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UK house prices surge the most in 11 years as lockdown lifts

UK house prices jumped the highest in 11 years this month, adding to signs that parts of the economy are rebounding rapidly as coronavirus restrictions are eased.

Mortgage lender Nationwide said average house prices leapt by 1.7% in July, above all forecasts in a Reuters poll of economists and the biggest monthly increase since August 2009, when the market was recovering from the financial crisis.

“The bounce back in prices reflects the unexpectedly rapid recovery in housing market activity since the easing of lockdown restrictions,” Nationwide chief economist Robert Gardner said.

The Bank of England reported that mortgage approvals – a first step to house purchases – quadrupled in June after hitting a record low in May, though they remained more than 40% below pre-pandemic levels.

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Prices are now 1.5% higher than they were a year ago, though Nationwide said that on a seasonally adjusted basis, they were 1.6% below a peak reached in April.

The mortgage lender said it expected price gains to continue in the short term, helped by a temporary cut in property purchase tax which finance minister Rishi Sunak announced this month to help what he saw as an ailing market.

But these price increases risked proving a “false dawn” if unemployment surged later this year when temporary job support measures end, Nationwide’s Gardner warned.

Britain’s economy shrank by a quarter over March and April due to the unprecedented hit from the coronavirus lockdown.

Some Bank of England officials fear that while there might be an initial rapid bounceback, this will rapidly slow and it could take years for the economy to regain its former size.

Retail sales are almost back at pre-pandemic levels, for example, but many pubs, restaurants and entertainment venues are closed or operating below capacity due to social distancing restrictions and public concern about the coronavirus.

Reporting by David Milliken

Source: UK Reuters

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Sterling set for biggest monthly rise in more than a decade as dollar slides

The pound advanced towards $1.32 on Friday, on track for its biggest monthly rise in more than a decade as a broad-based dollar decline fuelled demand for the British currency.

But concerns of a second wave of infections, a weak economy and growing pressure to strike a Brexit trade deal before a transition period ends in December are prompting investors to become wary of the currency’s prospects in coming months.

Bank of America Merrill Lynch strategists, who have been bearish on the pound, said the rest of 2020 could see weakness in the currency, especially as the period of August through December historically contains four negative months for sterling.

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“The fortunes of the pound will increasingly be driven by the monetary policy stance, the ability of the economy to rebound from the global pandemic, and Brexit negotiations, which are effectively stuck in the mud,” the strategists said.

On Friday, the pound rose 0.5% to $1.3159, its highest level since early March. On a monthly basis, it is up nearly 6%, its biggest rise since May 2009, according to Refinitiv data.

The pound’s gains can be attributed to the dollar’s losses.

The greenback has fallen nearly 5% in July, with most of the drop coming in the last 10 days as new cases of coronavirus surged across several U.S. states and some recent data pointed to an economic recovery losing steam.

British Prime Minister Boris Johnson said on Friday some lockdown easing planned for the whole of England would need to be delayed and the country’s chief medical officer said any further opening up of the economy would raise infection rates.

Concerns over the struggling economy have prompted hedge funds to unwind their bullish bets on the pound in recent weeks while derivatives data signal more weakness ahead.

Reporting by Saikat Chatterjee

Source: UK Reuters

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UK mortgage approvals beat expectations as housing market reopens

UK mortgage approvals beat expectations and rocketed in June as the housing market reopened from the coronavirus lockdown, the latest figures have shown.

The number of mortgages approved by UK banks rose to 40,000 in June after May’s record crash to just 9,300, the Bank of England said today. Analysts had predicted a rise to 34,000.

However, approvals were still 46 per cent below the February level of 73,700.

“The mortgage market showed some signs of recovery in June, but remained relatively weak in comparison to pre-Covid,” the Bank of England said.

An increase in house purchases helped consumer borrowing trends take a step closer to normality in June.

UK households pay down debts as mortgage approvals rise

Households repaid £86m of debt last month. But that was lower than the repayments totalling £15.6bn over the March to May period.

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People have been paying down their debts and saving money as there has been little to spend on during lockdown. The net repayments of the last four months contrast with an average of £1.1bn of borrowing per month in the year and a half to February.

The UK government has gradually loosened the country’s coronavirus restrictions over the last two months. In May it allowed the housing market to reopen, leading to June’s uptick in mortgage approvals.

In June the government allowed “non-essential” shops to reopen. And earlier this month pubs, cafes and restaurants were allowed to serve customers again.

The Treasury has unveiled a number of policies to encourage people to part with their lockdown savings. It hopes a VAT cut for the hospitality and tourism sectors and “eat out to help out” vouchers will boost the economy.

Chancellor Rishi Sunak’s stamp duty holiday has already helped the London housing market after just two weeks, data showed yesterday. London house sales rocketed 27 per cent after the property tax was slashed, housing website Zoopla said yesterday.

By Harry Robertson

Source: City AM

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Good Move: Housing market could return to ‘normal’ by the end of the year

Despite the significant impact of COVID-19 on the UK property market, positive signs of growth suggest a return to normal could be on the cards by the end of the year, according to Good Move.

Ross Counsell, chartered surveyor and director at Good Move, said: “COVID-19 has had a detrimental effect on the British economy, and this too included the property market.

“However, we are now seeing positive signs that signal growth in the property market as we re-emerge from lockdown.

“We’ve seen asking prices increase in July, up 2.4% compared to March, which signals a ‘boom’ in the property market and is a fantastic sign for sellers and estate agents as they can expect higher offers for homes.

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“Rishi Sunak’s stamp duty holiday also saw properties in London soar in sales by 27% in the weeks following the announcement in July, although this only increased by 6% in the rest of England.”

Counsell added that the impact of COVID-19 might change the shape of the market moving forwards.

He said: “Following the impact of coronavirus, we predict buyers will be looking for homes with a garden and a home office space, in the suburbs and countryside for added outdoor space rather than in cities.

“Sellers on the other hand need to adapt to the change in buyer preference.

“As we know, space is now at the forefront of buyer’s minds and they’re going to consider every single detail of a house before putting an offer in.

“Therefore, we advise sellers to instruct a chartered surveyor to perform a property survey, so they can take steps to rectify any major issues that will put buyers off or reduce the value of their home.

“For estate agents, we expect house prices to continue to increase across the UK, as well as more and more people looking to sell their home now the housing market has re-opened.

“We’ll see many estate agents working around the clock to support their clients and find the best possible deal for them to help protect their finances long-term.

“With everything considered, we fully predict the market to be back to ‘normal’ by the close of the year.”

By Jessica Bird

Source: Mortgage Introducer

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Stamp duty cut sees London house sales rocket 27 per cent

The stamp duty holiday has significantly boosted London’s housing market, with new sales agreed up by over a quarter in just two weeks, new data has shown.

UK house prices rose 0.2 per cent in June as a jump in demand for houses outstripped a fall in the number of sellers, the figures also showed.

But the market has still taken a big hit this year, said property website Zoopla, which compiled the data. Housing sales in 2020 so far are around 20 per cent below the same period in 2019, amounting to around £27bn in lost deals.

Chancellor Rishi Sunak earlier this month unveiled a “holiday” for the payment of the stamp duty property tax in a bid to boost the market and the economy. This raised the threshold at which stamp duty is paid from £125,000 to £500,000 until March 2021.

The move has spurred activity in London, according to Zoopla’s data, with new sales agreed up 27 per cent over the last two weeks. That compares to a six per cent rise across the rest of the country.

Zoopla said this was because London’s higher house prices meant it stood to benefit relatively more from an increase in the tax threshold.

London and UK house prices continue to rise

Overall, London house prices rose 1.7 per cent in June – before the stamp duty cut came in – compared to a year earlier.

Month on month prices flatlined. This meant the average London house price stood at £479,300.

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UK house prices as a whole were up 2.7 per cent year on year, although the monthly growth rate halved to 0.2 per cent. The average UK house price is £219,500.

The rise in prices “certainly seems at odds” with a cratering economy and rising unemployment, said Richard Donnell, Zoopla’s research director.

Yet he said the release of pent-up demand for new houses after the market was put on ice during lockdown would likely support prices for the rest of the year.

In London, buyer demand is up 28 per cent in 2020 so far compared to the same period a year earlier. This was partly because Brexit subdued activity last year.

Supply has fallen 11.2 per cent, however, meaning relatively higher demand is pushing up prices.

House prices expected to fall by 2021

But Zoopla said prices were likely to eventually fall as job losses and uncertainty take a toll.

“We expect rising unemployment to weigh on market activity over the final quarter of 2020 and into the first half of 2021,” Donnell said.

“The impact on pricing looks set to be pushed into 2021 as a result of sizable government support for the economy.”

However, Zoopla’s data laid bare the damage that has already been done to the housing market, despite London and UK activity being boosted by the stamp duty cut.

The closure of estate agents over the lockdown reduced new supply and agreed sales by 90 per cent.

So far this year, sales are 20 per cent below 2019 levels. Roughly 124,000 sales that were expected to take place and could have been worth £27bn since March did not happen.

Zoopla said it expects sales to be around 15 per cent lower in 2020 than they were last year.

By Harry Robertson

Source: City AM

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Zoopla: New sales agreed in June ran 28% above pre-lockdown levels

New sales agreed ran 28% above pre-lockdown levels in June, as the surge in demand converted into actual sales, according to the monthly House Price Index by Zoopla.

The market suspension during lockdown reduced the flow of new supply and sales agreed by 90%.

While these measures are now rising ahead of their pre-COVID levels, the increase in sales and supply since the start of the year is lagging 20% behind compared to 2019.

In contrast, in June 2020 demand from buyers was double that of the same period in 2019.

On a cumulative basis, since January 2020, demand ran 25% higher than the same period in 2019 despite the lockdown and market closure.

Zoopla’s analysis suggested that this was primarily ‘catch-up’ demand for what was lost over lockdown, and estimated that returning buyers accounted for 80% of levels that would have been expected over this period in 2020 had COVID not struck.

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Regional cities across the north of England recorded stronger growth in demand in the first half of 2020 compared to 2019, while new supply was hit countrywide as a result of the market closure.

Top of the list for demand are Sheffield, Liverpool, Manchester and Nottingham, which are all in the top fastest growing cities in terms of house price growth.

Short-term demand for city living is holding firm, despite predictions that it would fall. Research has suggested that COVID-19 has boosted demand for homes outside major cities; however, Zoopla said it expects this to be a one-off factor rather than a long-term shift in consumer attitudes.

London ranks fifth for growth in demand since the start of 2020; this demand has seen a modest shift away from the centre, towards the suburbs and commuter belt.

Despite an overall decline in annual transactions, London enjoyed an immediate boost to sales agreed following the temporary stamp duty holiday implemented by the government.

New sales agreed increased by over a quarter (27%) in just two weeks in London, which was geared to benefit most from the changes.

This boost to transaction volumes was not replicated in other regions, where average property prices are lower and less responsive to stamp duty amends.

While stamp duty relief will support demand in higher value markets across southern England, Zoopla said this was unlikely to sustain demand indefinitely into 2021.

UK house price inflation in the 12 months to June 2020 rose to +2.7%, registering the highest level of annual growth for almost two years.

By contrast, the monthly rate of growth has halved to 0.2% and the city level price indices registered slower growth still as a result of lockdown and reduced pricing evidence.

While there was a wide variation in annual growth rates across the country, there was no evidence of material, localised annual price falls at a regional or city level.

Based on current trends, Zoopla predicted that the headline annual rate of growth is set to remain positive, as the growing imbalance of supply and demand is set to support prices for the remainder of the year.

Richard Donnell, research and insight director at Zoopla, said: “COVID and the lockdown have shifted the dynamics of supply and demand across the housing market.

“The staggered reopening of housing markets across countries and the added impetus from the stamp duty holiday mean we expect buyer demand and new sales volumes to hold at current levels over the next two months.

“The net result will be continued support for house price growth at current levels over the second half of the year.

“Regional cities in northern England and the Midlands have the strongest underlying trends.

“For those operating in the market, and others looking in, the latest forecasts for increased unemployment and a sharp economic contraction over the next 12 to 18 months certainly seem at odds with current levels of sales market activity.

“We expect rising unemployment to weigh on market activity over the final quarter of 2020 and into the first half of 2021.

“The impact on pricing looks set to be pushed into 2021 as a result of sizeable government support for the economy.

“Further support cannot be ruled out while forbearance by lenders, and the availability of the mortgage payment deferrals, which can start up until the end of October for three to six months, is likely to limit the scale of downside for house prices.

“Much depends on how businesses respond to the outlook and their decisions on staffing levels and the knock-on impact for unemployment.”

By Jessica Bird

Source: Mortgage Introducer

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Property increasingly seen as a retirement tool

Property wealth is growing in importance for funding care in later life – as people lose faith in savings and pension income, Key’s Tackling the Care Question report has found.

Three in 10 (29%) over-55s plan to use their homes now compared with just 19% a year ago.

Meanwhile 34% of over-55s (44% – 2019) believe their savings and investments will help fund care while 30% (40% – 2019) say they will use pension income.

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Will Hale, chief executive at Key, said: “When you speak to people, you find that the vast majority are keen to receive care and support in the comfort of their own home but struggle to know how, or how best, they might meet these costs.

“With the recent economic turmoil, confidence in savings and pension income has fallen while more people are looking to the value tied up in bricks and mortar to finance care. Getting good advice and understanding what resources you have to draw on is important – and making sure you factor these potential costs into your retirement planning is vital.

“At the same time as councils are under pressure, over-55s are waking up to the reality that they may well need to pay for all or some of their care in later life. This has created the perfect storm and it is vital that the government focuses on setting out clear plans for reaching a cross-party consensus on social care, and consider long-term reform and funding of the care system.”

Over-55s overwhelmingly want to receive care in their own property – with three-quarters (75%) planning to either stay in their current home or move to a more manageable property. Just 4% would prefer to move to a care home.

BY RYAN BEMBRIDGE

Source: Property Wire

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Lockdown results in positive financial impact for a third of first-time buyers

A third of first-time buyers across the country have revealed that the lockdown has resulted in a positive impact on their finances, with this group of property hunters making up a third of those hoping to purchase a property in the next 12 months according to analysis from money.co.uk.

In regards to location, the data shows that over a quarter (28%) of first-time buyers are looking to purchase a home in London in the next year, with Barnet being the most sought after area for Help to Buy purchases. The top five London hotspots for first-time buyers also include Tower Hamlets, Lewisham and Greenwich.

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Additional insights reveal that the process of taking out a mortgage has become more difficult during the pandemic. Of those who have applied for a mortgage, 44% have claimed that there has been a reduced number of mortgage products available to them.

Salman Haqqi, personal finance expert at money.co.uk, said: “Since the UK went into lockdown in March, we have seen a huge impact on the property sector as a whole. However, following the recent reopening of the market, there has been an increase in the number of people purchasing the properties they had to put on hold due to COVID-19 restrictions.

“For those looking to buy, there are currently fewer mortgage products available than pre-COVID-19 but there are still some good deals to be found. With the base rate at a historical low at the moment, prospective buyers should really do their homework and research their options.

“If they have any doubts, they should speak to a mortgage advisor to ensure they are getting the right deal for their personal affordability, and circumstance.”

Source: Property Wire

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Residential property transactions jump 32% in June – HMRC

Residential property transactions in June increased 32% month-on-month to 63,250 transactions, HMRC figures show.

However, this is still far below the transaction levels seen in the same month last year. Year on year, transactions were 36% lower than June 2019.

Non-residential transactions rose 31% to 7,340 in June but annually, this was represented a 27% decline on the same month last year.

Market position to be seen in months

Andrew Southern, chairman of Southern Grove, said: “The annual decline isn’t particularly flattering but it’s the trajectory that’s most important. The next few months are going to make June look like an amuse-bouche rather than an entrée.

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“A healthy improvement in volumes month-on-month points to a large proportion of agreed sales that were knocked back, due to the pandemic, finally reaching completion.”

Paul Stockwell, chief commercial officer at Gatehouse Bank, added: “Whilst the transactions figures have not improved significantly since May, the nature of the property market means people have not had enough time to get through the moving process.

“It will take a bit longer for us to see how much new activity there has been in the market since it reopened in May.”

Stamp duty concerns

Mike Scott, chief property analyst at Yopa, said the recent stamp duty holiday in England and Northern Ireland, as well as similar initiatives in Scotland and Wales would help bring some transactions forward to this year but suggested this would not have a lasting impact.

“After a spike in the number of completions in March 2021 there will probably be another fall in the second quarter of next year as the normal rate of stamp duty is reimposed,” he said.

Tomer Aboody, director of MT Finance, also agreed the tax break had a positive effect on the market but said changes to capital gains tax could set that back.

Aboody said: “If the government increases capital gains tax on principal home sales, it will push us back again so any progress made by the stamp duty reduction will be swiftly lost.

“We need more stimulus via reduced stamp duty to the upper end of the market and hope for this in the Autumn Budget.”

Written by: Shekina Tuahene

Source: Your Money

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UK housing market enjoys ‘mini-boom’ as asking prices soar in July, says Rightmove

Residential property asking prices soared in July as coronavirus lockdown restrictions were lifted, sparking a “mini-boom” in the UK housing market.

The average asking price of property coming to market in July was up 2.4 per cent compared to March, before the coronavirus lockdown was announced.

The 3.7 per cent annual rate of increase recorded in July is the highest since 2016, according to the latest analysis by property platform Rightmove.

Year-on-year buyer enquiries were up 75 per cent in Britain since the beginning of the month, and 44 per cent of new listings that came up for sale in the first month after restrictions were eased in May have been marked as sale agreed.

Estate agents hailed the figures, saying that such levels of activity were “unheard of” within the UK market, saying that they expected prices to rise further.

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The property market was brought to a standstill during the UK coronavirus lockdown, as estate agents closed, construction work was paused and prospective buyers were unable to view houses.

The government opened the English property market on 13 May, and has since announced a stamp duty holiday to reignite the market.

The number of monthly sales agreed jumped 15 per cent in England compared to last year and soared 35 per cent in the five days after the government increased the stamp duty threshold from £125,000 to £500,000.

Rightmove housing market analyst Miles Shipside said: “The unexpected mini-boom continues to gather momentum as more nations reopen.

“The busy until interrupted spring market has now picked up where it left off and has been accelerated by both time-limited stamp duty holidays and by homeowners reappraising their homes and lifestyles because of the lockdown.”

James Forester, managing director of Barrows and Forester, said: “Such significant levels of buyer activity are unheard of within the UK market and should ensure a nitrous-oxide fuelled return to form for the UK property market.

“While the market will return to a more familiar form of ‘normality’ as this demand levels out, it has truly defibrillated any fears of a downturn in home values”.

However, former RICS chairman Jeremy Leaf said that the signs were that many expected this surge to be a brief one.

“We get the impression too that many recognise this may be a relatively short-term surge as government support schemes start to fall away and news about the economy is not very encouraging”, he said.

“Looking forward, we don’t expect prices to increase particularly strongly as the number of new listings is also rising, providing more balance between supply and demand. The market remains price-sensitive.”

By Jessica Clark

Source: City AM