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/

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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.

Government Announces £400m Housebuilding Investment Fund

The Housing Secretary Sajid Javid has revealed a new government investment fund to help boost housing construction in Greater Manchester, Oxfordshire and the West of England.

Almost million is being put towards building more homes, as well as delivering local infrastructure projects like schools, roads and hospitals.

The fund is similar to the £ 120m grant to build 215,000 new homes in the West Midlands, announced by the Chancellor in the Spring Statement.

Of this, Greater Manchester is set to receive m to accelerate economic growth in the Northern Powerhouse and support the construction target of 227,200 new homes in the region by 2035.

An interim package of 120m will be given to the West of England, which covers Bristol, Bath, and parts of Gloucestershire and Somerset, to nearly double the number of new homes built each year from 4,000 to 7,500.

Oxfordshire will receive the rest of the funding, some m, which will support the construction of an additional 100,000 new homes by 2031, as well as the building of vital bridges, roundabouts and roads.

Meanwhile, the government announced that shortlisting has finished on bids for the bn Housing Infrastructure Fund, with 44 bids for high-impact infrastructure projects successfully progressing to the next assessment stage.

“This government is determined to build the homes this country needs,” Sajid Javid said of the fund. “That’s why we’re working with ambitious areas across England and backing them with investment and support.

“We’re also investing in local infrastructures like schools, roads and hospitals so that we can help unlock even more new homes in the areas where they’re needed most.

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.

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£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.

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£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.

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£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.

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£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.”

Decade-High Number of First-Time Buyers in 2017

25,000 more first-time purchases in 2017 than 2016

First-time buyer numbers rose by 7.4% in 2017 compared to 2016, according to recent figures from UK Finance, the trade association for banks and finance firms.

 

According to the association, approximately 365,000 first-time buyer purchases were made throughout the last year, exceeding 2016’s total by more than 25,000 and reaching the highest level for a decade.

 

The report also revealed that the average age of a first-time buyer in the UK now stands at 30, whilst the average income of those taking their first step onto the property ladder was now

 

Last November, the Chancellor, Phillip Hammond, utilised the Autumn Budget to introduce the abolition of stamp duty land tax on the first of any property purchased by a first-time buyer, with the surprise move helping to boost activity in the final month of 2017.

Furthermore, interest rates remain historically low despite rising in November to 0.5%, although the Bank of England has indicated that rates may increase earlier than they originally intended.

Paul Smee, head of mortgages at UK Finance, believes that low mortgage activity will moderate the market in 2018: “2017 saw the number of first-time buyers reach its highest level in a decade, which is welcome news for those getting started on the housing ladder.

“But although the market remains competitive there is no room for complacency, with weaker December figures consistent with our market forecast of subdued growth this year.”

Property is Most Popular Investment Choice for Retirement

Retirement savers turn to property due to complexity of pensions and low interest rates

The majority of people believe that investing in property is the best way to fund retirement, according to a new survey from the Office for National Statistics (ONS).

49% of non-retired respondents claimed property was their preferred option for making the most of their money between July 2016 to June 2017, the latest Wealth and Assets survey reveals.

The second most popular method, employer pension schemes, was picked by just 22% of those surveyed.

With interest rates historically low, cash savings and ISAs have declined in popularity amongst the group; while personal pensions and premium bonds were favoured by less than 10% of those surveyed.

With the pensions system becoming increasingly complex, only 42% of respondents felt they had the sufficient knowledge on pensions to consider it as an option.

The survey also revealed that 23% of those not yet retired expected to downsize as a source of income in retirement, whereas 44% would use their savings or investments, further demonstrating the popularity of property as a means of funding retirement.

The Price of Land Rising Fastest Across the North

Growth in UK house prices is gaining momentum, driven by flourishing northern regions,

In their latest residential development land report, Savills predicts that property values in Scotland and the North of England will increase by 17-18% over the next five years – surpassing the UK average house price growth of 14%.

As a result of such strong performance, land costs across these northern areas are also due to rise exponentially, says Savills.

In particular, the value of greenfield land is expected to outstrip the national average of 1.7%, rising by 4.2% in Scotland and 2.7% in the North of England.

According to the estate agency, unlike many cities in the south, such as London, northern regions have yet to face affordability constraints – leading to greater opportunities for growth in these areas.

Furthermore, Manchester is seen as the leading driver of this trend, as house prices in the city rose by 8.6% in the year to October 2017 – more than double the national average of 4.2%.

Consequently, Manchester’s urban land prices have also seen significant increases, surging by 24% in 2017, compared to just 4% in the UK as a whole.

Also contributing to rising land values across the country is an increase in competition for land between large builders, medium-sized builders and housing associations, suggests the report

5% City House Price Inflation Predicted for 2018

Latest index reveals previously struggling cities reporting highest house price inflation

 

Since 2009, the cities which reported the weakest house price growth are bouncing back, recording the fastest rate of price inflation.

According to the latest UK Cities house price index from Hometrack, city house price inflation increased to 6.3% in November 2017, compared to 4.9% in the previous year.

Cities in Scotland are showing the strongest price growth, with Glasgow (7.9%) and Edinburgh (7.6%) taking the top spot. Also above the 7% mark are Leicester (7.5%) and Birmingham (7.3%).

For 2018, Hometrack predicts city house prices will increase by 5%, spearheaded by regional cities as London continues to struggle.

“A year ago, we predicted that UK city house price growth would be 4%,” the report notes, “as a continued recovery in regional city house prices would offset very low nominal growth in London.

“We expect 2018 to follow a similar pattern.”

London continues to weigh down on property prices, with LSL Property Services/Acadata’s house price index reporting annual house price growth in the UK was 0.9%. Excluding the capital and the South East this figure rises to 3.3%.