House Price Index Reaffirms North-South Divide

Property asking prices went up by 1.1% (+ ) this month, the largest October increase since the 1.4% rise in 2014. Eight out of 10 regions saw this increase, except for Yorkshire & Humber and East Midlands.

 

According to the latest house price index by Rightmove, the 104,000 new-to-market sellers may struggle to achieve a sale before Christmas as buyers are being cautious.

While the overall number of properties appearing on the market in England and Wales went up last month by 3.1%, compared with the same period in 2016, the number of sales agreed was down 5.9%.

However, the north is outperforming the south, with a fall of only 3.0% of sales, compared to the south’s 7.9%.

This is due in part to the increasing difficulty sellers of five-bedroom homes or four-bedroom detached properties are having, especially in London, where it takes an average of 86 days to find a buyer.

By comparison, sellers of three or four-bedroom homes, excluding four-bedroom detached properties, are typically sold in an average of 60 days. This suggests that second-steppers – typically couples and young families that are already on the property ladder and looking to move up – are the target audience for sellers that want to secure a sale before Christmas.

Rightmove’s director and housing market analyst, Miles Shipside, suggests sellers may want to price their properties competitively to achieve a sale:

“With buyers becoming more Scrooge-like with their cash, sellers who have undercut the average 1.1% rise in asking prices may stand a better chance of finding a buyer before Christmas”.

He goes on to say that “with buyers’ average wage rises often falling behind retail price inflation, and with a rise in interest rates being more heavily trailed by the Bank of England, sellers in these most popular sectors should still be wary of over-pricing.”

Get ready for a rate rise

BREXIT BULLETIN
Brexit is no longer the Bank of England’s biggest concern.

The bank’s monetary policy committee, led by Governor Mark Carney, reacted to accelerating inflation by  declaring on Thursday that “some withdrawal of monetary stimulus was likely to be appropriate over the coming months.”

Investors are now anticipating action as soon as the next meeting in November, regardless of any overhanging cloud from the U.K.’s exit from the European Union, which the bank expects to slow the economy.

It’s been over a decade since the BOE last raised rates and for most of the past year it has come under fire from Brexit supporters for highlighting the economic risks of the split. It again warned on Thursday that the divorce poses a challenge to the outlook.

The uncertainty may not be sufficient to stay the BOE’s hand, though. By one measure, the odds on a hike by November have risen to more than 60 percent from 40 percent earlier on Thursday. A rate rise is fully priced in for February 2018.

Bloomberg Intelligence economists Dan Hanson and Jamie Murray say if the BOE does act in November, it’s unlikely to mark the start of a series of interest rate increases. If that proves to be the case, the flow of data should keep rates on hold until 2019.

Over at Bloomberg Gadfly, Mark Gilbert and Marcus Ashworth say policy makers “ should continue to charm the pound higher, but should refrain from pulling the rate-rise trigger while growth stays lackluster and consumer confidence remains fragile at best.”

Simon Kennedy

The Business of Brexit

Britain’s retail giants may not be happy about higher interest rates, but there are splits over the economic effects of Brexit as business leaders prepare to meet government officials on Friday.

James Dyson, the man behind the eponymous vacuum cleaner, said on Thursday that the prospect of a disorderly Brexit doesn’t faze him and that the introduction of tariffs on trade “frankly [would] hurt the Europeans more than the British.” For Charlie Mayfield, chairman of John Lewis, one of Britain’s best-loved retailers, Brexit “is having an impact on everyone” and rattling business confidence.

“There needs to be a serious parliamentary debate to find the best way forward for the country and the economy,” Mayfield said.

Simon Wolfson, the boss of apparel chain Next, who like Dyson backed Brexit, also entered the debate by saying “things have stopped getting worse” and that price inflation would soon slow.

Separately, European businesses are getting increasingly frustrated by the slow pace of the Brexit talks, even as post-divorce decisions loom in corporate boardrooms, according to a  report from the Council of British Chambers of Commerce in Europe.

Brexit Latest

On the Markets | Sterling surged to its highest against the dollar in a year after the Bank of England revealed its thinking, and the cost of options to buy the pound relative to selling it soared to the steepest in more than three years. Former Chancellor Norman Lamont, who backed Brexit, said sterling could appreciate “considerably” if a Brexit deal is struck.

May Must Listen | Prime Minister Theresa May will have to listen to lawmakers who oppose her Brexit legislation, Leader of the House of Commons Andrea Leadsom said, acknowledging the premier’s weakened hand.

Customs Warning | The head of the U.K. tax agency said Britain could need up to 5,000 extra staff to handle customs and border checks after Brexit, the BBC reported. John Thompson said a new customs arrangement with the EU could cost as much as £800 million ($1.07 billion) and take seven years to implement.

Electricite de France | The French energy giant said the U.K.’s plan to quit the EU treaty that governs nuclear fuel and equipment trade as part of Brexit may hurt the operation of its eight British atomic power stations and its £19.6 billion project in southwest England. Separately, Business Secretary Greg Clark said the U.K. is establishing a domestic nuclear safeguards regime.

Trade Boost | EU officials sought to reassure the U.K. that the EU has no appetite to stall trade negotiations. Press reports that the U.K. will be placed at the back of the queue for a free-trade agreement with the EU after 2019 are “nonsense,” Jyrki Katainen, a vice president of the European Commission, the bloc’s executive, told reporters.

And Finally…

Prepare to hear almost 5,000 words on Brexit next Friday when Prime Minister Theresa May delivers her much-anticipated speech in Florence.

A photographer with a track record of document-spotting in Downing Street yesterday snapped a photo of a what appeared to be draft of the speech as a civil servant carried it down Downing Street. BBC political editor Laura Kuenssberg said the civil servant in question was Ollie Robbins, the top official dealing with Brexit.

While the picture didn’t reveal much, it showed a word count of 4,980 and that May’s opening words are currently “I am delighted [to be in Florence], a city that taught us what it was to be European.”

Brexit Failing to Impact Home Mover Decisions

People move homes mostly due to personal circumstances, says research

The majority of UK home movers say that the UK’s impending exit from the European Union has had no bearing on their decision to move home.

 

Research conducted by the Mortgage Advice Bureau revealed that 71% of property owners have not considered Brexit an important factor when planning the purchase of their next home.

 

Instead, home movers indicated that it was their personal circumstances that were behind their decision to move house, with 65% indicating that a change in lifestyle such as having a family or starting a new job was the main reason.

 

The group least likely to be affected by the impact of Brexit were those aged 25-34, said the survey. Amongst this demographic, 38% cited that the growing size of their families was the reason that they would be changing property.

 

Brian Murphy, Head of Lending at the Mortgage Advice Bureau, said: ‘This report should be regarded as a reality check and a reminder of the fact that, for most, a home move is driven primarily by personal circumstances rather than economics or politics.’

 

Murphy continued: ‘The poll gives us valuable insight into consumer sentiment and would indicate that homeowners who are motivated to move are not being swayed by the political negotiations, with consumer confidence in property seemingly still high.

The Midlands Leads UK House Price Growth in August

Counties in the UK’s central region are seeing significant annual growth, says Rightmove

 

Asking prices across the Midlands witnessed the largest increase in the UK this month, according to the latest house price index from property listings website, Rightmove.

Leading annual growth across the regions, the East Midlands was home to a 6.8% annual increase in property asking prices, with the average value now standing at

Sellers in the West Midlands and the North West also drove an increase in asking prices, with the two regions posting annual growth of 5.8% and 4.7% respectively.

All regions in the UK reported an annual increase in August, with the smallest growth being found in the North East (1.0%) and Greater London (1.6%).

The anticipated seasonal slowdown in the UK housing market also created a distinct split in monthly performance across the regions, said Rightmove, with the central belt of the UK commanding the highest levels of property price growth.

Led by an increase of 1.1% in Wales, four out of ten UK regions reported growth in asking prices compared to July 2017, with the North West, the West Midlands and the East Midlands seeing property asking prices rise by 0.9%, 0.8% and 0.4% respectively.

 

The East of England maintained its performance from last month, with no change in asking price within the region. However, half of UK regions were home to a fall in prices this month, with the capital continuing to struggle.

Greater London saw asking prices decline by 1.9%, whilst there were also monthly downturns in the South East (-1.7%) and the South West (-1.3%). Asking prices also fell by 0.8% in both the North East and Yorkshire & Humber, as the traditional summer lull in housing market activity took effect in August.

Commenting on the distinct trend found in their latest figures, Rightmove director, Miles Shipside, said:

‘High demand and limited supply are still driving momentum, especially in the counties in the middle of the country. Here, year-on-year rises at over twice the national average are widespread, in contrast to southern and northern counties where none have approached these heady heights.’

Landlords Owning Property in London See Lowest Yields

The East Midlands and the North West reported the highest average rental returns in the UK.

The latest figures released by the National Landlords Association (NLA) shows that whilst there has been a slight decrease in the proportion of landlords who are optimistic about their ability to rely on a steady rental yield, actual rental returns have remained mostly stable across the UK.

According to NLA, rental yields have fluctuated around the 6% mark over the past few years, with the poll’s results signalling that 49% of landlords still remain optimistic about the country’s rental market profitability.

Regionally, those owning property in the East Midlands and North West achieved the greatest rental yields in July, with the averages for these locations standing at 6.9% and 6.4% respectively.

Properties in Scotland and West Midlands also generated some of the highest rental returns, as both areas saw an average rental yield of 6.3%.

Conversely, landlords owning property in both central and outer London experienced the lowest levels of profitability seen across the UK, as yields stood at 5.3% and 5%.

The news comes as HomeLet latest rental index shows an increase in rents across the UK in July, rising by an average 1.1% year-on-year, with Northern Ireland leading the growth and seeing rental cost rise by 5.7% annually.