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UK property asking prices rise by least since 2009 – Rightmove

Asking prices for British homes rose by the least in a decade over the past year, property website Rightmove said on Monday, adding to signs of a slowing housing market ahead of Brexit.

Rightmove said prices for newly advertised property were up by just 0.2 percent in February compared with a year earlier, the smallest increase since 2009, although they increased by 0.6 percent on the month, in line with the seasonal average.

With wages rising at an annual rate of more than 3 percent, according to official data, the affordability of houses was improving at its fastest since 2011, the company said.

“In theory the scene would be set for an active spring if it were not for the uncertain political backdrop,” Rightmove housing market analyst Miles Shipside said.

Britain is on course to leave the European Union without a transition deal on March 29 unless Prime Minister Theresa May can broker a revised agreement with the bloc that is acceptable to her divided party and parliament.

British house prices have slowed over the past year, mostly in London and nearby regions, as Brexit worries added to the headwinds from stretched affordability and higher purchase taxes for rental properties and houses costing over 1 million pounds ($1.28 million).

Official data last week showed annual house price growth slowed to 2.5 percent in December, the lowest since 2013, while surveyors see the weakest near-term outlook for prices since 2011.

Rightmove’s data is based on property advertisements on its website, which it says accounts for 90 percent of residential property on sale in the United Kingdom.

Source: Investing

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Home possessions at lowest level in 40 years

There were 4,580 homeowner possessions in 2018, the lowest number since 1980, according to data from UK Finance.

Back in 1980 there were 3,480 possessions alongside 6.2 million outstanding homeowner mortgages, but by the end of last year there were 9 million outstanding mortgages.

UK Finance stated the relatively low repossession rate had been aided by the low interest rates and more flexibility from lenders to help those in financial difficulty.

Of the latest repossessions 1,130 homeowner mortgaged properties fell into the fourth quarter of 2018, alongside 540 buy-to-let mortgaged properties.

This was down 3 per cent and 14 per cent respectively on the same quarter of the previous year.

In the fourth quarter of 2018 there were 77,610 homeowner mortgages in arrears of 2.5 per cent or more of the outstanding balance, 5 per cent fewer than in the same quarter of the previous year.

In the buy-to-let space 4,690 mortgages were in arrears of at least 2.5 per cent in December, unchanged from the previous year.

Jackie Bennett, director of mortgages at UK Finance, said: “Homeowner possessions reached their lowest level in almost 40 years in 2018, aided by a historically low interest rate environment and lenders showing continued flexibility when working with borrowers in financial difficulty.

“Mortgage arrears also remain at historically low levels, with the majority of borrowers continuing to repay their mortgages in full and on time each month.

“We would always encourage anyone with concerns about making their mortgage repayments to contact their lender to discuss the options and support available to them. Repossession is always a last resort.”

Shaun Church, director at Private Finance, said homeownership was “remarkably secure” at present despite growing uncertainty elsewhere.

He said: “Doomsayers will argue that trouble is brewing for when rates do start to rise again. But lenders have stringent tests in place that ensure borrowers can afford their loan if rates rise by a far higher percentage than is likely.

“This means that, assuming there are no dramatic changes in their circumstances, borrowers should be able to comfortably accommodate slightly higher repayments when rates to begin to creep up.”

He said the low level of arrears and possessions meant high loan-to-value (LTV) products should be made more widely available.

He said: “Affordability tests are clearly working, and with a secure system in place, there is no reason why loans of 95 per cent or above should present any danger.

“Saving for a deposit is one of the biggest financial hurdles many will face, and for some is unsurmountable.

“Better availability of high LTV mortgages would help to remove this barrier and put buyers’ homeownership prospects on a more equal footing.”

Source: FT Adviser

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Sturdy sales data pushes pound higher amid Brexit concerns

The pound edged higher on Friday as strong British retail sales lifted sentiment, though investors were considering the consequences of a Brexit vote defeat in parliament for Prime Minister Theresa May.

On a weekly basis, the British currency was set for its third consecutive drop. Analysts said the latest parliamentary loss for the government, although on a symbolic vote, indicates May does not have the support of her lawmakers.

With less than six weeks before the March 29 exit date, May has stepped up efforts to convince the European Union to grant her concessions.

“The constant Brexit can-kicking has also increased the risks of a disorderly exit,” strategists at BNP Paribas said in a daily note.

May has promised that if parliament has not approved a deal by Feb. 26, she will make a statement updating lawmakers on her progress on that day and lawmakers will have an opportunity on Feb. 27 to debate and vote on the way forward.

For a factbox on what happens next, see

The pound was set to end the week on a cheerful note as data showed British retail sales rebounded in January, shaking off some of the recent gloom over the UK economy as the Brexit departure date nears.

After bouncing following the sales release, the pound held near the day’s high of $1.2839 in afternoon European trade, up 0.2 percent at $1.2824.

It performed even better against the euro, rising half a percent to 87.84 pence per euro at one point.

The euro’s decline accounted for much of the move, though. The euro fell after a European Central Bank board member said policymakers were discussing whether to issue new multi-year cheap loans to banks.

RATE HIKE BETS FALL

Dwindling expectations that the Bank of England will raise interest rates this year have weighed on the pound in recent days. Swap markets indicate a 28 percent probability rates will rise, compared with 30 percent earlier this week.

Derivatives markets painted a slightly more cautious picture for the pound, with one-month implied volatility picking up from December lows and rising to 9 vol on Friday.

Risk reversals, a market gauge of the ratio of puts to calls on a currency, indicate investors are leaning towards buying options to protect themselves against further downside in the British currency.

Source: UK Reuters

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Housing market off to ‘subdued’ start in 2019

The Royal Institution of Chartered Surveyors (RICS) has described the housing market as ‘subdued’, noting that new buyer enquiries fell in January for the sixth successive month.

In its latest residential market survey, the trade body confirmed that demand declined to some degree across almost every region in the UK, with Scotland the only exception. Even north of the border however the trend was flat.

A drop in demand has been accompanied by a fall in new listings also, to the weakest level seen since July 2016, while agreed sales fell further as well.

What’s ahead?

The RICS survey found that sales expectations are negative for the next three months both nationally and across most parts of the UK, though surveyors are positive in expecting sales to rise over the next year.

Prices are expected to continue to slip, with London and the south east subject to the most negativity from surveyors. RICS noted that these regions have seen strong house price growth in recent years, making them less affordable.

A mixed picture for landlords

The survey revealed a mixed picture for the lettings market. While demand picked up modestly, for the third straight quarter, new landlord instructions fell for the eleventh successive quarter.

Surveyors expect rents to increase by around 2% over the next year.

Simon Rubinsohn, chief economist at RICS, noted that while some respondents had enjoyed a stronger start to the year than anticipated, the majority were continuing to find the market a tough one in which to do business.

“Resolution of the Brexit negotiations is widely seen as critical to encouraging potential buyers back into the market, although whether that will be sufficient in London and parts of the south east where affordability remains stretched and the tax changes are most penal remains to be seen,” he added.

Source: Your Money

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UK property market peakes as average prices decline

The UK property market has peaked, and average prices are falling according to a property management firm.

Apropos by DJ Alexander Ltd has analysed official data and found that average prices in all parts of the UK (with the exception of Wales which continues to increase in average price) peaked between August and November of last year with average prices in London having reached their highest even earlier in July 2017.

All average property prices across the UK, England and Scotland peaked in August 2018 at £232,194, £152,411 and £249,127 respectively whilst in Wales the December 2018 average prices continued to rise reaching £161,845.

London prices reached their peak of £488,527 in July 2017 and have been below that level ever since and, in the latest month for data are 3.0 per cent below the peak.

The value of gross mortgage advances has grown to £73.5bn which is the highest level since Q4 2007. Of further concern is that the proportion of high loan-to-income (LTI) lending (loans above four times the value of annual income for a single buyer or above three times the annual income for joint buyers) has increased 1.7 per cent to 47 per cent with the share of loans with a loan to value (LTV) exceeding 90 per cent also increasing to 4.3 per cent.

The value of outstanding mortgages balances with some arrears increased for the first time since Q2 2016 in the fourth quarter of last year although still only accounts for one per cent of all balances.

David Alexander, joint managing director of Apropos by DJ Alexander Ltd, said: “Whilst there are concerns that the property market has stalled and is now falling back in most parts of the UK this is due to a number of factors rather than the enormous overheating of the market which occurred in 2007.

“London is undoubtedly suffering from a market which grew incredibly quickly and is now stabilising at a lower level. This will be because of individuals and investor worries over Brexit and continued economic uncertainty. The latest statement from the Chancellor that growth in the UK this year is slowing to its lowest level since 2012 will have done little to reassure the property markets.

“There is little doubt that the buy-to-let market has fallen back as smaller, more independent investors exit the market due to the enormous financial and regulatory changes which have occurred in the last couple of years. This will be taking some heat out of the market at a time when individual buyers may already be holding from commitment due to external factors.”

He added: “Although the value of debt is now at its highest level since Q4 2007 and high LTI lending is once again becoming a feature of the marketplace there is little sign of the same frenetic atmosphere which accompanied the 2007 property crash.”

Mr Alexander concluded: “Despite some of the gloom currently present within the market there are opportunities, there are possibilities for individuals and investors. It requires greater skill, a long-term attitude to the property market, and some courage to understand that property prices will always ebb and flow, but the overall direction is up.

“You need to take a medium to long term view to get the best out of a home or an investment. Short termism may sometimes win but as a rule it is a tactic which is likely to fail.”

Source: Scottish Legal

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Investors grab Brexit bargains among UK housebuilders

Daring investors are dipping their toes back into UK housebuilders, attracted by high dividend yields and low valuations even though they are seen as among the most vulnerable sectors in the event of a messy Brexit.

As Britain’s exit from the EU remains shrouded in fog, housebuilders have been top targets for short sellers betting on a fall in the shares, but recent data shows short positions have fallen and some investors are buying back in.

To those investors, Brexit fears and the perceived risk to housebuilders also give the potential for strong rallies. Indeed, British housebuilder stocks have risen 11 percent since their December low and Taylor Wimpey has shot up 30 percent since then.

“I like it when there’s a short. You can have good returns when there are disagreements,” said Fabrice Theveneau, head of global equities at Lyxor Asset Management in Paris, who has recently bought shares in some UK housebuilders.

“The guys who’ve been shorting the housebuilders made a lot of money on them… they could very quickly turn their positions.”

In the last thirty days, the level of short interest has fallen for most UK housebuilders, data from FIS Astec Analytics shows.

Shares in the UK’s biggest listed housebuilders fell between 26 and 33 percent in 2018 as housing data increasingly showed a severe slowdown in sales volumes and prices, blamed in part on the uncertainty surrounding jobs and growth after Brexit.

British property surveyors are the most downbeat about the short-term outlook for house prices in nearly eight years, a survey on Thursday showed, as buyers and sellers shy away from major financial decisions.

London and the South-East have led the slide in house prices and sales. Yet a Deloitte survey found construction in four regional cities is booming.

Investors are using that regional divide to guide their choices.

“We try to avoid those mostly focused on London, like Berkeley. We prefer Taylor Wimpey, Persimmon, and Barratt Developments,” said Lyxor’s Theveneau.

TARGETED STRATEGY

Data from FIS Astec Analytics shows short sellers are even differentiating between London-focused builders Berkeley and Crest Nicholson.

Crest Nicholson has seen short interest increase significantly, with a utilisation rate (percentage of total shares borrowed) as high as 32 percent.

Last year, Crest Nicholson pulled back from London, closing its office there in a bid to reduce its dependence on the UK capital’s faltering housing market where prices were falling and costs were rising.

“We have faced some challenges in London and with sales at higher price points where political and economic uncertainty has adversely impacted customer demand… this is likely to continue pending Brexit resolution,” it said in January.

The company which focuses on the south of England has moved into the Midlands in a push into more affordable areas, and has postponed opening its new South East division.

Rival Berkeley Group, which also has significant exposure to London, has meanwhile seen short interest fall since the Brexit vote.

Charlie Campbell, an analyst at Liberum, put this down to the housebuilder’s more international customer base which could insulate it from falling confidence among UK buyers.

Berkeley Group has sales offices in Dubai, Bangkok, Singapore, Hong Kong, Beijing and Shanghai.

Another strategy followed by some investors is to home in on stocks that could show more resilience in the face of slower sales and low buyer confidence.

Paul Mumford, fund manager at Cavendish Asset Management, owns Telford Homes because of its focus on building in non-prime, “up and coming” areas of London, and its policy of forward selling developments.

Mumford also owns Henry Boot, Daejan, and St Modwen, which he says are more insulated from the cyclicality of the housing market because they are more exposed to the commercial property market.

OVER-OPTIMISTIC?

How much of the hard Brexit scenario is discounted in housebuilder shares is key to investors seeking to find value.

Redburn analysts say current valuations factor in a roughly 30 percent decline in EBIT (earnings before interest and tax) this year, which would imply a 5 percent fall in house prices and 10 percent fall in volumes. The analysts have no sell recommendations in the sector.

That is a far more benign scenario than the 35 percent fall in house prices over the next three years predicted by Bank of England governor Mark Carney if the UK exits without a deal.

There is no date yet set for a new vote on May’s Brexit deal, but share prices have been climbing despite the lack of any clarity.

“The big question is not what happens today but where are we in the middle of summer, is all this behind us?” said Liberum’s Campbell.

“If it is, then the shares are pretty cheap, but if we’ve just gone through a disorderly Brexit you could look back at the shares and at this point in time you might think we were all a bit over-optimistic.”

Source: UK Reuters

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Newport sees biggest jump in house prices

Newport, South Wales, saw the biggest jump in house prices of any UK town or city in 2018, Land Registry data revealed this morning (February 14).

Average property prices in Newport increased by 10.6 per cent to £182,505 in 2018 while Aberdeen suffered the worst fall outside London, dropping 6.5 per cent to £152,799, the latest official statistics showed.

The average growth rate across the UK was 2.6 per cent last year, according to analysis by Gatehouse Bank, with 318 (78.3 per cent) of all 406 local authorities reporting prices increased in 2018, while 88 (21.7 per cent) saw them fall.

Top 10 performing towns and cities in 2018

TOP TEN 2018
Location Dec 2018 Change YoY (%) Change YoY (£)
Newport £182,505 10.6% £17,477
Merthyr Tydfil £106,228 9.7% £9,401
Nuneaton £181,987 9.3% £15,512
Warrington £201,446 8.6% £16,031
Corby £186,631 8.3% £14,268
Stirling £187,620 8.3% £14,443
Leicester £175,250 7.6% £12,436
Liverpool £137,163 7.3% £9,286
Edinburgh £260,221 7.2% £17,378
Sheffield £168,128 7.1% £11,183

Ten worst performing towns and cities in 2018

BOTTOM TEN 2018
Location Dec 2018 Change YoY (%) Change YoY (£)
Aberdeen £152,799 -6.5% -£10,708
Eastbourne £228,774 -5.9% -£14,324
St Albans £501,817 -5.1% -£27,031
Watford £350,868 -3.1% -£11,149
Conwy £159,589 -2.7% -£4,464
Blackburn £108,379 -2.3% -£2,535
Darlington £129,985 -2.0% -£2,602
Basingstoke £301,158 -1.9% -£5,815
Barrow-in-Furness £115,481 -1.7% -£2,028
Harlow £272,324 -1.7% -£4,712

Charles Haresnape, chief executive of Gatehouse Bank, said: “It was an unpredictable year for house prices in 2018 and in the end, although the market only just outpaced inflation on the whole, there were still some stand out performances.

“Increases of 10.6 per cent in Newport and 9.7 per cent in Merthyr Tydfil are pretty striking when you consider the political instability that has weighed on the UK since the Brexit vote.

“Poor performances like that seen in Aberdeen, which fell 6.5 per cent, are proof that the cocktail of economic uncertainty, lack of housing supply and a raft of buyer incentives and cheap borrowing are creating a heady mix of outcomes across the country.

“Of course, a strong increase in one year is no guarantee of future success. Indeed, only three places in 2017’s top 10 appear in 2018’s top flight, with first place Cambridge dropping to 259th of all local authority areas last year.”

Source: FT Adviser

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‘No deal’ Brexit prompts expectation of increase in demand for business loans

As predictions have emerged of an upsurge in borrowing demand from SMEs if a ‘no deal’ Brexit occurs, owners of small businesses are being urged to fully acquaint themselves with the terms of a personal guarantee backed loan, before signing on the dotted line.

Todd Davison, director of Purbeck Personal Guarantee Insurance said, “It is widely anticipated that there will be an increase in demand for loans as SMEs look to introduce additional working capital buffers in a bid to ride out any impact on business following a “no-deal” Brexit.

“Additional funding to aid cash flow may help to offset downturns in trade or disruption within the supply chain. But the reality is that most commercial funding will need a Personal Guarantee and this commitment should not be taken lightly.

“As the UK’s only provider of Personal Guarantee Insurance to SMEs, we would urge the Directors of SMEs to fully consider their options and the risks, particularly in the current uncertain economic climate.   It’s vital Directors seek independent advice, and ensure they have investigated what alternative funding may be available.  If a Personal Guarantee backed business loan is the right solution, they should ensure they’re comfortable with all the terms of the guarantee.”

Top facts to check before signing a personal guarantee for a business loan:

  • How will the lender enforce the guarantee?
  • Can the lender serve notice or seek payment on demand?
  • What exactly constitutes a default?
  • Do the terms allow for any remedy period upon default?
  • How will your net personal assets be assessed prior to the giving of the guarantee, and is this is likely to change?
  • Does the contract state that the lender must exhaust every other avenue before making demands on you?
  • Have you considered the cost of obtaining personal guarantee insurance?

Todd Davison concludes: “Personal Guarantees are likely to be requested by every business lender. Directors of small businesses should be clear on the terms of the guarantee, and should have contractual clarity on all eventualities. They should be as genuinely objective as they can about the financial prospects of their business and its commercial value too. It’s essential to remember that a Personal Guarantee is not a hypothetical assurance, creditors can and will enforce them.

“Because they significantly increase risk for the borrower, Personal Guarantees can cause enormous stress. It’s therefore advisable to get Personal Guarantee insurance against the risk that the Guarantee is called by a lender. It will offset any outstanding obligations called in under a Personal Guarantee. The level of cover is based on a fixed percentage of the Personal Guarantee the company director wishes to insure and this is dependent on whether the corresponding finance facility is secured or unsecured.”

Source: London Loves Business

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Housing market endures sluggish start to the year as buyer and seller confidence dwindles

The UK housing market has endured a slow start to the year as key activity measures for both buyers and sellers fell further in January.

Enquiries, sales and new instructions all declined in January as uncertainty continues to wear away at confidence, according to research by the Royal Institution of Chartered Surveyors (Rics).

New buyer enquiries fell for the sixth successive month in January, while demand slipped across almost all parts of the UK.

The figures revealed the number of new properties listed on the sales market also dropped to its lowest level since July 2016. Agreed sales also took a tumble, with the rate of decline gaining pace compared to the previous month.

Rics said forecasts for the coming three month remain gloomy, as uncertainty surrounding Brexit continues to take its toll.

But the long-term outlook is more positive, Rics said, with 16 per cent of those surveyed expecting sales to rise over the next 12 months.

Rics chief economist Simon Rubinsohn said: “Although some contributors to the survey have taken comfort from a better start to the year than anticipated, a larger proportion are continuing to find the market a difficult one in which to do business.

“Resolution of the Brexit negotiations is widely seen as critical to encouraging potential buyers back into the market, although whether that will be sufficient in London and parts of the south east where affordability remains stretched and the tax changes are most penal remains to be seen.”

The figures showed house price growth slowed for its four consecutive month, mainly dragged down by London and the south east.

The sluggish growth reflects the latest data from the Office for National Statistics (ONS) and the Land Registry, which revealed house prices rose at their slowest pace since 2013 in December.

But Rics said the lettings market has proved more robust, with tenant demand rising modestly in the three months to January. Despite this, new landlord instructions slowed for the eleventh successive quarter.

Source: City AM

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House price growth slows to six-year low

House price inflation slowed to 2.5 per cent during December, according to the Office for National Statistics.

This was the lowest annual rate of house price inflation since July 2013 and continued the slowdown seen in the housing market over the past two years.

The average UK house price was £231,000 in December 2018 – £6,000 higher than a year previously.

On a month-on-month basis, house prices only rose by 0.2 per cent between November and December.

Dilpreet Bhagrath, mortgage expert at Trussle, said: “Even with the slight increase in prices, it’s clear that Brexit nerves and uncertainty is still affecting the market. Not to mention the ongoing lack of supply, with more risk-adverse sellers staying put until the economic picture becomes clearer.

“That said, for new buyers, the current low interest rate climate coupled with the government’s commitment and extension of the help-to-buy scheme will offer further support for those hoping to get a foot on the ladder.

“For the slightly more cautious first-time buyers, opting for fixed rate mortgage deals might be favourable, giving complete clarity over how much your mortgage costs each month so that you can plan ahead.”

Steve Seal, director of sales and marketing at Bluestone Mortgages, added: “Slower house price growth is no doubt a reflection of potential buyers choosing to adopt a ‘wait and see’ approach before committing to the biggest purchase of their life – a home.

“To tackle this, lenders are offering near record low deals to reassure borrowers that there is still plenty of opportunity to lend.”

The lowest annual growth was in the North East, where prices fell by 1 per cent over the year to December 2018, followed by London where prices fell 0.6 per cent over the year.

House prices in London have now fallen from a peak of £488,527 in July 2017 to £473,822 in December.

Meanwhile house price growth was strongest in Northern Ireland, where prices increased by 5.5 per cent, and Wales, where house prices increased by 5.2 per cent.

The ONS said the increase in house prices in Wales was driven by strong growth in the south east of the nation, likely linked to the abolition of tolls on the Severn Bridge.

Despite the strong house price growth in Northern Ireland, it remains the cheapest area of the UK for property, with the average home costing £136,669 compared to £247,886 in England.

Source: FT Adviser