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Surprise fall in UK inflation muddies Bank of England rates picture

British inflation fell unexpectedly in April, according to data that prompted fresh questions about when the Bank of England would next raise interest rates and pushed sterling to its lowest level against the dollar this year.

Consumer prices rose by an annual 2.4 percent, the Office for National Statistics said on Wednesday, marking a 13-month low as the timing of the Easter holidays meant air fares pushed down on inflation last month.

Although the BoE had expected inflation to ease in April, most economists in a Reuters poll thought it would hold steady at 2.5 percent and some had forecast a rise. It was the second surprise fall in a row after a drop in March’s figures.

“With consumers remaining cautious and borrowing appearing to have fallen substantially, a rate hike over the next few months is certainly not a done deal,” ING economist James Smith said.

Investors priced in a one-in-three chance of the BoE raising borrowing costs in August — the next time it updates its economic forecasts — down from 50/50 earlier this week.

Two weeks ago the BoE refrained from a hike that had at one point been widely expected as it waited to see if the economy’s weak start to the year simply reflected heavy snowfall.

A Reuters poll of economists, conducted before Wednesday’s data, showed most still expected an August hike. [BOE/INT]

High inflation, caused by the pound’s drop after the 2016 Brexit vote, squeezed British consumers last year. Although it has receded from its November peak of 3.1 percent, it is running above the BoE’s target of 2.0 percent.

On Tuesday, Bank of England Governor Mark Carney cited a new sugar tax on soft drinks, as well as higher utility bills and petrol prices, as reasons why inflation in Britain “probably tips up a bit” in the coming months before resuming a decline.

The ONS said soft drink prices rose sharply over the last couple of months but the overall impact on inflation was small.

Data last week showed inflation in the euro zone also slowed in April.

Wednesday’s figures pointed to some signs of inflation pressure still in the pipeline in Britain.

Prices of goods leaving factories increased at a faster rate than expected last month and the cost of raw materials — many of them imported such as oil — was 5.3 percent higher than in April 2017, up sharply from an increase of 4.4 percent in March and suggesting a long run of weakening price growth has ended.

Source: UK Reuters

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The UK regions most and least confident about house price rises in the next six months

Homeowner confidence in the property market is on the up, though London still trails most other regions on optimism, according to new analysis by Zoopla.

The property website’s latest housing market sentiment survey found that more than eight in 10 homeowners now expect house prices in their area to grow in value – a rise of 14 per cent since the last survey in November.

Brits are predicting average property rises of 6.9 per cent in their area over the next six month, which has also risen from the 4.9 per cent expected during over the last six months.

The regions most and least confident in the property market

Most confident regions Percentage expecting property price rise Least confident regions Percentage expecting property price rise
1. East Midlands 93 per cent 1. North East England 63 per cent
2. East of England 90 per cent 2. London 76 per cent
3. South West 89 per cent 3. Yorkshire and the Humber 84 per cent

Those in the East Midlands and the East of England were ranked most optimistic about their local property market, with 93 per cent and 90 per cent of respondents respectively expecting house price rises in the next six months.

The South West was ranked the third most optimistic region with 89 per cent of homeowners anticipating a rise in their area’s property values.

North East England residents were less confident, with 63 per cent expecting property price rises, though that was a still a marked rise of 22 per cent on the last time the sentiment survey was taken. The capital was also less confident than other regions, though 76 per cent of Londoners still expect property value to rise in their area in the coming months.

When it came to the rate at which homeowners were forecasting local house prices to rise by, that had also increased across the regions. Those in the West Midlands were ranked most confident here, with homeowners in the area predicting properties to rise in value by 10.6 per cent over the next six months. Scotland residents were expecting the second steepest increase in house prices, forecasting an average 9.2 per cent rise in property value.

The lowest house price growth was expected in the North East of England, where homeowners expected a 2.6 per cent rise.

Zoopla’s sentiment survey had 2,466 respondents, and also found that while there was a rise in confidence reported, the majority of homeowners were still not planning to spend more on home improvements over the next six months.

Source: City A.M.

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Third Of Mortgage Brokers’ Buy To Let Business From Limited Companies

Approximately a third of mortgage brokers’ buy to let business will come from limited company clients in the next few years.

The prediction came from Mortgages for Business chief executive David Whittaker. Whittaker stated that there remained ‘considerable opportunity’ for mortgage brokers in the buy to let sector, despite a shrinking rental market.

At the Financial Services Expo in Manchester, Whittaker stated that falls in buy to let lending were beginning to stabilise but an uptick is not on the horizon. He said: ‘In 2018 we expect there to be £32 billion of gross lending, and this will fall to £28 billion in 2019. However we do believe this will have bottomed out by 2020, and a reshaped buy to let market is where advisers will do very well.’

Research from Mortgages for Business suggests that the buy to let market is currently evenly split between limited company and sole name business. However, seven out of 10 new purchases are now completed via a limited company structure proving its popularity.

According to One Savings Bank sales director Adrian Moloney, 17 lenders now offer close to 300 limited company products for mortgage brokers to choose from.

Whittaker also called for increased transparency from for buy to let lenders regarding their policies for properties that fail the new Energy Performance Certificate regulations.

The regulations that came into force on 1 April this year make it illegal for landlords to start new tenancies if a property has an EPC rating of F or G.

Whittaker said: ‘What will lenders’ position be on properties which don’t make the grade? As of now only three lenders have made their position clear on this issue. Clients will need the right EPCs on all their properties, but 4.3 per cent of properties are currently in the worst ‘G’ rating – and over 11 per cent of these are in the private rental sector so this could be a major issue.’

Source: Residential Landlord

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Shropshire is no rural idyll for young house buyers

High house prices and low wages are making life very difficult for young people trying to get on the housing ladder in Shropshire.

Young people in Shropshire and Telford and Wrekin are finding it impossible to get on the housing ladder or even find rented accommodation, according to an expert speaking today.

With average house prices 8.5 times the average salary and the average rent more than £570 a month, the county is not the rural idyll is it perceived to be for those looking for somewhere to live, a director of one of the biggest housing providers in the county says.

Sue Adams, from Star Housing, the arms-length management team for Shropshire Council housing says the squeeze on council funding means that local authority capacity to directly support rural housing and related services is limited.

That is bad news for young people with limited resources who are looking for housing.

Last week Star Housing reopened the New Century Court complex in Oswestry, which provides accommodation for 16-25 year olds, having taken over the building from a private housing association.

Ms Adams said that the answer should be to look to local social housing providers to help fill the gap. She says it is time that councils are given the resources they need to step in when private landlords move away.

She said: “Housing associations are reviewing the areas and properties that they manage and some properties have been sold into the private market. In rural areas costs of building are higher and properties are more expensive to manage due to a lack of economies of scale.

“In Shropshire some organisations have exited the county. Uncertainty over long-term service funding for supported housing and related services has also affected this type of provision and more than one housing association has ended its involvement in supported housing schemes for young people. The council decided that strategically the last few schemes in the county must be supported and Star Housing worked with an exiting provider and acquired the building in Oswestry.

“However, the squeeze on council funding means that its capacity to directly support rural housing and related services is limited.”

She said it was not all gloom and doom though, with recent increases in grant rates hopefully helping associations to consider provision in rural areas.

She added: “There are a few housing associations that are extremely dedicated to rural Shropshire and can now consider developing again for social rent in areas where local incomes are low.

“The Much Wenlock Neighbourhood Plan led to more community led affordable housing development but communities need more support to develop plans and landowners to release land for affordable housing. To ensure more progress we need continued funding for neighbourhood plans and revisions to inheritance tax and capital gains to incentivise landowners to release land specifically for affordable housing.

“We should give flexibility to councils to control some matters impacting on the provision of rural housing. They should have flexibility over empty homes premiums to finance temporary accommodation and homelessness services and be free to exempt properties in most demand from the Right-to-Buy.”

Telford-based Wrekin Housing Trust is one of the largest social housing providers in the West Midlands, with almost 12,000 homes for rent and low cost home ownership across Shropshire and Staffordshire.

It says it wants a new approach to the sale of land in order to provide more opportunities.

A spokesman for the Trust said: “We are committed to delivering 500 new build properties per year over the next five years. Part of this includes helping young people get on to the property ladder, such as our shared ownership scheme, which mainly helps younger people buy their first property.

“We are also building a greater number of smaller properties, such as one and two-bedroom homes, to match the increased demand. These types of properties tend to suit younger people.

“Unfortunately, many people in Shropshire are being forced out of home ownership due to high prices, the lack of available housing, wage stagnation and not enough homes being built annually.”

Source: Shropshire Star

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Interest rates could rise up to six times in three years, says Bank of England

The pound jumped today after a key Bank of England policymaker predicted interest rates could rise up to six times over the next three years.

Gertjan Vlieghe said his expectations of growth and inflation are in line with a gradually rising path of interest rates, in written evidence to the Treasury Select Committee (TSC).

The economy will require one or two quarter base rate rises in the three-year forecast period, he added.

This would take the base rate up to 2% by 2021, from its current level of 0.5%.

Vlieghe said his forecast is subject to “significant uncertainty” because of unknowns over how the economy will react to rising rates.

Rates likely to go up in 2018

Bank governor Mark Carney today also told MPs on the Treasury Committee that interest rates are “more likely to go up than not”.

It comes after the MPC held off raising rates in May as economy growth stalled in the first months of 2018.

Carney said  it appeared snow and bad weather had dented economic performance, which is likely to result in a rebound in the second quarter.

The chief policymaker added that it was right to hold off a rate rise in May and wait for further economic data.

Source: Your Money

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Buy-to-let property no longer a good punt, say more than half of investors

Over half of UK investors no longer see property as a good investment.

The finding comes from a survey of over 1,000 investors plus 500 high net worth individuals, and was commissioned by financial firm Rathbone Investment Management, which questioned whether the death of buy-to-let is now being witnessed.

It said that in view of recent tax changes, many investors are now re-evaluating the cost-effectiveness of property as an investment.

The richer investors were more upbeat about property. Of those high net worth individuals surveyed, a quarter owe their fortunes to property. The same proportion, 25%, currently own buy-to-let properties, but only 7% plan to increase their portfolios, and 38% view property as a poor investment.

Robert Szechenyi, investment director at Rathbones, said: “Recent changes to the tax and regulatory treatment of buy-to-let has caused investors to take a step back and assess the viability of these investments.”

“Whilst it’s understandable that property, and in particular residential property, has been a popular investment in the past, it’s now making less and less sense.

“Not only are the returns now being impacted by an increased rate of tax, but they can also prove high risk investments due to a lack of diversification.

“Property investments require a large amount of capital to be held in one single asset and landlords will often hold a number of properties within one region.

“Investors who are looking to invest in property, should make sure to assess their risk appetite, look at all alternative options and make sure this property is held within a well-diversified portfolio of investments.”

Source: Property Industry Eye

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Over half of UK investors no longer see property as a good investment

Over half of UK investors no longer view property as a good investment, according to a new survey commissioned by Rathbone Investment Management.

The introduction of an extra stamp duty levy as well as new regulations by the Prudential Regulation Authority affecting landlords has led to many investors re-evaluating property as an investment, according to Rathbone.

Those investors with over £100,000 of investable assets were slightly more optimistic about the property market, the research found, with only 38 per cent viewing it as a poor investment.

The survey showed that a quarter of high net worth investors currently own buy-to-let properties; however, just seven per cent plan to increase their portfolio.

The Rathbone survey comes in the wake of research by the National Landlords Association which reported in January that 20 per cent of its members planned to sell a property in their portfolio in 2018.

Robert Szechenyi, investment director at Rathbones said: “Recent changes to the tax and regulatory treatment of buy-to-let has caused investors to take a step back and assess the viability of these investments.”

Property has traditionally been a popular investment across the UK, with 49 per cent of Britons surveyed by the ONS saying that investing in property instead of a pension was the best way to save for retirement.

However, Szechenyi said this may be about to change.

“Whilst it’s understandable that property, and in particular residential property, has been a popular investment in the past, it’s now making less and less sense,” he said.

“Not only are the returns now being impacted by an increased rate of tax, but they can also prove high risk investments due to a lack of diversification.

“Property investments require a large amount of capital to be held in one single asset and landlords will often hold a number of properties within one region.”

The research from Rathbone comes as data from Rightmove published today found that asking prices in London were down 0.2 per cent in May compared to the same month last year.

Source: City A.M.

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House prices fall for third month in a row

House prices are down for the third month in a row, and the annual rate of growth has now fallen for almost a solid year – 11 months in succession, LSL Property Services/Acadata’s House Price Index for England and Wales has found.

It now stands at just 1%, down from 9% at its height in February 2016. Many areas continue to prove resilient, however.

Excluding London and the South East, prices in England and Wales remained 3% up year-on-year and only London is currently recording an annual fall in prices.

Oliver Blake, managing director of Your Move and Reeds Rains estate agents said: “London remains the exception, rather than the rule when it comes to the strength of the market in the major cities of England & Wales, which remain strong.

“The market remains slow, though, when it comes to the number of transactions.”

Overall, the average price in England and Wales at the end of April stood at £302,252, up from £299,374 a year ago. While annual price growth continues to fall, the decline is slowing.

Estimated sales of 50,000 in April were down by a quarter on March –significantly greater than the usual 5% seasonal decline.

Compared to London, the housing market in the rest of England and Wales looks robust. About three quarters of all unitary authorities (80 out of 108) have recorded a price rise over the last year.

A number continue to record fairly strong growth, including the East Midlands and North East, both up 3.9% annually, and the North West, up 3.6%.

In Wales prices have grown 4.8% annually with Cardiff and Swansea are up 9.7%, the Vale of Glamorgan 10.2%, Torfaen 10.4%, and Monmouthshire 11.3%.

These are the top five annual price increases in the whole of England and Wales after the 13.6% price growth in North Somerset.

This is because Wales introduced a new Land Transaction Tax in April, starting at a higher base, of £180,000, than stamp duty in England (£125,000) but at a higher rate, particularly for properties priced £400,000 to £925,000, with tax rates at 7.5% and 10%.

Anticipating this, buyers have brought forward purchases of high value homes to avoid the new tax, just as they did ahead of the stamp duty hike in April 2016.

Consequently, six of the eight most expensive local authority areas in Wales set a new peak price in March, including Monmouthshire, the Vale of Glamorgan and Cardiff, as well as Powys and Newport, up 5.5% and 8.0% annually, respectively. Such high price growth in Wales is likely to prove short-lived.

Major cities other than Cardiff have also set new peak prices in the month. They include Merseyside in the North West, up 3.9% annually; Tyne and Wear in the North East (5.4%); the West Midlands conurbation, which includes Birmingham, up 5.2%; and Derby in the East Midlands (2.4%).

Struggles with affordability are most pronounced in London, which, not coincidentally, is also the only region in England and Wales to see prices fall on an annual basis.

Prices are down 2.5% on the same time last year in the capital. The average property price is now £15,415 lower than a year earlier, at £601,808.

Price falls continue to be concentrated at the top of the market. Eight of the 11 most expensive boroughs in the capital have seen prices drop in the last year, including Westminster, the second most expensive borough, down 13.3%, Wandsworth, down 13.6%, and the City of London, down a huge 31.4%.

The big exception to the rule is Kensington and Chelsea, right at the top of the market, where prices are up 23.7% – still buoyed by a small number of extremely expensive (£10m plus) properties.

Ignoring this, the top 11 boroughs would be down 5.8% annually on average. At the bottom of the market, things are less volatile and, overall, more positive.

Source: Mortgage Introducer

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Property market to become ‘flooded’ as 380,000 landlords look to sell-up

Experts have predicted that the property market could be flooded by homes for first time buyers as 380,000 buy-to-let landlords are looking to offload their property in the next year.

A survey conducted by the National Landlords Association (NLA) said that around a fifth of the UK’s landlords were looking to sell, and that nearly half (45 per cent) of those selling would be offloading a flat or apartment.

The NLA explained that this flooding of the market would be good news for first time buyers and bad news for renters, as it may lead to a fall in the number of homes available to tenants.

Importantly, only seven per cent of landlords looking to get rid of a property said they intended to sell to other landlords, which will be welcome news for first-time buyers.

“These findings sound like positive news for potential new homeowners, but the reality is not everyone wants, or is in a position financially, to buy,” said Richard Lambert, NLA chief executive.

“In fact, if all these homes are sold as planned then it will lead to a significant fall in the supply of property available to those who choose to rent, or have no other option but to rent.”

Source: City A.M.

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Six million UK rental properties demanded by 2025

GBP 21 billion worth of purpose-built rental property was bought in 2017 alone, as a rising number of Britons are moving into the country’s rental market.

Summary:

  • The scale of demand in the UK’s rental sector has been revealed, with six million people expected to be wanting to live in rental accommodation by 2025
  • 20.5% of households in the UK are expected to be renting by 2022
  • Over 100,000 purpose-built rental properties are estimated to be in the pipeline, as buyers invest heavily into the sector

Is the UK’s rental market able to keep pace with rising demand levels?

As more Britons choose to rent their homes, new research from Hamptons International suggests that, by 2025, six million people will be demanding to access rental property.

From difficulties getting onto the property ladder, to changing generational attitudes towards renting, the rental sector continues to serve as the primary housing market for an increasing number of people in the UK.

The research also forecasts that, by 2022, 20.5% of all British households will be renting, up from 19.4% in 2018.

While Hamptons explored a number of theories as to how homes come onto the rental market, it did highlight the growth of the ‘Build to Rent’ market; purpose-built rental properties from developers funded by private and institutional investors.

As more Britons actively choose to rent their homes, there’s been an increased focus on ensuring that higher quality rental homes are delivered, while there’s also been renewed importance on raising management standards to better support the UK’s growing number of tenants.

The report commented: “Build to Rent only accounts for a small part of the market today, but we estimate there are more than 100,000 units in the pipeline and more to come.”

Analysis shows that the sector is anchored by significant amounts of wealth, with 65% of investor purchases in the sector in 2017 made with cash, totalling GBP 21 billion worth of property sold.

Source: Select Property