The Economist - UK (2022-05-28)

66 Finance & economics TheEconomistMay28th 2022

roughly the same share as the current ipef

partners.  Most  crucially,  China  is  still  ex­

cluded.  The  ipef,  like  the  tpp,  is  an  at­

tempt  to  build  a  trading  structure  in  Asia

that  enshrines  both  America’s  economic

principles  and  its  economic  power—wel­

comed by many in the region as a counter­

balance to China’s heft.

That, however, is where the similarities

end.  Mr  Trump’s  success  in  winning  sup­

port  with  his  calls  to  stop  countries  “rip­

ping off” America has made many in Wash­

ington leery of ambitious free­trade deals.

So rather than starting work on a pact that

would require approval from Congress, Mr

Biden’s  team  has  designed  a  framework

that is more malleable and may avoid that

political  death­trap.  In  announcing  the

launch,  Katherine  Tai,  the  United  States

Trade  Representative  (ustr),  pledged  to

“keep  Congress  close”  in  shaping  the

ipef—a far cry from putting it to a vote.

Malleability has a few big downsides. It

limits what America can offer. A cut in ta­

riff rates, a plank of most free­trade deals,

is  a  non­starter  because  it  would  require

congressional support. America still vows

to push for strong labour and environmen­

tal standards but, unable to offer more ac­

cess  to  its  vast  market,  it  lacks  a  key  bar­

gaining  chip.  The  durability  of  the  ipefis

also in doubt. Were Mr Trump to return to

the Oval Office in 2024, he would not need

three days to ditch the framework.

The  Biden  administration  has  tried  to

make a virtue of these limits. Rather than

conceiving  of  the  ipefas  a  conventional

deal, it has declared that the pact will rest

on  four  pillars,  with  trade  promotion  just

one. The other three goals are to make sup­

ply  chains  more  resilient;  to  promote  in­

frastructure investment and clean energy;

and  to  form  new  rules  on  taxation  and

anti­corruption.  It  is  tempting  to  dismiss

such a wide­ranging agenda as too vague to

amount  to  anything.  But  paradoxically,  a

near­stumbleatthelaunchoftheframe­

work illustratedthatitcould,intheory,

haveforcetoitscontents:Americahadto

tone downthelanguageinitsfounding

documents,otherwisesomeinAsiawould

havebalkedatsigningthem.

MatthewGoodman oftheCentre for

Strategic and International Studies, a

think­tank, notesthatthefocusontopics

suchasdigitaltrade,competitionpolicy

andbriberymakesfora goodmenuforthe

ipef. “Theseareissuesthatareverymuch

intheinterestofourpartnersinthere­

gion,”hesays.Atthesametime,breadth

posesachallenge.Insteadofjusthaving

theustrastheleadnegotiator,asinnor­

maltradetalks,theCommerceDepartment

isinchargeofthenon­tradeportfolio.That

risksturningit intoa multi­headedbeast.

Fornow,manyintheregionaremost

pleased by the symbolism.The wounds

fromAmerica’stppexitarestillraw.Since

Mr Biden’s election victory, allies have

waitedandwaitedforAmericatodevisea

newAsiantradestrategy.Atlastithasar­

rived,evenif it ismorenotableforitspolit­

icalconstraintsthanitseconomicpoten­

tial.“Wearejusthappytohavethematthe

table,”saysoneAustralianofficial.n

Housingmarkets

Home run

S

pring weatheroftenbringsastam­

pede of homebuyers. Blossoming flow­

ers  and  gushing  sunlight  after  the  winter

slog  make  homes  look  more  inviting.  Not

this  year,  though.  Across  the  rich  world

house­hunters  perturbed  by  high  prices

and  rising  rates  are  holding  fire  on  mort­

gage  applications.  In  America  new  home

sales have crashed to two­year lows.

One group of buyers, however, remains

unfazed:  Wall  Street.  What  began  as  an

opportunistic  bet  on  single­family  hous­

ing  during  America’s  subprime  crash  of

2007­10  has  morphed  into  a  mainstream

asset class. Today all sorts of institutions—

from  private­equity  firms  to  insurers  and

pension funds—are piling into the sector.

They are unlikely to vacate it: being a ren­

tier looks as appealing as ever.

One  reason  is  that  demand  for  rental

homes will jump as home ownership gets

costlier.  American  savers  need  on  average

$15,000 more than they did before the pan­

demic  to  afford  a  10%  downpayment.

Higher borrowing costs are forcing millen­

nials nearing their peak buying years into

longer leases. This coincides with a larger

trendfuelledbycovid­19:a shiftfromflats

towards suburban homes with gardens

andofficespace—whichmanyhouseholds

cannotaffordandmustthereforerent.

Ascarcityofhousingwillalsohelpthe

rentiers.Despitea recentsurgeininvest­

ment, themarketforsingle­familyhomes

remainswoefullyundersupplied.America

isshortmorethan5mhomesforbuyers

andrenters. England has more than 28

prospective tenants for every available

property. Big institutions are building

their wayout of constrainedsupply. In

America,morethanoneinfournewprop­

ertiesadded to the portfolios ofsingle­

familyrentalprovidersinthefinalquarter

of 2021 werebuiltratherthanbought. In

Britain,investorsareprojectedtosupplya

tenthofthegovernment’stargetfornew

housinginthenextfewyears.

This helps explain thesector’s resil­

ience.Whilelandlordsofshops,barsand

restaurantsstruggledtocollectpayments

atthestartofthepandemic,strong de­

mand for single­family homes pushed

rentsthroughtheroof.InAmerica,they

roseby13%inthe 12 monthstoMarch2022.

InMiami,theyjumpedbymorethan40%.

Rentshelduprelatively wellduringthe

globalfinancial crisis; in somemarkets

theyevengrew(seechart).Thatishelping

toreassureinvestorsasa recessionlooms.

Therearerisks.Assetpriceswillbesen­

sitivetohigherrates,particularlyifinfla­

tionstayshigh.Yetitisthesmallestland­

lords,withfivehomesorfewer,wholook

mostexposed.Theyownnearlynineinten

single­family rental homes in America.

JohnBurnsRealEstateConsulting,are­

search firm, reckons smaller investors

bought28%ofallhomessoldinthecoun­

tryduringthefirstquarterof2022,com­

pared with 6% for investorswith more

thantenhomes.AsWallStreet’shomerun

continues,itisthelesserlandlordswho

havetheirbackstothewall.n

Wall Street’s housing grab continues

Safe-ish as houses

United States, Burns single-family rent index

% change following the Great Recession*

Source:John Burns Real Estate Consulting

*Effectiverent for new leases from peak to trough (2007-2)

Phoenix

Atlanta

Tampa

Dallas

Nashville

Salt Lake City

Miami

Denver

San Antonio

Columbus

Cincinnati

Indianapolis

Chicago

Houston

-3-4 -2 -1 10