Inflation and poor growth see Bank of England ditch rate rise plans

Interest rates could stay low for as long as another two years, as falling inflation and weak economic growth force the Bank of England to scrap plans to push up rates in the coming months.

Mark Carney is expected to hold rates at 0.5pc at Thursday’s Monetary Policy Committee meeting, postponing a highly-anticipated rate rise for at least three months. The freeze will disappoint savers who have laboured under historically low rates for almost a decade – and a boon to borrowers who get extra time with cheap money.

But economists now suspect that inflation will keep falling quickly towards the Bank’s 2pc target, making it harder for policymakers to raise the rate.

Poor GDP growth at the start of this year and signs of a slowing global economy could also dent the Bank’s longer-term inflation estimates.

If that forces it to cut back its inflation forecast then the case for higher rates could evaporate altogether.

“They are stuck. The Bank can’t raise rates now, the economic numbers have been too weak recently,” said Martin Beck at Oxford Economics. “They should not have raised rates in November, closed the term funding scheme or worried that credit growth was too strong – those three things have contributed to the economy slowing.”

Markets are currently pricing in only two rate rises by August 2019, but George Buckley, an economist at Nomura, thinks even this may be too many if inflation is slowing sharply.

“Should the Bank publish a forecast with inflation below target based on market rates that would be quite a statement, as it would imply that even limited market pricing for rate hikes might prove too much,” he said.

UniCredit’s Daniel Vernazza believes it will be at least another year before rates rise to 0.75pc.

Kallum Pickering at Berenberg Bank fears the Bank has missed its chance. “They should have hiked by this stage of the economic    cycle, but they cannot do it now because of the soft data,” he said.

One Third of Millennials Will Continue to Rent in Their Retirement

The number of families with children living in rented property tripled between 2003-2016…

The Resolution Foundation has proposed a series of reforms aimed at protecting tenants and landlords in the private rented sector.

According to the think-tank’s research, half of all millennials – people born between 1980 and 1996 – will be living in rented property up to their 40s, whilst a third are likely to be renting beyond retirement.

Furthermore, four out of ten millennials aged 30 are already renting, double the rate of the previous generation and four times that of baby boomers, whilst the number of families with children lived in the private rented sector has grown substantially, from 0.6m in 2003 to 1.8m in 2016.

Although they acknowledge the policies the government has introduced to make housing more accessible for first time buyers, the Resolution Foundation argues that more needs to be done to provide greater security for those that rely on renting.

This includes short-term measures such as proposals for indeterminate tenancies, which are essentially open-ended leases. Such tenancies are already in use in parts of Europe, including Scotland.

A new tribunal system could also be created, in order to resolve disputes in a timely and cost-effective manner.

Lindsay Judge, a senior analyst at the Resolution Foundation, notes that support needs to be available across all areas of the housing market: “While there have been some steps recently to support housebuilding and first-time buyers, up to a third of millennial still face the prospect of renting from cradle to grave.

“If we want to tackle Britain’s ‘here and now’ housing crisis we have to improve conditions for the millions of families living in private rented accommodation.”

Extent of North-South Renting Affordability Gap Revealed

Households outside London spend an average of just over half their income on renting…

Households renting in London are putting a significant percentage of their income towards rent compared to the rest of the country, according to new data from Landbay.

Annual rental growth in the UK, excluding London, rose to 1.21% in March, bringing the average monthly rent to outside the capital.

In London, the average monthly cost of renting is more than double the national average, at 2100

However, the average disposable income for a worker in the capital is per 2455 month. As a result, 89% of their take-home pay is used on renting.

Outside the capital, rental payments amount to just over half (52%) of the average disposable income, which is per 1760 month.

In England, renters in the North East have the lowest percentage (41%) of their incomes going towards rent, followed by Yorkshire & the Humber (43%), the North West (44%) and the East Midlands (44%).

“Rents have continued to rise over the last five years, increasing by 9% across the UK since March 2013 and by 7% in London,” notes John Goodall, CEO and founder of Landbay.

“Not a day goes by when there isn’t more news about the supply-demand mismatch in the UK housing sector and until this is resolved, tenants will continue to rely on the private rented sector to support them.

“With the right property and the right location, there are attractive yields to be had, and consistent rental demand will drive returns in the long-term,” Goodall concludes.

 

Midlands Cities Among Top 10 Buy-To-Let Property Postcodes

London commuter belt towns fall down the rankings as Northampton, Leicester and Birmingham surge

Three of the top five locations for buy-to-let property investments are in the Midlands, according to new research.

Northampton, Birmingham and Leicester were all cited as top postcodes for buy-to-let, with strong rental growth of 2.38%, 3.91% and 4.35% respectively, according to independent mortgage lender LendInvest.

Whilst the Midlands regions have been steadily rising up the rankings, the report highlights the South West region as an up-and-coming market, as strong rental growth and healthy market activity has boosted the profile of cities like Bristol, Swindow, Truro and Gloucester.

Conversely, London and the South East continue to underperform, as declining rents deters further investment in these regional markets.

Historically strong performing commuter towns like Dartford, Romford and St Albans have recent begun to slide down the LendInvest buy-to-let rankings, in some cases by as many as 58 places.

However, the report notes that demand for housing will continue to support future growth: “Political changes are increasingly underpinning this uncertainty in the market, however the need for housing around the UK prevails.

“As such, we can expect the rental market to grow, with investors prioritising yields and rental price growth as valuable metrics to consider when purchasing a property.”

Over the last 10 years, rents have grown by 16% nationally, according to figures from Rightmove.

 

Buy-To-Let Investors Target North West and South East

Two-fifths of landlords are planning to purchase more property in 2018

Landlords in the UK are optimistic that their buy-to-let (BTL) property portfolios will continue to perform well in 2018, despite the challenges the market faces from Brexit-related uncertainty and affordability stress tests.

According to the annual ‘buy-to-let barometer’ by Shawbrook Bank, 65% of investors were confident in their portfolio, whilst just 14% of respondents were concerned.

Growing returns and rising demand were cited as the two primary reasons for the confidence, as 21% of landlords had seen an increase in tenant demand in 2017.

Meanwhile, investor sentiment towards the UK economy is waning due to lacklustre growth and the uncertainty surrounding Brexit, as more landlords in 2017 (42%) expressed concern than in 2016 (33%).

Despite this, appetite for buy-to-let property remains healthy, with 39% of landlords planning to invest in an additional property in 2018, whilst expressing a strong preference for property in the North West and South East regions.

Commenting on the data, Karen Bennett, managing director of Shawbrook Bank commercial mortgages said: “There’s a healthy dose of uncertainty around at the moment, but the BTL market is showing its resilience. Property continues to offer an excellent underlying investment vehicle for professional landlords with the right investment strategy.

“Whilst the investment case for BTL remains strong, there are particular challenges ahead for portfolio landlords and the additional impact of the PRA (Prudential Regulation Authority) changes.

“Landlords now face much more stringent affordability tests and it’s therefore more important than ever than landlords are clued up on their obligations as the market continues to get even more complex.”

Economy wobbles as factories and building sites stall – putting May interest rate hike in doubt

Economic growth slowed again in February as the construction and manufacturing industries both stalled, a pair of oil refineries closed for maintenance, and the export boost from the weak pound began to fade.

The Bank of England had already cut its first-quarter growth forecasts from 0.4pc to 0.3pc because the icy Beast from the East made families stay at home instead of hitting the shops. But now economists fear even this estimate is too high.

The new figures “look consistent with GDP growth slowing to 0.2pc in the first quarter – below the Monetary Policy Committee’s 0.3pc forecast – from 0.4pc in the fourth quarter, casting doubt over whether a May rate hike is as likely as markets currently expect”, said Samuel Tombs at Pantheon Macroeconomics.

 

“We estimate that economic growth nudged lower to 0.2pc in the first quarter of 2018,” he said.

“The main reason for the weakness was severe weather in March, which is likely to have disrupted activity in all major sectors of the economy.”

Manufacturing output fell by 0.2pc in February, the Office for National Statistics said, and January’s 0.1pc expansion was also revised down to zero.

Falling output of electrical goods, machinery, textiles and plastics hit the figures.

Growth in industrial production overall – which includes manufacturing as well as industries such as mining and quarrying, and utilities – slowed to 0.1pc for the month.

A major cause was that two of the UK’s six refineries were closed for refurbishment. However, growth was supported by February’s unusually cold weather, which boosted domestic energy consumption.

Mark Carney at the Bank of England is expected to raise interest rates to 0.75pc next month – but this weaker data could make him think again Credit: Simon Dawson/Bloomberg

At the same time construction output tumbled by 1.6pc in the month, defying expectations of a 0.9pc increase. This drop may not be entirely weather related. The ONS said maintenance work led the decline, even as residential building and infrastructure construction increased.

The trade deficit increased in the three months to February, rising by £0.4bn to £6.4bn, as a dip in imports was more than offset by a larger fall in exports – which the ONS said coincided with a strengthening of the pound.

However, the overall slowdown may only be a temporary wobble, rather than a longer-term slowdown in the economy.

“While a continuation of such news may generate some nervousness in markets about whether the Bank of England will deliver another rate hike next month, it is worth pointing out that there is another full round of economic news before the Bank announces its decision,” said George Buckley at Nomura.

“We continue to expect a 25-basis point move on May 10 on the assumption of better economic news to come.”

Chief economist Lee Hopley at manufacturing industry group EEF said: “The data looks more like a temporary wobble than a turn for the worse. Whilst other indicators may have softened since the start of the year, ongoing growth in the global economy should continue to spur growth across manufacturing in the coming quarters.”

Source https://www.telegraph.co.uk/business/2018/04/11/economy-wobbles-factories-building-sites-stall-putting-may/

Call Smart Invest UK on 0203 637 5844

Rental Rates Increased Nationally by 16% Over Last Decade

East and West Midlands top annual rent increases in Q1 2018

 

Rental growth has remained stable in the first quarter of 2018, the latest Rental Tracker from Rightmove suggests.

 

Excluding Greater London, the average asking rent for all tenures has risen by 0.9% annually, compared with an annual increase of 0.7% recorded in the final quarter of 2017.

 

This comes despite rents being down on a quarterly basis by 0.2% between Q4 2017 and Q1 2018, bringing the average asking rent per month to

 

The East Midlands was the strongest performing region for annual growth, with asking rents rising by 2.6%, followed by the West Midlands (1.9%), Wales (1.8%) and Yorkshire & the Humber (1.5%).

 

In the capital, asking rents for Q1 2018 were down 0.1% year-on-year, but had increased 0.2% from Q4 2017.

 

Looking back on the last decade, the data shows that the cost of renting a two-bedroom home has increased nationally – excluding London – by 16% in 10 years, and 25% in London.

 

“A look at the first few months of this year shows the usual seasonal trend of asking rents falling slightly compared to the last quarter of the last year, but we’re likely to see a rise again next quarter,” Rightmove’s housing market analyst Miles Shipside said.

 

“London asking rents remain flat compared to this time last year, a sign that we are highly unlikely to see the same big increases over the next ten years that we’ve seen in some areas in the capital over the previous ten years.”

London property market moves out of boom phase, says Rightmove

The capital’s housing market lagged the rest of the UK in 2017, and there’s little to suggest any upturn is in store

London’s property market has moved out of its boom phase, and home sellers need to be more realistic about their price demands, according to Rightmove.

The February report from the home-listing website shows that asking prices were down 1 per cent from a year earlier, a sixth consecutive fall. They rose 4.4 per cent on the month, reflecting the usual jump at the start of the spring season.

The capital’s housing market lagged the rest of the UK in 2017, and there’s little to suggest any upturn is in store. Still, while multiple reports point to a cooling in London housing, the damage is being limited by cautious sellers, who aren’t flooding the market in a panic to dump property.

That means the long-running supply-demand imbalance in the city is providing some support to prices.

“End-of-the-boom prices normally readjust more quickly if there is an oversupply,” Miles Shipside, Rightmove director, said in the report. However, “some would-be sellers are holding back, preventing a glut of competition from forcing prices downward,” he said.

The capital’s housing market lagged the rest of the UK in 2017, and there’s little to suggest any upturn is in store. Brexit uncertainty has damped demand, while years of rampant inflation has pushed ownership out of reach for many.

The mean asking price in London this month was almost £630,000, more than 20 times average UK earnings.

For those who need a fast sale, Shipside’s advice is to “sacrifice some of the substantial price gains of the last few years.” The average time to sell a property in London is now 83 days, up from 73 days a year ago.

Nationally, asking prices increased 0.8 per cent in February from January, though that was below the 10-year average for the time of year. The average price of £300,000 is up 1.5 per cent year-on-year. That compares with gains of about 6 per cent seen less than two years ago.

The 10 UK areas where house prices rose the most in 2017

UK house prices:Cambridge and Orkney see the biggest average price growth across the UK

New figures reveal the districts where house price growth outperformed the rest of the UK last year.

Property prices in Cambridge have risen by £63,000 in a year, according to the first detailed report on how much homes sold for in 2017.

Annual house price growth of 15 per cent takes the average price of a home in the university town and surrounding areas to £462,000.

Meanwhile, with prices across the UK rising by five per cent to average £227,000, the pace of growth in Cambridge is three times higher than the national average, according to the Office for National Statistics (ONS) report.

Last year, the government committed to a £7 billion investment programme in the city which is set to bring new roads, rail links and homes between Cambridge and Oxford.

“There is lots of talk about the Oxford-Cambridge corridor becoming England’s own Silicon Valley. Faster rail links for London workers is music to many home owner’s ears as the exodus from London continues,” says Michael Houlden, head of national estate agency at Strutt & Parker in Cambridge.

He reports that the proportion of buyers from London in the area rose by 60 per cent last year.

cambridgehp.png
£475,000: this three-bedroom detached house is between Cambridge North and Cambridge stations with easy access to the A14

THE UK’S TOP 10 FASTEST RISING LOCAL AUTHORITIES IN TERMS OF HOUSE PRICE GROWTH:

Local authorities Av. house price Dec 2017 Av. house price Dec 2016 Av. growth
Orkney Islands £146,842 £124,256 18.20%
Cambridge £462,033 £399,330 15.70%
Eden £206,713 £179,676 15.00%
West Dunbartonshire £109,293 £95,081 14.90%
Kettering £203,237 £178,200 14.00%
Cotswold £394,405 £346,150 13.90%
North Norfolk £258,580 £227,473 13.70%
Oadby and Wigston £215,417 £189,806 13.50%
Forest Heath £223,407 £199,385 12.00%
Dover £246,887 £220,776 11.80%

ENGLAND

Other areas with double-digit growth were Eden, just outside of the Lake District National Park, where an average house now costs £206,000; Kettering in Northamptonshire with average prices of £203,000; and the Cotswolds in south-central England.

An average of £48,000 was added to Cotswolds residences over the course of 12 months, taking the average price to £394,000 in December last year.

For this price, buyers seeking their own slice of Cotswolds charm can stretch their budget to a three-bedroom house with exposed beams and an Inglenook fireplace.

costwoldshp.png
£400,000: this Grade II-listed, three-bedroom house is in the historic hamlet of Churchend.

“The Cotswolds remained a firm hotspot last year as it continued to attract strong levels of demand from buyers looking for a change of pace and lifestyle,” says William Leschallas, director of Jackson-Stops’ Burford branch.

Widely regarded for its beautiful countryside and picturesque villages, the area is proving popular with young professionals commuting to Cheltenham, Bristol and Bath, Birmingham and Oxford, as well as families and downsizers.

“We expect demand to continue over the coming years, but whether or not supply can keep pace is yet to be seen. There are a number of larger property schemes in the planning system on the edge of major Cotswold towns, which may appeal more to local buyers who wish to remain in the area as their needs change,” says Mark Johnson, residential development partner at Knight Frank.

SCOTLAND

Homeowners in The Orkney Islands, off the north-east coast of Scotland, saw the biggest growth in percentage terms, with average prices rising by £23,000 (18.2 per cent) to reach £147,000.

For this, home owners can buy a dreamy two-bedroom house with sea and farmland views.

orkneyhp.png
£155,000: a two-bedroom house in Orkney

“The romanticism of a secluded island life, coupled with an affordable price tag, has no doubt made the islands impervious to the negative market influences of the mainland. Although it is also likely that the Orkney Islands’ explosive growth is no doubt a tad skewed to a smaller sample size than most other areas of the UK,” says founder of Emoov Russell Quirk.

There are also generous grants available to businesses setting up in the area, which will be attractive to qualifying entrepreneurs.

Scotland’s West Dunbartonshire also made it in to the top five performing areas in terms of house price growth. With an average house price of just £109,000, it is nearly £20,000 cheaper than nearby Glasgow and nearly £70,000 cheaper than Stirling, boosting its appeal.

WALES

Newport was the standout area in Wales for price growth, with homes selling for an average of £168,000. However, growth of 9.6 per cent puts the region outside of the UK’s top 20 performing areas.

newporthp.png
£169,950: a semi-detached three-bedroom home for sale in Newport

“Over the last few years, Scotland and Wales have seen property prices fall due to influences other than the wider uncertainty surrounding our departure from the EU.

“Both countries are home to pockets that have seen a drastic decline in the local property market, as the result of diminishing industries which have previously been pivotal to the local populace and economy,” says Quirk.

“However, with a much lower cost of getting on the ladder than the majority of regions in England, both have benefited from a greater degree of buyer and seller confidence, which has returned at a much quicker rate than other more inflated markets.”

Rents Continue to Grow Across England and Wales in February

London experiences lowest annual rental growth in over 7 years….

Official figures suggest the rental market remains subdued at the start of the year, whilst regional differences in performance persist.

In the 12 months to February 2018 rents in England increased by 1.1%, which remains unchanged on January, data from the Office for National Statistics (ONS) revealed.

This rises to 1.6% if London is excluded, where rents increased slightly by 0.1%; the lowest annual growth in the capital since September 2010.

The strongest rental growth was recorded in the East Midlands (2.5%), followed by the East of England and South West (2.1%), and the West Midlands and South East (1.7%), with above-average increases also reported in Wales (1.4%).

Kate Davies, executive director at The Intermediary Mortgage Lenders Association, believes the ONS figures demonstrate the burdens buy-to-let landlords are having to face, saying:

“Whilst [the data] may be giving tenants some temporary respite from higher rents, the flip-side is that landlords will be facing downward pressure on their cash-flows and profitability. This comes at a time when successive policy changes in the buy-to-let sector have proved detrimental.

“We therefore ask the Government to recognise the benefits that a strong private rented sector brings for the UK, and the importance of maintaining a good supply of rental properties for the periods when home ownership is not suitable or achievable for households.”