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Thousands of homebuyers in ‘leasehold limbo’

Thousands of homebuyers could still be “sleepwalking into leasehold limbo” despite the government’s pledge to ban new-build leasehold houses, a property expert has said.

In December 2017 then communities secretary Sajid Javid had pledged to end the “exploitation of homebuyers through unnecessary leaseholds” by legislating to prevent the sale of new-build leasehold houses except where necessary, such as shared ownership.

In July this year current communities secretary James Brokenshire put further weight behind the pledge, promising to to tackle “unfair and abusive” practices within the current leasehold system and cease funding of “unjustified” leasehold houses through government schemes.

But one year on from Mr Javid’s initial announcement, it has been claimed developers have continued to sell thousands of new-build houses with leaseholds – some believed to be funded via the Help to Buy scheme.

Phil Spencer, co-founder of property advice site Move iQ, said: “A year on from the government’s pledge to ban the sale of new build leasehold houses, thousands of buyers are still being allowed to sleepwalk into leasehold limbo.

“And in a further ironic twist, many are even being encouraged to do so by the Help to Buy scheme.”

The firm’s analysis of Land Registry figures showed 26,024 new-build properties have been sold with leaseholds since the government’s pledge last December, 2,644 of which were houses.

Data from the Ministry of Housing, Communities and Local Government showed 5,949 leasehold homes were bought with assistance from the Help to Buy scheme in the first six months of this year- 1,340 were houses.

Mr Spencer said: “Millions of Britons live happily in leasehold homes. But anyone buying a leasehold property needs to do so with their eyes wide open, and should take legal advice to understand the obligations that go with owning a home this way.

“While leasehold tenure is normal for flats, the government says it is determined to stop newly built houses being sold in this way – while at the same time offering Help to Buy incentives. These mixed messages are deeply confusing.”

Mr Spencer said when the ban is introduced there should be some redress for the thousands who have bought leasehold houses.

He said: “At the very least they should be given first refusal on the freehold of their home at a reasonable rate, before it is sold on to a third party.”

The Ministry of Housing, Communities and Local Government has recently launched a technical consultation on how to implement reforms to the leasehold system, which shut at the end of November.

It is now considering next steps with a view to bringing forward legislation in due course.

A spokesperson said: “It’s unacceptable for home buyers to be exploited through unnecessary leaseholds on new houses.

“We have announced measures to ban leaseholds for all new build houses unless there is a genuine reason, and ensure ground rents on new long leases are set to a peppercorn.”

It is understood that development contracts in place until March 2021 prevent the introduction of an outright ban on the sale of leasehold houses or setting terms around ground rents without giving risk to legal challenge.

But the government said: “We have been clear in telling developers that Help to Buy funding should not be used for leasehold houses, and recent statistics show this practice is already reducing.”

Source: FT Adviser

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Former top Bank of England official calls Brexit economists ‘charlatans and crackpots’

A former top official at the Bank of England has claimed most economists’ work is irrelevant, and said it allowed “charlatans and crack pots” to fill their place in the debate over issues like Brexit.

Danny Blanchflower tweeted that it was “hard to see the relevance of most of economics”, saying 95% of papers he saw were on subjects that few people cared about or which “failed to make the world better.”

Blanchflower then told Yahoo Finance UK the profession was too focused on publishing in major but not widely read journals, rather than seeking to answer critical questions.

The economist, a former member of the Monetary Policy Committee which sets UK interest rates, said economics’ reputation suffered as a result of its failure to predict the financial crisis, partly because it had been dominated by “third-rate mathematicians who knew nothing about the real world.”

Many economists had begun to use more empirical rather than theoretical work, he added, but were using narrow experimental methods which “precisely answer narrow questions that nobody cares about very much.”

He said: “My view is that economics has lost its way. I did some work looking at the top five journals and ten years later most papers are hardly cited, and especially so in theory.

“As a policy maker I look at the papers that are published weekly and say to myself, ‘Who is this aimed at, which policy maker in the world cares and how would this improve the human condition one jot?’ The vast majority fail these tests.”

“This leaves the major issues of the day, especially in macro-economics, open to charlatans and fools. A good example in the UK is some of the economists supporting Brexit, who are a bunch of charlatans and crackpots,” he said.

It is not the first time economists in favour of Brexit have come under fire, with the Economists for Brexit group accused of publishing a “doubly misleading” study last year.

Their report was the only economic model to show material benefits from a no-deal Brexit, but the modelling used was condemned by several leading economists.

But mainstream economists have also drawn increased criticism over the past decade since the financial crisis, though heavy attacks from former influential government figures like Blanchflower are less common.

In 2016, the Conservative MP Michael Gove, now environment minister, refused to name any economists who had endorsed Brexit, famously claiming that “people in this country have had enough of experts”.

US president Donald Trump also allegedly considered sacking Chair of the Federal Reserve Jerome Powell, who he appointed in February 2018, as the S&P 500 entered a bear market last week.

Source: Yahoo Finance UK

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UK mortgage approvals show first annual rise in 14 months – UK Finance

A decline in the number of mortgages approved by British high-street banks flattened out last month, with the first year-on-year rise since September 2017, figures from industry group UK Finance showed on Friday.

Britain’s housing market has slowed since the country voted to leave the European Union in June 2016, and other surveys this month have shown anxiety among consumers and businesses ahead of the planned departure on March 29.

Friday’s data showed British banks approved 39,403 mortgages for house purchase in November on a seasonally adjusted basis, down from 39,640 in October but up by 0.2 percent from November 2017 — the first annual rise in 14 months.

“The housing market is struggling for momentum in the face of still relatively limited consumer purchasing power, fragile consumer confidence and, possibly, wariness over higher interest rates,” Howard Archer, chief economist at consultants EY ITEM Club, said.

Many economists expect house prices to be flat or marginally higher next year, as weakness in London and surrounding areas weighs on faster price growth in other parts of Britain, though the Bank of England has said falls of as much as a third are possible if Brexit descends into chaos.

Prime Minister Theresa May’s minority government plans to seek parliamentary approval for her Brexit deal in the week starting Jan. 14, after scrapping a vote before Christmas due to opposition from lawmakers of all parties.

Without a deal, Britain faces major economic disruption from the reintroduction of tariffs and customs checks at its borders.

UK Finance said credit card lending picked up slightly last month, though this mostly reflected a shift in preferred payment means rather than higher borrowing, with credit cards offering better consumer protection for purchases such as holiday travel.

Net lending to non-financial businesses fell by the most since May, dropping by 656 million pounds ($829 million).

“Overall lending to businesses has remained subdued in this period of economic uncertainty,” UK Finance’s managing director for commercial finance, Stephen Pegge, said.

The Bank of England will publish November mortgage and consumer credit data from a wider range of lenders on Jan. 4.

Source: UK Reuters

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London Brexit fears see Asian property investors choose Dublin

Brexit has turned Asian property investors off London. Now, they’re reappearing in Dublin.

For the first time ever, Asian investors accounted for three of the top five investments in office buildings in the Irish capital in 2018, according to estate agents Knight Frank.

This included the biggest deal, the €176m (£158m) sale of one of the city’s largest office developments to Hong Kong-based CK Properties Ltd.

Across the board, analysts have been suggesting that London would see a Brexit-related dent to its property market. Earlier this year, a report from Savills indicated that Asian-based investors’ interest in the capital had tailed off, falling behind the level of demand among UK-based buyers.

It is of course no secret that many of the UK’s large financial services firms have decided to move some of their operations from London to elsewhere in Europe because of concerns over Brexit.

Dublin has been a big winner in this respect, and now it seems to be benefitting from top-line investment, too.

According to Knight Frank, when all of the year’s transactions are completed, the overall value of commercial property deals will have jumped from €2.5bn (£2.25bn) in 2017 to €3.5bn (£3.15) in 2018.

The office market accounted for the biggest share of transactions, something the firm said was due to strong occupier demand and competitive pricing compared to other European capitals.

Around 25% of Brexit-related relocation announcements between June 2016 and September 2018 involved moves to Dublin, according to Knight Frank — putting the city ahead of Luxembourg, Paris and Frankfurt.

Bank of America and Barclays, which has rented prime city-centre real estate a stone’s throw from Ireland’s parliament, are two high-profile banks that chose Dublin for their post-Brexit European Union hubs.

But Dublin’s real estate market has also long benefitted from its thriving technology district, known as Silicon Docks.

In May, Google announced it would spend €300m on the purchase and redevelopment of a series of warehouses in the district, dramatically expanding its existing European headquarters.

And Facebook, which also has its European headquarters in Dublin, announced it was set to quadruple its office space in the city, with room for 5,000 extra staff, by signing a long-term lease for a new 14-acre campus.

Knight Frank’s report also points to a big increase in Dublin’s private rental market, with several global institutional investors spending upwards of €1bn (£899m) in the sector.

Favourable long-term demographics, rising rents, and new investment-grade properties coming on stream are three of the main factors that encouraged the growth, the report says.

Source: Yahoo Finance UK

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Looking to the future

2018 was certainly a year of uncertainty in the UK so it comes as no surprise to see a knock-on effect on the property market that’s experiencing sluggish house purchase activity and slowing house price growth.

Property investors could therefore be forgiven for operating with understandable caution given the current political and economic climate.

So putting Brexit aside for one moment, property investors face an anxious January waiting for this year’s heavier tax bill to land on the doormat as Osborne’s tax changes really begin to bite.

Many professional landlords have already taken steps to limit their tax exposure by moving their portfolios into a limited company structure; however, it is still a huge burden on landlords looking to expand their portfolios.

These tax changes heighten the importance of yield of for professional landlords with many of them already looking further afield to access higher yields and some diversifying into HMOs, commercial and semi-commercial property.

These are also potential pockets of the property sector still growing substantially and may even benefit from a slowdown in other areas. For example, the bridging market has expanded over recent years with new lenders entering and new products being introduced to the market.

This substantial growth in the bridging market is reflected in the Association of Short Term Lenders (ASTL)’s quarterly results, showing that the number of loans written by its members had grown 21.2% in the 12-month period to 30 September 2018.

Brokers have also identified it as an area of growth. In the latter part of 2018, our research found that 70% of brokers believed that demand for bridging had risen. By comparison, only 8% thought it had fallen.

Many put this rise in demand for bridging down to property sales taking longer to complete leading to more developers requiring exit finance, more buy-to-let investors undertaking refurbishment and increased demand for purchasing properties at auction.

Like investors, brokers are increasingly turning to bridging, advising on cases and looking to diversify their revenue streams. Indeed, 65% of brokers stated that as bridging cases involve higher fees they present an opportunity to generate extra income.

When looking ahead in 2019, 12 times as many brokers expect demand for bridging to grow rather than shrink (62% vs 5%), making it a key growth area this year.

Brokers who predicted increased demand put some of the reasons down to rising house prices, slower sales of property developments, increased investors at property auctions and growing demand from buy-to-let investors.

With the demand for bridging increasing within a sluggish property market, we will continue to see more lenders stepping into the bridging market, increasing competition and improving rates. However, with lots of lenders offering similar products, brokers will really need to be aware of all the alternative financing options in the market.

For some brokers it can seem like a daunting and complicated market but through developing good relationships with specialist business development managers (BDMs), flexible solutions can be found.

BDMs are best placed to inform on product availability and appropriate criteria as well as offering flexible tailored advice.

As the bridging market continues to expand in an uncertain wider property market, BDMs will be able to familiarise brokers with all the products currently on offer and help navigate the more complex cases, ultimately providing the best solution for the client.

Source: Mortgage Introducer

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Pound Sterling to Rise by 5% against the U.S. Dollar in 2019 says Lloyds Bank

The Britsh Pound will rise by more than 5% against the U.S. Dollar next year, according to analysts at Lloyds Bank, as an orderly exit from the EU enables the Bank of England(BoE) to lift its interest rate again just as the Federal Reserve (Fed) brings its own tightening cycle to a close.

Pound Sterling will be volatile until the end of the first-quarter 2019, the bank says, as markets fret over whether Prime Minister Theresa May will be able to pass her Withdrawal Agreement through parliament. However, ratification of the deal early next year is forecast to see the UK exit the EU in an orderly manner.

That should enable markets and the Bank of England to address mounting inflation pressures in the economy, where a falling unemployment rate has been encouraging wage growth for workers. The BoE has already flagged this repeatedly as a likely threat to its 2% inflation target over coming years.

“The BoE has been clear in its guidance, reiterating that, should the economy progress in line with its expectations, a gradual tightening of monetary conditions would be appropriate. There is broad agreement on the MPC that this is consistent with a 25bp rate hike per year over the next three years,” says Gajan Mahadevan, a strategist at Lloyds Bank.

Mahadevan says the BoE will raise the base rate again in August 2019, taking it up to 1%, after PM May is succesful in passing her Withdrawal Agreement through the House of Commons. Meanwhile, the Federal Reserve is expected to ease off on its tightening of monetary policy.

“Among key developed market economies, the US has been the outperformer for some time. Having hit an annualised rate of 4.2% in Q2, GDP growth slowed in Q3 to a still impressive 3.5%,” Mahadevan writes. “However, there are signs that the rises in interest rates over the course of the last few years are starting to take their toll.”

Mahadevan and the Lloyds team say the Federal Reserve will raise interest rates only twice in 2019 as earlier policy tightening takes its toll on the US economy, leading the central bank to bring its multi-year cycle of interest rate hikes to a close. That would mark a turning point for the U.S. Dollar, especially against the Pound.

If the Fed stops raising its interest rate at the same times as markets are becoming willing to bet more confidently on further BoE policy tightening over coming years then it could effectively pull the rug out from beneath the U.S. Dollar.

The Fed raised its interest rate to 2.5% last week, marking its fourth rate hike of 2018, but used its so-called dot plot to signal that it will raise rates on only two occassions next year.

The Dollar index has risen by 5.2% in 2018 after reversing what was once a 4% year-to-date loss wracked up mostly during the first quarter. A superior performance from the U.S. economy was behind the move, because it enabled the Fed to raise rates as economies elsewhere slowed and their respective central banks sat on their hands.

“We expect the currency pair to rally towards 1.35 by June 2019, before settling around 1.33 at year-end. However, the high degree of uncertainty, particularly around the UK’s withdrawal from the EU, means that at this stage our conviction is low,” Mahadevan writes, in a recent note to clients.

Mahadevan’s target of 1.33 for the Pound-to-Dollar rate at the end of 2019 implies a 5.1% increase from Thursday’s 1.2657 level. However, while Sterling may easily recover lost ground from the Dollar before the end of 2019, other analysts have warned that steep losses could be likely before March 2019 comes to a close.

“We will enter 2019 with the most important aspects of the Brexit situation still unresolved. December was an enormously bad month for Theresa May,” says Stephen Gallo, European head of FX strategy at BMO. “To the detriment of the GBP, the remaining Brexit permutations appear to be declining in number.”

Prime Minister Theresa May survived a leadership challenge in December but she still lacks enough support in parliament for her Brexit Withdrawal Agreement to make it onto the statute book.

Analysts and traders have been readying themselves for a seemingly inevitable defeat of the government when the House of Commons gets its “meaningful vote” on the Withdrawal Agreement in January.

Lawmakers on all sides of the House have pledged to vote against the proposals for a variety of reasons and the PM is currently expected to lose the ballot in the Commons.

Approval before March 29, 2019 is key if the UK is to avoid leaving the EU without any preferable arrangements in March 2019 and defaulting to trading with the bloc on WTO terms.

“The first permutation is a “hard Brexit” in which the UK legally exits the EU on March 29th without a deal, forcing the country to revert to WTO rules. We would assign a 45% probability to that outcome at this stage and assume a level of $1.20 in GBPUSD if that comes to pass,” Gallo writes, in a note to clients.

Source: Pound Sterling Live

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Breaking down the lending barriers

Peer-to-peer lending may not be a familiar part of an adviser’s arsenal, but interest in the area is on the rise and the industry’s overall growth rates add weight to its suggestion that it is moving into the mainstream.

However, a recent paper by the FCA that has suggested consumers are at risk of harm shows there is work to be done to convince more advisers of its merits.

At its heart, P2P is a way of for consumers to lend money to companies and individuals – via platforms, which either set interest rates themselves (the most common method, as Table 1 shows) or allow consumers to do so.

The attraction is that these rates are typically substantially higher than can be found elsewhere. But as always, the greater yields come at the expense of higher risk of default, and P2P is not covered by the Financial Services Compensation Scheme.

For intermediaries, such lending might provide a useful option when catering for clients with short-term time horizons, such as one to three years, in cases where equities pose too much of a risk to capital and cash is unable to match inflation.

The sector’s relative infancy has meant the number of advisers dipping their toes in remains fairly small. But providers say they are starting to see a notable uptick in intermediaries using P2P for client recommendations.

“A few years ago very few financial advisers were using [P2P]. But we’ve now got 1,100 advisers registered on the platform, and adding more and more every day,” says Sam Handfield-Jones, chief product officer at Octopus, who adds his company’s loan book has grown to in excess of £250m.

“They range from advisers having 10, 20, 40, 50 clients on [the platform], through to advisers using it to solve really specific problems or one or two clients, so it’s still massively varied as to how it’s used.”

Nathan Mead-Wellings, director at London-based advice firm Finura Partners, says more clients are starting to broach the subject. “There is an interest among the higher net worth to get into the lending space where they have reasonable knowledge of asset-backed lending in particular,” he says.

“Familiarity with larger platforms such as Ratesetter is also filtering down. These clients are often prepared to view these as high-risk investments and are aware that they lack FSCS protection.”

Growth and responsibility

Growth in the sector has certainly been eye-catching. Data compiled by the UK Peer2Peer Finance Association shows cumulative lending had risen to nearly £9bn in the first quarter of 2018, a jump of more than 50 per cent from the second quarter of 2017. Almost two-thirds of this lending was shared between two providers – Funding Circle and Zopa, the longest running P2P platform.

Greater regulation is inevitable in any new sector that starts to gain popularity with consumers. Back in 2016, FCA chief executive Andrew Bailey remarked of P2P: “It’s a fast-moving, evolving industry. Some of the directions in which it’s going are posing some quite big challenges in terms of transparency and fairness.

“Those are the things that we’ll be considering when it comes to the point of proposing and making rules. We always try to balance innovation and competition against having a fair and transparent environment.”

Two years later, in July 2018, the watchdog subsequently unveiled a 156-page consultation paper in a bid to address potential problems in the space.

The regulator identified poor business practices, particularly on some P2P platforms. These related to “disclosure of information to clients, charging structures, wind-down arrangements and record keeping”, it said.

The report also highlighted a number of potential and ongoing harms that may impact investors, such as poor quality or unsuitable products, poor treatment of customers, and high prices.

Gonçalo de Vasconcelos, chief executive at crowdfunding platform SyndicateRoom, says the real surprise was a proposed clampdown on promotional activity by P2P providers.

Investors in the space could now face the same kind of marketing restrictions that already apply to the investment-based crowdfunding sector. These require providers to ensure they only target their promotions at advisers or sophisticated/wealthy investors, or else those who certify they will not invest more than 10 per cent of their assets in “readily realisable” securities.

Mr de Vasconcelos says: “The changes to the P2P sector were mostly unnecessary and slightly over the top. The unintended consequence, or perhaps intended, is that everyday investors see P2P as this spooky, dangerous thing that it isn’t – just look at the track record of the main P2P platforms for more than 10 years now.”

But some say this track record is rightly treated with scepticism.

Mr Mead-Wellings says: “It can be hard to run due diligence on the different platforms and understand the default rates/profitability and so on, but mostly [the issue] is that few have been tested in a downturn. It would be interesting to see what the average credit profile of their borrowers and lenders is.”

Mr Handfield-Jones adds: “Advisers are where they should be, cautious about adopting new things. They have an obligation to protect their clients’ money and the sector is 11 to 12 years old – so it’s still new.”

Mr Vasconcelos concedes the example of an adviser who took an interest in one of his company’s products, but ultimately would not show it to clients because it lacked a three-year track record.

He says: “It’s not worth them running the risk due to regulatory reasons. The two main barriers for advisers to get involved are lack of knowledge and being risk-adverse. The most sophisticated advisers are on it, but it’s still a very small percentage of the market.”

The task for providers is to assess how the industry can evolve in an adviser-friendly way.

Medical attraction

Another obstacle to more advisers and consumers embracing the asset class is accessibility. Mr Handfield-Jones says encouraging more self-invested personal pension providers to permit P2P investments is one of Octopus’s key aims.

Just two providers are currently on board, and regulators’ growing suspicion of unregulated investments held within Sipps may mean others are reluctant to take the plunge. But Mr Handfield-Jones notes those in the decumulation phase often seek to access parts of their money on a number of different time horizons, a preference he says can chime with P2P.

He explains: “An adviser will rarely recommend equity exposure on a sub three-year time horizon, yet if you’re buying multi-asset funds and selling them down to fund income in decumulation, you’re effectively buying equities and selling them down on a sub-three year. But because it’s wrapped up in the multi-asset fund it’s not so obvious.

“When you’re talking about portfolio construction, decumulation and income drawdown, maintaining that capital within your Sipp wrapper is an important part of that and will be the big switch to [push P2P lending into the] mainstream.”

Providers also claim advisers may end up using P2P to support client objectives in relation to their businesses.

Mr Handfield-Jones says he has seen a sharp rise in medical workers, such as doctors and dentists, who fund private work through a limited company, investing the business’s capital into P2P.

“They don’t want to take out the dividends and pay dividend tax, but if you’ve got a company bank account with a high street bank you’re going to be earning negative interest. So the idea of putting your balance sheet to work a bit harder is quite appealing,” he says.

As ever, ensuring that all clients’ eggs are not in one basket will be paramount in such situations.

Losing interest

One initiative that was previously predicted as a game changer for P2P was the Innovative Finance Isa. Introduced in April 2016, the IFISA enabled peer-to-peer lending to be accessed in a tax-efficient wrapper for the first time. Rates on offer from such propositions extended all the way up to 13 per cent, suggesting the risks involved in P2P may be greater than some claim.

Take-up rates began at very low levels, but £290m was invested during the 2017-18 tax year, a sharp uptick on the £36m invested in the Isa’s first 12 months of existence.

Mr Handfield-Jones says: “The first year was a little bit underwhelming. The year just gone has been much stronger, and we expect this year to be double or triple what we did last year.”

He adds the first-year results could largely be attributed to the lack of providers in the market. Low savings rates remain the most obvious way in which providers can attract investors, especially as cash Isas can be transferred without the need for new funds to be committed. But consumer’s love affair with cash, regardless of its suitability, is proving difficult to change.

“You’re seeing solid adoption, but in the context of seeing £40bn into cash Isas it’s still a drop in the ocean. And that’s where the opportunity is – you’re talking about hundreds of millions of pounds of lost interest in the UK,” Mr Handfield-Jones adds.

That is a problem faced by the investment industry more generally. But with lending platforms having yet to experience real hardship, the question of whether P2P is a suitable replacement may not be answered until the next economic downturn.

Source: FT Adviser

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France could overtake UK as world’s sixth biggest economy as Brexit bites

France will temporarily overtake the UK to become the world’s sixth biggest economy as Brexit takes its toll, a report has said.

The Centre for Economics and Business Research (CEBR) said that while a no-deal Brexit would do the most economic damage in the short-term, a depressed British economy is inevitable in any case due to lower business and inward investment. This could give France – or possibly India – a chance to catch up.

However, CEBR’s 2018 World Economic League Table, which makes predictions for 180 countries’ economies up until 2033, forecasts the UK returning to the sixth spot after the dust settles in 2020 and staying there until at least 2023.

CEBR also predicts that in the event of Brexit leading to Scottish and Northern Irish independence, the rest of the UK will still be a larger economy than France in 2026 due to France “not really coming to terms with reducing its bloated public sector and resulting higher taxes”.

The US remains the world’s largest economy, but China is predicted to steal the coveted top stop by 2032. Currency collapses led to falls in the rankings for Argentina (down four places to 30th), Pakistan (down three to 44th) and Iran (down 10 places to 40th).

Douglas McWilliams, deputy chairman of CEBR, said: “[The table] shows that despite global uncertainty and tightening in US monetary policy which has pushed down some of the emerging market currencies, the 21st century is still likely to to be the Asian century.

“In 2003, the world’s five largest economies were the US, Japan and three European countries. Thirty years later, three out of the top five economies are expected be Asian and only one will be European. This is one reason why even though Brexit will be disruptive in the short term, it is not thought likely to do much long-term damage to the UK economy and, on some assumptions, could even boost it.”

This follows the news that Britain’s economy has slowed since the 2016 referendum and growth is now at its lowest in almost a decade.

Earlier in the year, the British Chambers of Commerce forecast that 2019 would be the weakest year for growth since the country’s last recession, due to depressed business investment and weakened consumer demand.

Source: Yahoo Finance UK

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Company directors’ optimism in UK economy plunges on Brexit fears

BUSINESS leaders’ confidence in the UK economy has tumbled to its lowest for more than 18 months as Brexit fears dominate, a poll by the Institute of Directors reveals.

The poll of 724 company directors, conducted between December 5 and 20 and published today, shows business leaders in all nations and regions of the UK are pessimistic over the economic outlook on a 12-month view.

The IoD noted that its confidence tracker showed overall optimism about the economy had recovered to be in positive territory briefly earlier this year, boosted by the initial agreement of a Brexit transition period. But the IoD flagged the fact that business leaders’ optimism over the UK economy had fallen steadily since April.

Tej Parikh, senior economist at the IoD, said: “Business leaders are looking ahead to the new year with trepidation about the economy. While we saw cautious optimism emerging when the Brexit talks appeared to be moving towards a transition period after March 2019, that has utterly dissipated now. There can be no doubt that the tumultuous Brexit process is having a damaging impact on firms’ outlooks. The prospect of a no-deal in the near future will be weighing heavily on directors’ minds.”

He added: “Politicians must not forget that every day of Brexit confusion is a day we aren’t focused on the long term. Leaving the EU has consumed the political agenda since the referendum, deflecting attention from critical challenges we face, including boosting growth across the UK and addressing widening skills gaps.”

The IoD noted investment would likely remain subdued. It flagged its finding that, subtracting the proportion expecting to cut investment from that planning to increase capital expenditure, only a net seven per cent of business leaders anticipate a rise.

Mr Parikh said: “Uncertainty is already causing businesses to delay investment, hiring decisions and product launches, which also acts to weaken our international competitiveness further down the line. The longer this state of affairs continues, the more we lose by it, even if these effects aren’t apparent in the here and now.”

The IoD observed business leaders nevertheless remained relatively upbeat about the prospects for their own firms.

Source: Herald Scotland

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2019 ‘may be year of improving not moving’ for housing market

2019 could be the year of improving rather than moving for the housing market as various obstacles prompt home owners to stay put, experts predict.

With the fog of Brexit uncertainty still hanging over the market – and other issues such as affordability and a lack of choice for buyers – some experts believe house price growth will take a pause in 2019.

A North-South divide may also continue to open up, with house price growth in previously “booming” parts of the South proving weaker than growth further north where affordability is less stretched, according to forecasts.

Fionnuala Earley, head of market insight at SellMyHome.co.uk, expects to see a 1% dip in house prices across the UK in 2019 followed by a 1% increase in 2020 – with stronger growth of 2.5% in 2021 and 3.5% in 2022.

She said: “Looking ahead, we should expect only very modest house price growth on a national scale, but with weaker conditions in London, the East and the South.

“Housing market activity will remain broadly flat compared with recent years as uncertainty stymies decision-making and transactions costs continue to hinder movement.

“This combination has tilted the balance in favour of improving rather than moving as the choice of property to buy is limited.”

The Royal Institution of Chartered Surveyors (Rics) expects house prices to come to a standstill by mid-2019.

Rics economy Tarrant Parsons said: “Demand has tailed off over recent months, with Brexit uncertainty causing greater hesitancy as the withdrawal deadline draws closer.

“That said, the current political environment is far from the only obstacle hindering activity with a shortage of stock continuing to present buyers with limited choice, while stretched affordability is pricing many people out.”

Meanwhile, property website Rightmove predicts house-sellers’ asking prices will be unchanged at 0% across 2019.

Underlying the flat growth across the UK generally, Rightmove expects to see asking prices falling by around 2% around London’s commuter belt and decreasing by around 1% in Greater London itself.

Heading further north, where affordability is less stretched, asking prices could increase by around 2% to 4%, Rightmove predicts.

Director Miles Shipside said: “Since the property market’s recovery from the 2008 financial crisis, many parts of the northern half of the UK have seen marginal or relatively modest price increases.

“We predict that these areas will continue to see price rises, though tempered by affordability constraints.

“In contrast, regions in and around the influence of London saw prices go up in a five-year period by an average of around 40%.

“Consequently, we forecast that these previously booming areas will continue to see modest downward price re-adjustments in 2019.”

Mark Hayward, chief executive, NAEA (National Association of Estate Agents) Propertymark, said: “As we look ahead to 2019, there’s a fog of uncertainty. Brexit is undoubtedly fuelling a sense of apprehension in the housing market, which in turn affects sentiment.

“However, this slowdown presents a window of opportunity for first-time buyers who will find more affordable properties, granting them greater bargaining power.

“We usually see demand spike in the first few months of the year, but the landscape will probably be very different in 2019 as buyers sit on the fence and adopt a ‘wait and see’ strategy until the Brexit deal is complete.”

According to property analysts Hometrack, London house prices still equate to around 13 times incomes typically, despite some recent price falls in the capital – meaning affordability there is still very stretched.

During 2019, Hometrack expects house prices across the UK’s major cities to rise by 2%.

However, it forecasts house prices to see falls of up to 2% next year, while in more affordable cities such as Liverpool and Glasgow prices could rise by another 5%.

Richard Donnell, insight director at Hometrack, said: “Brexit is the greatest driver of uncertainty in the near term and the prospects are for a slow start for the housing market in 2019.”

Russell Galley, managing director, Halifax, has stronger expectations for house prices than some other commentators – and believes the UK could see house price growth as high as 4% by the end of 2019.

He said that, despite current political upheaval: “We expect annual house price growth nationally to be in the range of 2% to 4% by the end of 2019.

“This is slightly stronger than 2018, but still fairly subdued by modern comparison.

“Longer term, the most important issue for the housing market remains addressing the affordability challenge for younger generations through more dynamic housebuilding.”

Source: Yahoo Finance UK