

Creation of such a category by US state legislators, or by some future Congress capable of legislation, would be highly desirable. It has been reported that tech companies are enthusiastic about the idea of creating such a category, though there is much hard work ahead in working out the details.

It would recognize that Americans are committed both to the creation of new ways of working and, at the same time, to the proposition that the powerful must not be permitted to exploit people whose services are integral to their businesses.

Author: Alan Hyde, Distinguished Professor of Law and Sidney Reitman Scholar at Rutgers University Newark

Greece: why there can be no winners in the Grexit game

From The Conversation. Greece is on the brink. Even if a last-minute deal is found it is clear that the solutions proposed are little more than a way to delay the crisis. A more comprehensive resolution of the Greek tragedy needs to address the medium-term (non-)sustainability of the Greek debt position.

Economists know that negotiations usually break down when there is uncertainty in bargaining. When the two sides are uncertain as to what gains and losses the other side can make through any deal or by walking away. In this case, part of the uncertainty is political, because the Greek and other EU governments don’t fully know what might be acceptable to their electorates. But a good part of the uncertainty at this bargaining table is economic. Because we are in totally uncharted waters. Monetary unions can be, and have been, dissolved before in history but, except in the aftermath of wars, not usually in anger.

Uncharted waters

There are several sources of uncertainty for both sides in the dispute.

First, if Greece leaves the Eurozone, at one level it will have greater freedom to walk away from at least some its debt, or to restructure it in a way which suits its short-term economic need. It could plan a moderate primary surplus. The problem for the Greek government is that it will inherit a broken banking system and there will be great uncertainty on whether a devaluing new Drachma could benefit its net trade position, with an impaired financial system, and shut out from world capital markets. Greece is not Iceland, and there is less social consensus on how to share the short-run burden of economic adjustment in a Grexit scenario.

Second, the losses for the EU lenders are truly eye-watering. The two bail-out packages for Greece amount to €215.8 billion. Of these €183.8 billion came from other EU countries and the rest from the IMF. The biggest shares of the support through the European Financial Stability Facility came from Germany and France. None of this includes the cost of support given to the Greek banking system via the ECB. The IMF would suffer considerable losses too (the UK’s main exposure is through this channel). The impact of Grexit and a partial or full debt repudiation on the rest of the EU would be considerable. Paradoxically by triggering a Grexit rather than an orderly debt restructure, the EU lenders may lose more of their current bail-out. So why are they not more accommodating? Because if it stays in, Greece will need a further bail-out, as no-one believes the current plan is sustainable. It’s that uncertainty again.

Third, no-one can really estimate the contagion effect of a seemingly irreversible monetary union breaking up. A major jump in borrowing costs for countries like Italy and Spain would hit these countries hard, and potentially create a domino effect. If Grexit happens, the Eurozone needs rapid reform to ensure a guarantee of greater mutualisation of fiscal policy. Is that likely to be acceptable to northern EU members? Nobody knows for sure, but it seems unlikely.

The computer gets it

In the 1980s movie War Games, the computer in charge of the US nuclear arsenal realises, by constantly repeating the game of noughts and crosses (which cannot be won if both players play rationally), that nuclear war is unwinnable. The problem with all this uncertainty is that the various players in the Grexit game fail to properly understand the serious consequences of not reaching a rational deal. They still think they can win. That’s not to say that keeping Greece in the Euro is the best option in the long term. But a breakdown in negotiations and a disorderly exit doesn’t appear desirable.

Author: Anton Muscatelli, Principal and Vice Chancellor at University of Glasgow

Australian Job Mix In Rotation – Warning Signs Ahead

The recent ABS data on Labour Force in Australia which is a quarterly publication to May 2015 contained some interesting insights into the changes underway. Essentially, in sectors where there is strong international competition there has been a relative reduction in the number of jobs available in Australia, whilst in other sectors more shielded from the chill winds of direct international competition the relative proportion is rising. The chart below shows the change in the relative distribution of jobs on a 2 year, 5 year and 10 year horizon.

The most significant growth areas have been in Health Care and Social Assistance, Education and Training and Professional, Scientific and Technical Services. The most significant falls are in Manufacturing, Agriculture, Forestry and Fishing and Retail Trade. Mining highlights the long term growth, but short term fall in jobs as competition increases, and we move into the exploit phase. In marked contrast, Construction, which dipped in the 5 year horizon is now growing again. We also see modest falls in Financial Services due to greater efficiency and online channels, and a rise recently in Real Estate Services thanks to the property boom.

However, there is an important point to make. The rise in service related industries in general has lower wages relative to some other sectors, and it will only flourish whilst there are enough people able and willing to pay for said services. For example, the vast pool of superannuation savings will flow into the healthcare sector as households age. In essence these industries move money about the economy, but do not create things which in turn can create value. The worry is that those sectors which truly create wealth in the economy are under the most pressure. As a result, wages are flat, and the growth levers are not operating that strongly. This highlight the long-term issues we face.

Which industry sectors will be the next growth engines for the economy?

Fed Rate Hike Would Cause Modest US Corporate Discomfort – Fitch

A gradual hike in interest rates would increase the cost of borrowing for US companies, likely resulting in lower profits and slower growth, according to Fitch Ratings.

But while higher rates would cause some discomfort, Fitch continues to believe a gradual rise would have limited impact for U.S. corporate credits as a whole, given the offsetting backdrop of US economic growth and aggressive refinancing by most corporates over the last few years that has resulted in maturities being pushed out with low-coupon, long dated debt.

In contrast, under our stress case scenario, rapid interest rate increases by the Federal Reserve would put additional pressure on credit metrics and could prompt more rating changes. Our stress case scenario includes more rapid rate increases, a choking off of near-term credit, a flattening of the yield curve and a spike in inflation. Against a backdrop of increased M&A activity, interest rate pressure could also impair the financial flexibility of buyers as acquisitions become more expensive to finance.

The ability to handle interest rate increases varies by corporate sector. U.S. Corporate sectors with cost recovery mechanisms (utilities, master limited partnerships (MLPs)) or strong pricing power (aerospace and defense, engineering and construction) are generally among those best able to counter the challenges in the stress case stemming from faster rising inflation and interest rates, while sectors with limited pricing power(such as homebuilders) may encounter more issues.

The secondary effects of a stress scenario are also important, as rising rates in a stagnant economic environment are likely to dampen equity values. Sectors where ongoing access to capital markets is critical for funding growth (REITs and MLPs) are likely to be especially sensitive to the stress scenario, given their high distributions and limited ability to retain cash.

Macroprudential Case Studies

The IMF just released a working paper “Experiences with Macroprudential Policy—Five Case Studies” which discusses the implementation of macroprudential policies, mainly to attempt to manage the housing sector at a time of rising prices and high levels of bank lending.

The paper presents case studies of macroprudential policy in five jurisdictions (Hong Kong SAR, the Netherlands, New Zealand, Singapore, and Sweden). The case studies describe the institutional framework, its evolution, the use of macroprudential tools, and the circumstances under which the tools have been used. In all cases macroprudential tools have been used to address risks in the housing market. In addition, some of them have moved to enhance the resilience of their banks to more general cyclical and structural risks.

In all the cases reviewed, the macroprudential tools have been used primarily to address risks in the real estate sector. Partly for this reason, the loan-to-value (LTV) limit was the most popular macroprudential tool, used in the five cases. Some jurisdictions have used multiple tools to help the effectiveness of the measures. For instance, Hong Kong SAR and Singapore have used the debt service–to-income (DSTI) ratio and taxes applied to real estate transactions along with the LTV ratio. Sweden and Hong Kong SAR also have imposed additional capital requirements for mortgages.

To enhance the resilience of the banking system, some authorities in these five cases also have used, or plan to use, additional macroprudential tools to address risk in the time and structural dimensions. Most of these measures were adopted in response to the global financial crisis. New Zealand, for instance, moved quite quickly compared to other countries and imposed liquidity requirements to contain bank funding risks, and gradually increased the requirement. Sweden did the same in 2013. Banks in both countries rely heavily on wholesale funding. Countercyclical capital buffers will take effect in Sweden in the Fall of 2015 and in Hong Kong SAR in phases beginning 2016, while the Netherlands intends to impose them too. Furthermore, systemically important institutions will have to hold additional capital buffers starting in 2015 in Sweden and 2016 in Hong Kong SAR and the Netherlands.

It is too early to gauge the full impact of the measures that have been undertaken. In addition, some measures will only take effect in the future. Nevertheless, there is some early evidence that the implementation of macroprudential measures have enhanced banking system resilience and helped reduce the build-up of housing sector leverage in the cases reviewed. For instance, LTV ratios declined in Hong Kong SAR, New Zealand, and Singapore following the adoption of LTV limits. House prices growth was also affected. For example, the rate of growth of house prices peaked in New Zealand following the imposition of a cap on LTVs. House prices also leveled off in Hong Kong SAR under the combined weight of macroprudential tools and taxes, with the taxes appearing to have a more immediate impact.

CONCLUDING REMARKS
Increasing attention has been given to the field of macroprudential policy following the global financial crisis. This paper reviews the use of macroprudential policy in five economies (Hong Kong SAR, the Netherlands, New Zealand, Singapore, and Sweden). All these jurisdictions actively implemented macroprudential policy measures following the global financial crisis. The analysis shows that each jurisdiction reviewed adopted an institutional framework for macroprudential policy suited to their own circumstances. The evidence reviewed confirms that “one size does not fit all,” and that it is possible to conduct macroprudential policy with a heterogenous set of institutional frameworks. In all cases, most of the macroprudential tools used were directed at containing risks arising from a booming housing market (for e.g., LTV and DSTI ratio limits). Some of the cases studied also took steps to enhance the resilience of the banking system to more general cyclical and structural risks (for e.g., liquidity requirements and additional capital requirement for systemically important institutions). While there is some early evidence that the measures taken have enhanced banking system resilience, it is still early to determine their full impact.

Note: The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate.

Five Reasons Housing Is More Affordable Overseas

From The Conversation. Housing affordability continues to be an issue of importance to voters, with a recent Fairfax-Ipsos poll showing 69% of Australian capital city residents disagree that housing is affordable for prospective first home buyers.

Different countries have adopted varying approaches to improve access to affordable housing – with governments playing a central role in ensuring people are adequately sheltered, as well as being encouraged to buy housing where possible. In many countries there is an underlying desire by households to own their own home, although renting is the norm in others.

More than 84% of households in Berlin rent their home. exilism/Flickr, CC BY-NC-ND

In each case there are specific and sometimes unique-to-that-country approaches that have helped address the issue of affordability. Here’s five.

Government intervenes in the rental market

In some countries there is a general culture of renting for accessing accommodation, rather than assuming all households should achieve home ownership. At times, renting is cheaper than buying. In Germany most households (54.1%) are renters due to the long-term intervention in the marketplace by the government, as well as the accepted culture that renting is suitable over the long-term. In Berlin a total of 84.4% of all households rent. Providing this amount of rental accommodation is a major challenge without substantial government intervention and/or provision of housing.

For example, in Germany a housing allowance was paid to approximately 783,000 households in 2012, equating to 1.9% of all private households. However most of this funding was allocated to single person households (57%) unable to compete in the open housing market with multiple income households.

Other countries have acknowledged the gap between (a) the maximum amount of rent a tenant can pay and (b) the minimum level of rent a landlord will charge. For example in the US, this gap is bridged by the widespread use of a voucher system which subsidies the payment of rent to private landlords. This system is funded by the US government and ensures tenants can access a minimum quality of affordable housing.

Government provides affordable housing

In Singapore there is a high level of government intervention in the market with the HDB (Housing and Development Board) providing approximately 80% of all housing in the country. Approximately 90% of households in Singapore own their own home and there are also grants for first time buyers and second time buyers in Singapore.

In Hong Kong about 29.7% of residents live in PRH (public rental housing) provided by the Hong Kong government. In Scotland a large proportion of the supply of affordable housing is undertaken by housing associations and local authorities. This collectively equates to about quarter of total housing accommodation in the market. However the recent trend for many countries, including Australia, has been the provision of less direct housing by governments.

Cities embrace higher density housing

There are numerous examples of global cities making better use of limited inner-city land supply by encouraging higher density living in high rise units or condominiums, especially in Asian cities including Hong Kong, Macau and Singapore. The provision of affordable housing for purchase or renting is therefore more likely to be achieved in these circumstances due to minimal land use and higher densities. However high-rise living is not commonly accepted in many European cities or in locations with a resistance due to cultural preferences for detached housing.

Public transport allows residents to commute to less expensive housing

The main driver of where a household lives is the need to be close to their workplace. As more affordable housing is usually located away from the central business district, households can buy cheaper homes but the trade-off is additional commuting time to work. When this extended commuting time (e.g. up to 2 hours each way) is combined with improved transport infrastructure such as in Japan, it is possible to access affordable housing in outlying satellite towns and cities where land is more affordable. Therefore governments which improve road and public transport infrastructure also increase access to affordable housing.

Multiple person households are encouraged

Lower demand can be achieved by limiting population levels and underlying demand for housing. But while this may not be an option for many governments, another option is to encourage multiple person households which otherwise would remain as single person households. According to the ABS (2012) in 1911 the average persons per household was 4.5, decreasing to 2.7 persons per household by 1991.

List of countries by number of households

Wikipedia compiled from various sources.

Author: Richard Reed, Chair in Property & Real Estate at Deakin University

Getting The Right Results From Social Media Strategies

We have had the opportunity to work with a number of Australian companies, helping them to understand the true potential of social media. From our surveys we know consumers are migrating fast, many companies are slow to follow. Standing back, many of the players we have engaged with recently had two common issues. First, they felt in their gut there was unharnessed potential in social media, and second they did not know what that leverage point might be. We would also observe, quite often the business leaders we were engaging with were not themselves very active social media users. So we initially immersed them in social, including customer comments from our research.

Our approach boiled down to starting by uncovering what objective the business has – or should have – for their social media. More than half thought it was no more than a brand or marketing channel (and indeed commonly they were frustrated with their presence and saw it as a necessary evil, rather than an opportunity). We then moved the conversation on to explore how both sales and service could be impacted via social, and demonstrated that rather than being a side issue, it had the potential to be integrated into overall strategy and business process. To be clear, social is more than just a communication or marketing tool. Platforms like Twitter offer the potential for customised – perhaps one to one conversations with customers, and are ideally placed for customer service and fulfillment as well as marketing and brand awareness.

There are some good examples of leveraging social right, and DFA likes Twitters case study pages as a way to stimulate ideas. The financial services examples can be found here. From startup Acorns, to Paypal, Visa, ING and Money Supermarket, each has a detailed description of what they did, and how they did it. Here are a few extracts. You should read the extended case studies on their site.

@Acorns wanted to reach a mobile-first audience and drive downloads of its new app. The @Acorns app connects to your credit and/or debit cards and automatically rounds up the change from everyday purchases into any one of five investment portfolios, depending on risk. Leveraging Twitter’s mobile app promotion and a focused targeting strategy helped the brand surpass its acquisition goals within the first 90 days of the campaign launching. @Acorns was able to monitor performance in real time and optimize creative instantly to connect the messaging with the right audience at the right time.

@INGBankTurkiye advertises weekly special loan offers through ‘Survivor Turkey’ TV broadcast sponsorships. The bank wanted to use this partnership to generate mass engagement, increase loan consideration and acquire more customers. @INGBankTurkiye created an integrated marketing campaign around the ‘Survivor Turkey’ sponsorship. During the May 26 broadcast, it announced on TV and Twitter that consumers could tweet their way to lower interest rates. The announcement was followed by the Promoted Trend #Uptomytweet, giving consumers the opportunity to reduce the interest rate on loans from 0.88% to 0.48% by tweeting with the hashtag during an episode of ‘Survivor Turkey.’

With mobile phones playing an ever-increasing role in Australian life, @PayPalAU wanted to raise awareness of its digital wallet app. With it, users can order ahead at cafes, pay for a taxi or send money to a friend anywhere in Australia. To increase app downloads, @PayPalAU wanted to engage savvy smartphone users with an offer they couldn’t resist: free coffee. @PayPalAU offered to buy Sydneysiders a free coffee when they used the PayPal app on Monday 19 May. The offer was valid at over 200 cafes across Sydney. @PayPalAU targeted inner-city trendsetters who Tweeted about coffee, using Twitter as its direct response mechanism. Promoted Tweets with links to the PayPal app download raised awareness of the ‘Free Coffee’ event, which was further amplified across radio, email, outdoor advertising, direct mail, SMS marketing and online platforms.

@MoneySupermkt was planning the launch of a new TV ad in which satisfied customer Dave shows off his ‘epic strut’ after saving money on his car insurance, and celebrity Sharon Osbourne (@MrsSOsbourne) appears impressed by his moves. The brand aimed to maximise interest and conversation around the ad and its @MrsSOsbourne connection. To support the launch of its #EpicStrut ad, and then to maintain the ad’s momentum, @MoneySupermkt planned a four-phase campaign on Twitter. A ‘teaser phase’ sparked intrigue across a wide audience in the 24 hours pre-launch, as Promoted Video of reactions from extras in the ad drove reach and engagement.

Canadians tend to use credit to pay for more established categories like Travel and Dining. Visa Canada (@VisaCA) wanted to encourage cardholders to use their Visa cards more often on Everyday Spend categories (groceries, gas or quick service restaurants) and grow its core business. @VisaCA made up the name “smallenfreuden” to mean using your Visa card for everyday purchases and started a conversation on Twitter around this behavior in three phases. To build curiosity, the brand launched the @smallenfreuden Twitter account and an unbranded teaser campaign centered around the hashtag #smallenfreuden. Billboards around Canada popped up with the question ‘Do you #smallenfreuden?” Similarly mysterious ads across digital sparked online buzz. They pointed to a YouTube video explaining smallenfreuden combines the English word ‘small’ and the German word ‘freuden,’ which translates into ‘joy of the small.’ A week later, the brand launched the @VisaCA handle and revealed its role behind the mysterious teasers with the Promoted Trend #smallenfreuden. Promoted Tweets associated with the Promoted Trend featured embedded rich media. The video content showed the benefits of paying for small purchases like a drink at a hockey game with a Visa card.