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Brexit delay will keep stranglehold on UK economy, warns former Bank policymaker

Delaying Brexit will consign Britain’s already weak economy to “sluggish” growth and risks a further manufacturing exodus until a deal is struck, a former Bank of England rate-setter has warned.

Ian McCafferty – who sat on the Bank’s Monetary Policy Committee (MPC) for six years until last August – told the Press Association if the EU approves a delay to Article 50 with no clear plan for a deal at the end, the uncertainty will wreak further havoc on the economy.

He said the sharper than-expected slowdown in business investment, which was largely behind the weak growth of 0.2% in the fourth quarter of 2018, would continue as firms halt large-scale strategic investments.

The longer the uncertainty continues, the more it’s clear that businesses are finding it difficult simply to wait

Ian McCafferty, Oxford Economics

In a sobering take on the prospects for the economy, he said small suppliers face the threat of going out of business if large manufacturers start ditching the UK in droves amid political dithering.

He said: “A longer-term delay would continue the issue of business uncertainty and lack of confidence.

“It would probably continue to see the economy grow very sluggishly.”

He added that large firms will be increasingly forced to put contingency plans into place, which may mean more moves to shift production and operations out of the UK.

“The longer the uncertainty continues, the more it’s clear that businesses are finding it difficult simply to wait,” he said.

Mr McCafferty, who joined Oxford Economics as senior adviser last month, said even if a delay of a year or two was accompanied by the prospect of a better Brexit outcome at the end, there would still not be an immediate bounce back in the economy.

Businesses want to see firm details of trading relationships before committing to investment, he said.

“Until the degree of uncertainty is properly resolved and there is much greater clarity on the future of the trading relationship, I’m not sure we’ll see business confidence and business investment rallying dramatically,” he cautioned.

His comments come ahead of the Bank of England’s MPC meeting on Thursday, when it is set to keep interest rates firmly on hold at 0.75% amid the Brexit maelstrom.

Bank governor Mark Carney has also recently warned that delaying Article 50 is not a better option than a deal or transition period, telling MPs earlier this month that uncertainty will linger for at least a year even after an agreement is struck.

Oxford Economics is currently predicting a 60% chance that Prime Minister Theresa May’s deal will eventually go ahead, albeit with amendments.

Given that the MP votes are not yet legally binding, it believes there is still a 35% chance of the UK crashing out without a deal – and a 5% probability of Article 50 being revoked completely.

While a delayed Brexit deal will inflict yet more uncertainty on Britain’s beleaguered businesses, a no-deal outcome would still be a far worse outcome in the short term, said Mr McCafferty.

Oxford Economics is forecasting a no-deal Brexit would wipe at least 2% off gross domestic product (GDP) in the next two years – tipping the UK into recession.

Mr McCafferty said the UK’s already “weak economy” is likely to have eked out growth of just 0.1% to 0.2% in the first quarter of 2019 – a far cry from the 0.6% growth seen last summer amid the heatwave and World Cup boost.

He said the MPC has “limited room for manoeuvre” to boost the economy, with rates already not far off zero and increasing political resistance to further quantitative easing (QE).

Given the “shifting attitudes” to QE, he questions if the Bank could use it again, with politicians blaming it for increasing inequality in the UK since the financial crisis.

But he said the better position in the public finances should allow the Chancellor to use his fiscal firepower to bolster the economy in tandem with monetary policy.

Mr McCafferty – whose new role sees him provide boardroom-level consultancy for large companies on issues such as the economy and Brexit – left the MPC just before the worst of the Brexit turmoil.

But he dismissed suggestions he left at the right time.

He said: “I envy my colleagues who are still on the committee – it’s a fascinating time to be on the MPC.”

Source: iTV

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BOE Set to Hold Rates as Officials Face Longer Brexit Paralysis

BOE Set to Hold Rates as Officials Face Longer Brexit Paralysis More (Bloomberg) — Any hope Bank of England officials may have had of escaping from Brexit limbo this month has been dashed.

The Monetary Policy Committee’s next interest-rate decision will be announced on Thursday, just a week before the U.K.’s planned March 29 exit date from the European Union.

While any kind of delay — which would still need to be approved by the European Union — would help avoid the worst-case scenario of a no-deal exit, it’s unlikely to lift the “fog of Brexit” that Governor Mark Carney spoke of last month.

Against that backdrop, all 20 economists surveyed by Bloomberg say the nine-member MPC will vote unanimously to keep interest rates unchanged at 0.75 percent on March 21.

That chimes with the views of markets, who don’t see another move until beyond May 2020. The MPC’s central view remains that a gradual series of interest-rate hikes will be needed in coming years.

However, a number of officials, including the hawkish Michael Saunders, have indicated they’re prepared to wait and see how Brexit turns out before making another move. That may now take longer than previously anticipated.

Parliament voted this week to seek a delay to the U.K.’s exit date, buying Prime Minister Theresa May time to try to get her deal through on the third try.

If she manages to win that vote — which could come before the BOE decision — then it’s likely that a short delay will be requested. Lose it, and there could be a far more a lengthy postponement.

By David Goodman

Source: Gooruf

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House Prices Predicted to Fall

House prices in the UK are expected to fall by the end of the year, according to the Office for Budget Responsibility.

The OBR downgraded their official forecasts, predicting that in the final quarter of 2019 average house prices will fall by 0.3%. The independent analysts previously predicted back in October last year that the average price of a home in the UK would grow by 3.2% over that period.

According to official figures, the growth of house prices over 2018 was just 2.5%, the lowest rate in the last 5 years. Many analysts have pointed towards uncertainty surrounding Brexit as a reason for the slowdown in the UK housing market, as well as a shortage of supply. The Royal Institution of Chartered Surveyors said that new buyer enquiries and agreed sales have both been falling for six months in a row.

However, the OBR were more positive about the outlook beyond 2019. They predicted that by the second quarter of next year, average house price growth will hit 0.9%. This is still lower than their previous prediction of 3.1%. But they believe that by the end of 2021, growth will be up to 4% – higher than the 3.3% predicted in October.

“Leading indicators of housing activity and prices have weakened noticeably since our October forecast,” said the OBR. “Beyond the near term, we expect price inflation to pick up as a result of stronger real household income growth and continued pressure of demand on supply. Overall, we expect house prices to rise by almost 17% between the fourth quarter of 2018 and the first quarter of 2024 – close to household income growth over the same period. That compares with forecast growth of nearly 20% in our October forecast.”

However, some people in the housing industry weren’t as confident. Aneisha Beveridge, head of research at estate agents Hamptons International, believes the future of the housing market will be less prosperous if the UK were to crash out of the EU without a deal by the end of the month.

“Their forecasts are based on the assumption that the UK will leave the EU on March 29 with a deal in place and a smooth transition period,” said Ms Beveridge. “But given that this assumption is now looking less likely than ever, there is every possibility that their forecast for house price growth will be revised down again.”

Simon Rubinsohn, the chief economist at Rics, believes that people selling their home need to be more realistic and have more awareness of the current market conditions.

“This environment requires a greater degree of realism from those looking to move,” said Rubinsohn. “A reluctance from some vendors to acknowledge the shift in the balance of power in the market will compound the difficulty in executing transactions.”

In a bid to tackle the issue of limited supply, the government have announced plans to inject more affordable housing on the market. In his Spring Statement, the chancellor Philipp Hammond guaranteed £3bn of lending to housing associations to help deliver 30,000 affordable homes.

By Fergus Cole

Source: Money Expert

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UK Economy Roars Back to Life in New Year with Strong GDP Beat

– UK economy rebounds with a bang in January as GDP rises 0.5%.

– Rebound more than offsets -0.4% decline seen back in December.

– And may be enough for markets to keep faith with BoE rate hike bets.

The UK economy rebounded from its December slump early in the New Year, according to Office for National Statistics (ONS) figures released Tuesday, and momentum behind the recovery could be enough to ensure financial markets keep faith with hawkish bets about Bank of England (BoE) interest rate policy.

The UK economy grew by 0.5% in January, which more than reverses the -0.4% decline seen back in December, when markets had been looking for only a 0.2% increase in the New Year.

All main sectors of the economy contributed to growth during the January month, with the exception of agriculture, although the standout performer was the construction sector which saw output rise by 2.8%. However, that simply reverses a -2.8% decline from December.

“The larger than expected monthly increase in GDP of 0.5% in January (consensus 0.2%) is a reassuring sign that, up until January at least, the UK economy was weathering the political crisis at home and slowdown overseas pretty well,” says Andrew Wishart, an economist at Capital Economics.

“The rebound in GDP in January, after December’s 0.4% month-to-month drop, is a timely reminder that the PMIs aren’t a reliable indicator of the economy’s momentum when political uncertainty is elevated,” says Samuel Tombs, chief UK economist at Pantheon Macroeconomics.

Tuesday’s report comes after IHS Markit PMI surveys of the services, construction and manufacturing sectors suggested strongly that the economy ground to a halt in January.

Those PMI surveys continued to point toward economic stagnation after ONS data revealed the December GDP contraction, leading to increased speculation that the economy had hit a rough patch just as the March 29, 2019 Brexit day appeared on the horizon.

ONS figures for January show the economy rebounding resolvedly from its December trough but the UK economic picture painted by Tuesday’s numbers is entirely different when viewed over a longer horizon, because GDP grew by just 0.2% for the three months to the end of January.

Above: Sectoral contributions to UK GDP growth on a three-month basis.

Quarterly growth was led by a robust expansion in the services sector but the increase was unchanged from the 0.2% pace of growth seen in the final quarter of 2018 and takes the shine off of Tuesday’s headline.

On a three-month basis the services sector expanded by 0.38% while output from the construction sector declined -0.04% and output from the industrial sector fell -0.12%. However, economists say the pace of growth in the January month alone could be more important for the outlook than the three-month number.

“January’s increase in GDP exceeded even our top-of-the-range 0.4% forecast, so we are revising up our forecast for quarter-on-quarter growth in Q1 to 0.3%, from 0.2%. This implies that little, if any, excess capacity will open up in the first half of the year, giving the MPC little time to delay another rate hike if, as we expect, GDP growth regains some momentum once a Brexit deal has been signed off,” says Tombs.

Tuesday’s data follows a year in which UK GDP grew by just 1.4% after the economy expanded by 0.2% in the final quarter, 0.6% in the third quarter, 0.4% in the second quarter and just 0.1% in the first quarter. That was the weakest expansion since 2012, and one that many economists have attributed to uncertainty over the Brexit process.

First quarter GDP growth has tended to be weak in recent years and given the performance of the economy in 2018, expectations for the New Year period in 2019 have been particularly downbeat. But some economists are telling their clients that Tuesday’s figures could mean this year is different.

“There is no denying that today’s figures suggest the economy is weathering the Brexit storm remarkably well,” says Wishart of Capital Economics. “Of course, the data may deteriorate in February and March if Brexit has caused consumers and firms to reach for the handbrake. But note that even if monthly GDP growth is zero in February and March, the economy would still grow by 0.4% in Q1. As a result, we are happy to stick with our 0.3% q/q forecast.”

UK economy

Above: UK GDP growth trends.

Currency markets care about the GDP data because of what it might mean for Bank of England interest rate policy. Rising demand within an economy can often mean increased inflation pressures, and it is changes in the consumer price outlook that dictate BoE interest rate decisions.

The BoE has raised rates by 25 basis points on two occasions since the referendum in 2016, taking the Bank Rate up to 0.75%, and it’s said repeatedly in recent months that elevated inflation and a robust outlook for consumer price pressures mean it’ll need to keep raising rates in the coming quarters.

However, pricing in the overnight-index-swap market implies a BoE bank rate of just 0.81% for December 19, 2019, which is just 6 basis points above the current cash rate and suggests strongly that investors have only limited appetite for betting on a BoE rate hike coming this year.

The actual Bank Rate that would prevail if the BoE were to hike again is 1%. As a result, there is significant scope for investors to price-in BoE policy action for 2019, which would be positive for Pound Sterling exchange rates if such a thing were to happen.

Many economists say a deal facilitating an orderly exit of the UK from the EU would be enough to persuade the BoE to come off the sidelines and lift its interest rate again.

By James Skinner

Source: Pound Sterling Live

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Brexit fallout on UK finance intensifies – think tank

More than 275 financial firms are moving a combined $1.2 trillion (£925 billion) in assets and funds and thousands of staff from Britain to the European Union in readiness for Brexit at a cost of up to $4 billion, a report from a think tank said on Monday.

UK lawmakers are due to vote on Tuesday on an EU divorce settlement. But with less than three weeks to go before Brexit day on March 29, it is still unclear whether the deal will be approved, whether departure from the EU will be delayed, or whether it will happen without agreement.

The report by the New Financial think tank, one of the most detailed yet on the impact of Brexit on financial services, said Dublin alone accounted for 100 relocations, ahead of Luxembourg with 60, Paris 41, Frankfurt 40, and Amsterdam 32.

The independent think tank said half of the affected asset management firms, such as Goldman Sachs Investment Management, Morgan Stanley Investment Management and Vanguard, had chosen Dublin, with Luxembourg the next port of call, attracting firms like Schroders, JP Morgan Wealth Management and Aviva Investors.

Nearly 90 percent of all firms moving to Frankfurt are banks, while two-thirds of those going to Amsterdam are trading platforms or brokers. Paris is carving out a niche for markets and trading operations of banks and attracting a broad spread of firms.

New Financial identified 5,000 expected staff moves or local hires, a figure that is expected to rise in coming years.

A better measure of Brexit’s impact is the scale of assets and funds being transferred, it said.

Ten large banks and investment banks are together moving 800 billion pounds of assets from Britain – or 10 percent of banking assets in the country. A small selection of insurers have shifted a combined 35 billion pounds in assets, and a handful of asset managers have moved a total of 65 billion pounds in funds.

William Wright, founder and managing director of New Financial, said the hit to London was bigger than expected and would get worse.

“Business will continue to leak from London to the EU, with more activity being booked through local subsidiaries,” Wright said.

“This will reduce the UK’s influence in European banking and finance, reduce tax receipts from the industry, and reduce financial services exports to the EU.”

A 10 percent shift in banking and finance activity would cut UK tax receipts by about 1 percent, the report said.

Relocations have cost firms $3 billion to $4 billion, which will be passed on to customers and shareholders, the report said.

But the breadth and depth of relocations so far, combined with pacts between regulators in Britain and the EU, mean the industry is well prepared for whatever form Brexit takes, New Financial said.

London will remain the dominant financial centre for the foreseeable future, but other European cities will chip away at London’s lead over time, it added.

By Huw Jones

Source: Yahoo Finance

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UK property market “resilient” as Brexit deadline nears

Property price growth, particularly in the north west of England, remains strong, highlighting the continued strength of the UK’s real estate sector even during times of wider economic changes.

Summary:

  • A shortage of supply continues to drive price growth in the UK property market, even as the country’s Brexit deadline nears
  • Average property prices in the UK have risen on a monthly, quarterly and annual basis for the first time since October 2018, with growth and demand from buyers highest in regions such as north west England
  • The performance underlines the enduring strength of the country’s real estate sector for both domestic and international investors

UK property continues to remain “resilient” in the face of wider economic developments relating to Brexit.

That’s the message from some of the country’s leading experts and agents, who point to rising prices and a supply to demand imbalance as proof of the sector’s enduring strength.

Nationally, the average property price in the UK rose by 2.8% in the 12 months to February 2019, according to the latest figures from Halifax. Prices also increased 5.9% month on month and 1.8% based on the previous quarter. This is the first-time average values have grown on a monthly, quarterly and annual basis for the first time since October 2018.

Commenting on the performance Russell Galley, Managing Director of Halifax, believes the growth is a result of a significant lack of supply of property across the country.

He also added: “People are still facing challenges in raising a deposit which means we continue to expect subdued price growth for the time being. However, the number of sales in January was right on the five-year average and, at over 100,000 for the fifth consecutive month, the overall resilience of the market is still evident.”

Analysts have noticed a trend among some domestic home buyers of adopting a ‘wait and see’ approach with regards to buying a property before the Brexit deadline on 29th March. But Dilpreet Bhagrath, Mortgage Expert at Trussle, advised buyers not to be put off, reminding them that “there are still good offers to be had in some areas of the country”.

Furthermore, Sam Mitchell, Chief Executive Officer of HouseSimple, reminded investors that regardless of the external considerations of Brexit, the UK property is an investment sector renowned for its stability, particularly during times of wider economic change.

He said: “Even with an acceptable exit deal in place, house prices are likely to face some heavy turbulence. But it’s nothing the property market can’t take in its stride.”

Mr Mitchell also advised investors not to focus their attention on London’s property market, pointing out that sales activity continues to be highest in key regions such as north-west England, home to cities such as Manchester.

“Far too much has been made of stalling price growth in the capital and the part Brexit has played, when in fact London was already showing signs of running out of steam. The danger is that stuttering house price growth in London sets the tone for the whole country,” he said.

 “And the strength of regional property markets in the north, buoyed by strong first-time buyer and investor numbers, is an encouraging sign that the performance of the UK’s housing market is not determined by what’s happening within the M25.”
Recent figures published by Savills showed that, between 2004 and 2018, it was those that bought UK property in 2009, in the immediate aftermath of the global financial recession, that made the highest returns when selling their properties last year.

With some investors hesitating, and with further fluctuations in the value of the pound expected in the coming weeks whilst the UK negotiates its withdrawal from the EU, those that make a move in the market now could achieve some of the highest returns on their investment in the coming years.

Source: Select Property

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Brexit set to hurt UK investment for years – BoE’s Haskel

British business investment will probably stay weak for the next few years because of uncertainty linked to Brexit, a Bank of England interest-rate setter said, calling into question suggestions of a Brexit deal “dividend” by the finance minister.

As Jonathan Haskel gave his first speech since joining the BoE’s Monetary Policy Committee in September, Prime Minister Theresa May’s Brexit strategy was in meltdown after her failure to win last-minute concessions from the EU ahead of a key parliamentary vote on Tuesday.

Haskel said a planned 21-month transition period that is supposed to come into effect when Britain formally exits the European Union on March 29 might run for longer than expected.

In the longer term, companies also need to know whether Britain will have a customs union agreement with the EU or strike a free trade agreement in order to have a sense of how high any new barriers to trade with the bloc will be, he said.

“The longer-term question is whether investment will eventually bounce back after uncertainty is resolved. The answer to this depends on what trade deal is struck,” he said in a speech at the Department of Economics at the University of Birmingham.

“At least for the next few years the prospect of low investment seems possible.”

Companies in Britain cut back their investment in each of the four calendar quarters of 2018 — the longest such run since the depths of the global financial crisis — as the country approached its departure from the European Union.

PRODUCTIVITY CONCERNS

Haskel said almost 70 percent of the slowdown in business investment in Britain since the Brexit referendum in June 2016 was linked to uncertainty over Brexit.

The BoE is concerned that weak business investment will aggravate Britain’s low productivity growth, holding down growth in wages and making the economy more susceptible to inflation.

With May facing the risk of another humiliating defeat of her Brexit plan in parliament on Tuesday, she has opened up the possibility of a short extension to the current negotiations.

Finance minister Philip Hammond, seeking to help May get parliament behind her deal, has said investment is likely to pick up once companies have more clarity that Britain can avoid an economically damaging no-deal Brexit.

Haskel declined to comment on the implications of weak investment for the BoE’s thinking on interest rates, saying that would be something for his next speech.

“Since this thing… is very hard to predict, that’s the way I would think about it. But that will be the next speech, to trace through the relative impact on the demand and supply,” he said during a question-and-answer session after his speech.

The BoE has said it expects to resume raising interest rates if Britain can seal a deal to avoid a no-deal Brexit.

Governor Mark Carney and some other policymakers have said they think they would probably need to cut rates if Britain fails to secure a transition deal to ease the shock of its exit from the EU.

By Andy Bruce

Source: UK Reuters

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Property Market Steady in January as Wait for Brexit Decision Continues

The start to 2019 saw a continuation of many of the trends that were apparent towards the end of 2018, namely that there was still significant disaggregation between regional performance, and further nuances between price brackets in key conurbations. With values increasing slightly on a monthly basis in Wales, Scotland, the North East and East of England, and reports across our network of a busy month with buyer enquiries, we would suggest that there is plenty of steam left in the market in parts of the country, albeit that other areas are perhaps seeing some potential movers taking the ‘wait and see’ approach until there is more clarity around the current political situation.

This has led to reports of shortages of stock in some areas, as vendors who would like to move are also holding on until such time as the market in their area improves, providing a degree of insulation for values even where there are fewer buyers who are currently active. With many lenders entering the final quarter of their financial year in January, the market saw a raft of new and highly competitive rates released which added further support for the market as fixed-term product pricing fell to near-historically low levels.

Overall, it would seem that pent-up demand is building in many areas, due to the number of well intentioned buyers and sellers who had hoped that the political uncertainty would have abated by now. Therefore, whilst market sentiment may be one of caution in some areas for the short-term, the mid to longer-term view could well be more optimistic once we have a Brexit denouement.

On a topline basis data for Wales is as follows:   

Wales Average Statistics –January 2019 data Purchase Mortgage Remortgage
Average LTV % 77% 62.5%
Average loan size £133,484 £125,808
Average age 36 42
Average income £30,788 £32,152
Average property value £172,460 £201,293

Richard Hullin from Mortgage Advice Bureau in Swansea comments:

“We came back to work in January expecting a quiet couple of weeks, but instead hit the ground running with the phones ringing non-stop on the first day back!  It would seem that a lot of our clients had been out viewing properties over the Christmas holidays, and as a result wanted to formalise their offers early in the new year.  This meant that the majority of mortgages we arranged last month were for clients moving home, either due to a change in circumstances – for example, a few divorce cases which were quite complex to navigate – as well as growing families for whom the festive period had highlighted that they needed more room.  As a consequence of this level of activity, prices locally remained steady in January on the previous month.

We also assisted a substantial number of clients with their remortgages in January, many of whom wanted to take the time to review their borrowing and get their finances in order for the new year.  In addition, we worked closely with a few of our professional investor clients who required specialist Buy To Let mortgages, as they have large portfolios owned by limited company structures. Overall then, it was very much business as usual for us, despite the Brexit headlines which don’t seem to be causing much – if any – concern to buyers in our local area.” 

By Chris McColgan

Source: Business News Wales

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UK Construction Set for Growth Amid Brexit Uncertainty

The annual Construction Skills Network (CSN) report, which issues a five-year forecast into the skills requirements for the industry, anticipates a 1.3% growth in construction across the UK, which is one-third of a percent lower than last year. The forecast is based on the premise that the UK has an exit deal with the EU.

Public housing is the largest anticipated increase- it appears to be moving steadily ahead as infrastructure declines. Financial support from the local and national government is supporting a growth rate of 3.2% in public housing, which is up by half a percent since the forecast last year.

Infrastructure is expected to increase by 1.9%, which is down from last year’s forecast of 3.1%. This sector has been heavily impacted by Brexit uncertainty and last month’s stalling of Wylfa, the Welsh nuclear power plant.

Commercial construction is going down significantly due to investors being overly cautious in the face of Brexit. The forecast anticipates that the sector will decline sharply in 2019 and level out by 2023, with no growth expected overall.

Despite this outlook, the housing repair and maintenance industry appears to be profiting from a more subdued property market, as homeowners cancel plans to sell and improve their current properties. This sector is expected to grow by 1.7% by 2023.

Although the wider economic outlook remains uncertain, more construction workers will be needed over the coming five years. An estimated 168,500 construction jobs will be created in Britain during that time, 10,000 more than the 2018 forecast. Employment in construction is expected to reach 2.79 million in 2023, which is only 2% lower than its 2008 peak.

CITB Policy Director Steve Radley said that the forecast reflected the uncertainty across the wider economy, primarily due to Brexit.  Concerns about Brexit are weighing on investors and clients at present, which is affecting contractors and their ability to plan for the future.

Mr. Radley said that if a deal is agreed regarding the UK departure from the EU, low but positive growth is expected for the construction industry. Even as infrastructure slows down, public houses and repair and maintenance are showing signs of strengthening. This should result in the number of construction jobs increasing over the next five years, creating more opportunities for construction careers and heightening the importance of tackling the current skills pressures.

Source: CRL

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UK house prices: Experts cast doubt on ‘volatile’ Halifax price hike figures

House prices rose almost three per cent at the start of 2019 compared to the same period last year, new figures revealed today.

Annual house price growth hit 2.8 per cent in the three months to February compared to the corresponding time in 2018, Halifax’s house price index said today – much higher than the 0.8 per cent growth in January.

The value of UK homes rose 5.9 per cent month-to-month, Halifax added, seeing the average UK house price hit £236,800.

Measured on a quarterly basis, growth hit 1.8 per cent as a lack of homes on the market buoyed prices.

Halifax managing director Russell Galley said: “The shortage of houses for sale will certainly be playing a role in supporting prices.

“Annual house price growth at 2.8 per cent is within our expectations, but is fairly subdued compared to 2015 and 2016, when the average growth rate was 8.3 per cent.

“People are still facing challenges in raising a deposit which means we continue to expect subdued price growth for the time being. However, the number of sales in January was right on the five-year average and, at over 100,000 for the fifth consecutive month, the overall resilience of the market is still evident.”

Unreliable indicator?

However, Howard Archer, chief economist to the EY ITem Club, said Halifax’s February jump was “completely off the radar” after Nationwide warned growth was at an anaemic 0.4 per cent.

“The Halifax house price measure has been particularly volatile in recent months and the sharp monthly movements have been out of kilter with other measures,” Archer added.

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, agreed, calling Halifax’s jump “implausible”.

“We have little confidence in Halifax’s index as a reliable indicator of the housing market. Its extreme volatility … undermines its validity,” he added.

Lucy Pendleton, founder and director of independent estate agents James Pendleton, called the market volality “a ricocheting bullet”.

“At first glance this monthly surge could be a bout of pre-Brexit confidence but nothing has changed,” she added.

“The more likely answer is that in key areas low supply is squeezing those buyers who have a need, rather than just a desire, to move and just can’t put it off any longer.”

“There is no doubt that the shortage of supply is a significant factor in the uplift,” said Jeremy Leaf, north London estate agent and a former Rics residential chairman.

Will UK house prices rise after Brexit?

Tombs said that while a Brexit deal would revive the housing market, it would only work as a short term fix, warning that it would also lead to a rise in interest rates.

“With loan-to-income ratios at a record high, even modest increases in mortgage rates will greatly dampen house price growth,” he predicted.

“As a result, we still expect the official measure of house prices to rise by just 1.5 per cent over the course of 2019.”

Mark Harris, chief executive of mortgage broker SPF Private Clients, said that a Brexit decision will spur sales – but won’t bolster prices.

‘Brexit has created some pent-up demand and when we get a decision, whichever way it goes, we expect to see a spike in activity, not prices,” he said.

Leaf said he hopes for a “more balanced market” if Brexit negotiations make more progress, saying: “The reasons behind [the drop] are certainly not just to do with Brexit as we consistently hear on the doorsteps – affordability and tough lending criteria as other factors.

“Local factors are also highly relevant and activity varies quite a bit from area to area.”

By Joe Curtis

Source: City AM