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Average Property Rises Almost £3,000 in 2018

It’s official: the UK property hotspot of 2018 is the town on Ryde, on the Isle of Wight, where house prices have gone up by over 10%.

According to property website Zoopla, Ryde was the town where average property values rose the most. The average house costs £242,016, and the 10.24% rise added £22,500 to the cost of buying one. Zoopla figures showed that the value of the average UK home increased by a much lower £2,860.

Next to Ryde, the biggest property value rises occurred in Smethwick, near Birmingham, where property prices increased by 9.67% to an average of £163,627, and Diss, in Norfolk, where homes were up 7.89%.

Overall, house price inflation in the UK has subsided in 2018, making it the first year in which the cost of buying a home has not exceeded wages since 2012.

Zoopla indicated that property value rises averaged 1.02%, but there were variations across the UK. Property values in Scotland rose by 6.43% and by 3.98% in Wales. In England, the rise was a marginal 0.58%.

Zoopla said that the property value rises had come during fears over Brexit, which is affecting London and the commuter belt in particular. Buyers in London and the South East are also struggling to afford homes with near-record high prices.

Richard Donnell, Zoopla insight director, said that property values in London have gone up significantly since 2010 but tax changes and affordability issues are causing values to fall back. In contrast, properties remain affordable in areas outside of southern England, and on the back of lower mortgage rates and rising employment, values are outperforming the rest of the UK, a trend that is expected to continue.

Difficult times have been forecast for the property market since 2019, with would-be buyers concerned about the ramifications of Brexit on property prices and the national economy. Another concern is the high cost of buying a home.

Some have suggested that if a Brexit deal is made, a bounce may occur, making this winter a good time to buy for those seeking to negotiate prices.

Halifax, the UK’s largest mortgage lender, forecast property values to rise between 2 and 4% in 2019.

Halifax managing director Russell Galley said that looking ahead, the biggest challenge for the UK housing market in 2019 will be the extent to which mortgage affordability changes.

He pointed out that average income growth is likely to increase but with an additional increase in interest rates, property prices are not likely to be affected significantly. Despite the present political upheaval, annual house prices are expected to grow anywhere between 2% and 4% in 2019.

This rate of growth is slightly stronger than 2018, but still moderate by today’s comparison. However, uncertainty over Brexit means that both sides of the forecast carry a degree of risk.

Source: CRL

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UK economy posts slowest growth in six months but beats lower expectations

The UK economy grew at its slower rate in six months between September and November, data released today shows, but still managed to beat lower expectations.

GDP grew by 0.2 per cent in November compared to the month before, and by 0.3 per cent in the 12 weeks to the end of the month, the Office for National Statistics (ONS) said today.

That is the weakest GDP growth since an increase of 0.1 per cent between March and May this year.

Head of National Accounts, Rob Kent-Smith, said: “Growth in the UK economy continued to slow in the three months to November 2018 after performing more strongly through the middle of the year.

“Accountancy and housebuilding again grew but a number of other areas were sluggish.

“Manufacturing saw a steep decline, with car production and the often-erratic pharmaceutical industry both performing poorly.”

Retail sales fuelled by Black Friday activity boosted the services sector to a 0.3 per cent rise in November, slightly offset by a small contraction in legal activities and accounting.

The services sector also posted 0.3 per cent growth for the three months to the end of November, with professional services and sciences acting as the largest contributor.

Meanwhile the UK production industry fell to a 0.4 per cent decline in November, with unplanned maintenance hitting miners and weak manufacturing also to blame.

Over three months that fall doubled to a 0.8 per cent drop, with all four sub-divisions reported a decline for the first time since October 2012.

Manufacturing hit a six-month high last month as Brexit stockpiling pushed up sales.

Andy Soloman, boss of business growth experts Yomdel, called the latest economic figures “fairly positive news”, against lower predictions as the UK faces Brexit uncertainty and retail woes.

“Of course, while the overall figures may seem positive some sectors are suffering more than others and one more so than the industrial manufacturing and production,” he added.

“One has to wonder if this area of UK industry has already begun to scale down production in anticipation of a bad or no deal Brexit and the potential evaporation of EU demand for their products.”

However, construction continued to perform well after experiencing high demand in summer, growing by 2.1 per cent between September and November, despite then hitting a three-month low in December, according to a closely-followed index.

Sterling moved up against the dollar after a slight dip following the figures, rising from 1.274 to 1.276.

Joshua Mahony, senior market analyst at trading platform IG, said: “While many will be looking towards the improved November GDP figure of 0.2 per cent, depressed industrial and manufacturing production numbers for the month are somewhat less encouraging.

“Ultimately traders are waiting on Tuesday’s vote as the primary source of directional bias for the pound, with Theresa May expected to suffer a scolding defeat that will leave the UK in limbo once again.”

Source: City A.M.

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Leave voters think falling house prices and higher interest rates are a price worth paying for Brexit

Falling house prices and higher interest rates are a price worth paying for Brexit, according to many Leave voters.

Research by YouGov found that various ‘worst-case scenarios’ predicted by the Bank of England were seen as being worth it in the minds of Leave voters.

According to The Times, 56% of Leave voters said interest rates rising to 4% would be a price worth paying for Brexit, compared to just 16% who don’t.

Brexiteers were also more likely to see falling house prices as a price worth paying, at 52% versus 20%, according to the report.

But they were split on the warning that unemployment could rise, with 35% seeing it as a price worth paying and 35% thinking it’s not a price worth paying.

The same went for the value of the pound falling (34% on both sides) and inflation rising (36% thinking it would be a price worth paying and 32% saying not).

YouGov quizzed people on individual worst-case scenarios set out by the Bank of England.

But its research also suggested that Leave voters are less likely to be worried about the scenario than Remainers.

According to The Times, while overall 77% of Brits think the Bank of England’s project rise in unemployment to 7.5% would be a bad thing – this works out at 69% or Leave voters, compared to 91% of Remainers.

And while just 1% of overall Britons see a GDP drop to be a good thing, it works out at 16% of Leave voters compared to 4% of Remain voters.

Source: Yahoo News UK

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Construction output rises despite Brexit uncertainty, says FMB

The Government must not be complacent about the damage a ‘no deal’ Brexit would cause amid positive signs of growth in the UK construction industry, says the Federation of Master Builders (FMB).

Commenting on the construction output figures for November 2018, published by the Office for National Statistics, Sarah McMonagle, Director of External Affairs at the FMB, said: “The UK construction sector grew by 2.1 per cent during September to November 2018 compared with the previous three months. This is despite unparalleled levels of political uncertainty around the very real prospect of a ‘no deal’ scenario. However, we are urging the Government not to allow these results to create a false sense of security. Since November, political uncertainty has cranked up and is increasing every day. A growing and prosperous construction sector will be a distant memory if the Government allows the UK to crash out of the EU without a deal in place.”

McMonagle concluded: “The construction industry is also extremely concerned about the Government’s proposed post-Brexit immigration system. In the Immigration White Paper, published at the end of last year, the Government revealed that they will make few allowances for low skilled workers to enter the UK post-Brexit. Most tradespeople will be defined as low skilled and therefore will not be permitted to enter the UK, regardless of whether they are from the EU or further afield. It is crucial that the Government introduces a post-Brexit immigration system that continues to allow us to draw on essential migrant workers or else their house building and infrastructure targets will be totally unachievable.”

Source: Politics Home

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Productivity setback adds to worries for UK economy

British productivity growth slowed to a two-year low during the three months to last September, official figures showed on Wednesday, reinforcing concerns about the underlying health of the economy ahead of Brexit.

Weak productivity growth has bedevilled rich economies around the world since the global financial crisis, but the problem has been particularly acute in Britain.

Most economists see it as the main reason wages have failed to rise materially despite the lowest unemployment rate in a generation.

Britain’s departure from the European Union is adding headwinds, with business investment falling as firms hold off while it remains unclear if they will retain tariff-free access to EU markets after March 29.

Britain’s overall economy has slowed since the 2016 Brexit referendum and appears to have lost more momentum in late 2018 as Prime Minister Theresa May struggled to get support in parliament for her plan for a smooth exit from the bloc.

The Office for National Statistics said annual growth in output per hour slowed to 0.2 percent in the third quarter of 2018, its weakest since the same period in 2016, after touching an 18-month high of 1.6 percent in the second quarter.

Compared with the second quarter alone, output per hour fell by 0.4 percent.

“The latest relapse in productivity will reinforce concerns over the UK’s overall poor productivity record since the deep 2008/9 recession,” economist Howard Archer of consultants EY ITEM Club said.

Brexit was probably already hurting productivity by discouraging firms from purchasing labour-saving technology that would save money in the long run in favour of hiring staff who could be sacked easily if the economy sours, Archer said.

The Bank of England expects productivity to grow by about 1 percent a year over the medium term, compared with 2 percent before the financial crisis.

Unit labour costs — a driver of medium-term inflation pressures that measure how much it costs employers to produce a given level of output — rose by an annual 2.8 percent, the fastest in a year and a half.

The BoE pencilled in annual unit labour cost growth of 1.75 percent for 2018 in its last forecasts in November.

Source: Yahoo Finance UK

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Sterling to make solid gains this year if Brexit path smooth – Reuters poll

Sterling is likely to gain more than 8 percent this year — assuming Britain and the European Union part ways amicably, according to a Reuters poll of foreign exchange strategists.

The pound has largely been ignoring economic data, instead swinging wildly on any snippet of news about Britain’s departure from the EU in less than three months.

While it has showed some strength to start the year, that is largely down to dollar weakness. Its performance against the euro has been more muted.

With only a short time left, the Brexit outcome remains uncertain. British lawmakers are expected to vote next week against a Brexit agreement Prime Minister Theresa May struck with the EU in November.

May’s government suffered a defeat in parliament on Tuesday when lawmakers who oppose leaving the EU without an accord won a vote creating a new obstacle to a no-deal Brexit.

On Wednesday, May failed to win over the Northern Irish party which props up her government and then lost a vote which means she has a shorter period of time to come up with an alternative plan if she is beaten next week.

A November Reuters poll said sterling would rise around 5.5 percent in the event of an amicable split but fall over 6 percent if there is a hard Brexit.

Still, there is only a median 25 percent probability of a disorderly Brexit, a Reuters poll predicted last month. Almost 90 percent of economists surveyed expect a free-trade deal between the two sides. [ECILT/GB]

Those economists also mostly expect the Bank of England to raise interest rates by 25 basis points to 1.0 percent as soon as April, which would support the currency.

Ongoing doubts about the health of the world’s two biggest economies – the U.S. and China – as well as a trade war between them that’s hurting growth have raised questions about how high U.S. interest rates will go this year.

The dollar’s rally is largely over, according to about two-thirds of the currency strategists polled by Reuters. They said dialling back rate hike expectations has diminished the dollar’s strength. [EUR/POLL]

On Wednesday, the pound rose towards $1.28 after reports May was attempting to win over the Northern Irish Democratic Unionist Party in next week’s crucial vote but dropped when she failed.

Sterling also rallied on Tuesday following reports British and European officials were discussing the possibility of extending the formal exit process amid fears a Brexit deal will not be approved by March 29.

In a month, sterling will be little moved from Wednesday’s levels, trading at $1.27. When Britain and the EU part ways it will have strengthened to $1.30. By mid-year it will have climbed to $1.32 and at year-end it will be over 8 percent higher at $1.38.

“Ultimately, we assume the removal of the current Brexit uncertainty, which will prompt a period of pound appreciation as the year unfolds,” noted analysts at MUFG, who expect a sterling rally to $1.43 by year end.

However, that 12-month median forecast is still lower than the $1.50 sterling was hovering around before the June 2016 Brexit referendum. Only three of 66 analysts with 12-month forecasts expected it to strengthen past that.

Highlighting the uncertainty around the pound’s future, the 12-month forecast ranged from $1.22 to $1.59.

Against the euro, the pound will make modest gains. On Wednesday, a euro was worth about 90.0 pence. In six months, forecasts are for 87.0p and in a year 86.5p.

Source: UK Reuters

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Brexit: a boon not block to London investment in 2019

There is firm evidence of what market participants are witnessing every day with their own eyes – that Brexit has not scared overseas investors buying commercial real estate assets in the capital.

It is not a case of the market struggling on ‘despite Brexit’. Rather than dampen the enthusiasm of foreign investors, Brexit has had the opposite effect.

Several overseas property investor clients highlight the weaker British pound as a reason for their continued heavy investment in the London property market. Many foreign investors have seen the UK government actively discouraging foreign investment in residential properties, for example by increasing stamp duty land tax (SDLT) rates for additional residential properties and residential properties purchased by companies, and have in turn switched their sights to commercial property – for which SDLT rates are significantly lower.

We can see this continued interest illustrated in some of the high-profile office acquisitions of 2018. In June, a Hong Kong-focused property developer snapped up the London headquarters of UBS, and a couple of months later, South Korea’s National Pension Service purchased Goldman Sachs’ European headquarters for £1.1bn.

It is not surprising that a significant portion of foreign investment in the London property market is in the commercial office sector. The West End is ranked the second most expensive rental office market in the world, with the City not far behind at number 10. The rise and rise of shared office space, spearheaded by WeWork – a privately owned US company – highlights the new ways that foreign investors are tightening their grip on the London office market even as the clock ticks down to Brexit.

2019 promises more of the same – more big ticket deals, more shared office capacity and more investors making moves into the capital’s commercial property – with significant cause for optimism right across the market.

Source: Property Week

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Predictions for the UK property market in 2019

We predict that house price growth will stagnate in 2019 due to property market uncertainty and the ceiling of affordability being reached in much of the South. The outcome of Brexit could have the most significant impact on prices, with a disorderly ‘no-deal’ scenario likely leading to a fall in prices. However we expect a rise, albeit at a subdued rate, of around 1% should the government form a reasonable exit deal with the EU.

Prices in London and the South East are likely to fall regardless of Brexit as they reach the limits of affordability. Lenders have no further capacity to stretch loan-to-income ratios, with regulation and prices having raced far ahead of income growth. However we expect many areas outside of here to experience growth should the Brexit negotiations reach a reasonable outcome.

The effect of Brexit

Since the vote on 23rd June 2016, the uncertainty surrounding Brexit has made market sentiment quite fickle. The consequence of this is a slowing in house price growth, with the future state of the economy and housing market becoming difficult to predict.

Homeowners in areas where prices are already stagnating or falling have an incentive to wait and see rather than commit now.

The critical point will come when we agree (or fail to agree) an exit deal with the EU. The market could see a recovery if the government can pull off a sensible deal.

However the outcome of a ‘no-deal’ scenario is likely to be a fall in house prices. The Bank of England’s governor predicts that in a worst case scenario, prices could fall as much as 33% over three years. We predict that a fall in prices in the wake of a ‘no-deal’ Brexit will be far less dramatic. The scarcity of supply to the market and limited choice for buyers will prop prices up and decrease likelihood of a crash.

Mortgage rates

We expect interest rates to rise, albeit at a modest rate and to a limited extent. However the effect of a ‘no-deal’ Brexit on interest rates is difficult to predict – in this scenario a devaluation of the pound could force the Bank of England to increase rates to counter inflation.

First-time buyers

Whilst the near future of the property market remains uncertain, we believe it is still a good time to be a first-time buyer. First-time buyers have been given a stamp-duty break from the government, with an effective rate of 0% on the first £300,000 of a purchase. Mortgage rates also remain low, and those wanting some shelter from potential interest rate rises in the near term are being offered very competitive rates on five-year mortgage products.

However with Brexit in the background and uncertainty surrounding the economy and housing market, it would be prudent to plan for a scenario where prices fall and consider job security before buying a property.

Source: Mortgage Introducer

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Brexit worries slow UK growth to near standstill

Britain’s economic growth slowed to a crawl at the end of 2018 and the housing market is stalling, according to data published on Friday, less than three months before Brexit.

A closely watched business survey indicated firms were growing more anxious, while figures from the Bank of England and mortgage lender Nationwide painted a picture of households reining in spending.

Britain is due to leave the European Union on March 29 but what will actually happen on that day remains far from clear.

The future of Prime Minister Theresa May’s deal struck with the EU hangs in the balance as a parliamentary vote looms, raising the possibility of Britain leaving the EU without a deal to smooth the economic shock.

Calls for a second referendum — which May has rejected — are growing.

Friday’s figures indicated that the disarray is starting to affect the economy.

Lending to consumers grew at its slowest pace in nearly four years in November and the number of mortgage approvals fell by far more than expected, the Bank said.

Nationwide said its house price index had grown in December at the weakest annual pace in nearly six years.

Overall, Britain’s economy looks on track for quarterly growth of just 0.1 percent in the fourth quarter, data company IHS Markit estimated, based on its monthly purchasing managers’ index (PMI) surveys of businesses.

November and December were the weakest two months for morale among services firms, which make up the bulk of the economy, since March 2009 — around the low point of Britain’s last recession — the PMI indicated.

“The latest UK services PMI provides further evidence that the economy has lost most, if not all, of the momentum it had last summer,” ING economist James Smith said.

The headline IHS Markit/CIPS UK services PMI rose slightly more than forecast by economists polled by Reuters, to 51.2 in December. But the increase was one of the slowest since the Brexit referendum in 2016.

“(Clarity) on Brexit is needed urgently in order to prevent the economy sliding into contraction,” said IHS Markit’s chief economist, Chris Williamson.

LENDING SLOWS

The Bank figures showed the annual growth rate in unsecured consumer lending had slowed to 7.1 percent in November from 7.4 percent in October, the smallest increase since March 2015.

The data chimed with signals from many retailers that consumers had reined in their spending in late 2018.

The number of mortgages approved for house purchase fell to 63,728 in November, the Bank said, the lowest figure since April.

Nationwide said house prices had fallen 0.7 percent from November, the biggest monthly fall since July 2012. Compared with a year earlier, prices were up just 0.5 percent compared with a 1.9 percent rise in the year to November.

Both readings were below all forecasts in a Reuters poll of economists.

Economist Samuel Tombs from the consultancy Pantheon Macroeconomics said the house price data amounted to “a bad end to the worst year since 2012”.

BoE Governor Mark Carney warned last month that in the event of a “disorderly” departure from the EU — which is not the central bank’s base-case scenario — house prices could plunge 30 percent as part of a broader economic shock.

Source: UK Reuters

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UK house prices drop amid Brexit uncertainty

One of Britain’s leading mortgage providers says uk house prices in the country fell in December by their biggest amount in six and a half years, in a further sign that uncertainty surrounding Brexit is weighing on economic activity.

The Nationwide Building Society said Friday that house prices fell by a monthly rate of 0.7 percent in December, the biggest monthly decline since July 2012.

On an annual basis, prices were up only 0.5 percent, the lowest since February 2013.

The housing market, a barometer of the British economy, has slowed since the country voted in June 2016 to leave the European Union. Now that the country’s actual departure in March is looming, the property market, like other sectors, is being hobbled by uncertainty over what Brexit will mean economically.

Source: Business Insider