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Property prices must drop to save market

We should all be worried about a number of conversations regarding the property market that are going on in the corridors of power.

These concern whether buy-to-let investments should be allowed in pensions, and whether savers should be allow to dip into their pensions to pay for a house deposit.

Separately, the lobby group for equity wants personal housing wealth to be included on a new database that will show every individual’s total pension savings.

Finally, there is a suggestion from a former adviser to George Osborne that mortgage lending caps should now be lifted.

For each case there is a compelling argument, but together they threaten to undermine the great progress made in pension saving. And, once you strip away the rhetoric, they are all just about keeping the property gravy train going.

We have such a crackpot relationship with housing in this country.

Doing well in the property market wins praise, even though the vast majority of us have done nothing to earn it.

It is one of the most dysfunctional markets, and is constantly propped up by government-backed incentives, from right-to-buy and mortgage interest relief under Margaret Thatcher, to Gordon Brown’s HomeBuy Direct and Help to Buy, introduced when Mr Osborne was chancellor.

Every decade or so we have an affordability crunch, when prices climb so fast that banks and building societies begin to overlook lending constraints to maintain the number of loans – all under the pretence of helping first-time buyers.

In 2007, we had lenders offer seven times income and 125 per cent loans; today, we have 40-year mortgage terms and the rise of the guarantor loan. Anything, but anything, to avoid a fall in house prices.

Meanwhile, despite widespread pensions mis-selling in the 1990s, the death of final salary schemes, and the chronic mismanagement and recent collapse of some company plans, retirement saving is in robust health – largely because each of us has been put in control of our future.

Automatic-enrolment into a pension will turn out to be one of the greatest political strategies of recent times, bringing retirement savings to more than 10m who had none previously.

Figures from the OECD group of developed nations show that Britain’s pension fund assets add up to more than the size of the economy, at 105.5 per cent of gross domestic product.

Only Australia, Iceland, Switzerland, Holland and Denmark do better, the latter with a spectacular 204 per cent. Pensions have their problems, not least the confusion over taxation, but private saving is doing pretty well in Britain.

Given the vast wealth in our retirement funds – about £2.9tn – it is little wonder those in the housing sector who are worried about the market stagnating should view this as a pot to be tapped.

But that is short-termism in the extreme, swapping investment for debt.

These high-level conversations have to stop now. The answer to unaffordable homes is not to let people borrow ever greater sums, nor to allow savers to spend their retirement funds on them.

If we care about helping people buy a home, we are all going to have to accept that a fall in prices is the best medicine.

Channel blocked

Goodness me, Neil Woodford keeps getting himself in a right old pickle at the moment. Just a few weeks ago he was busy shuffling three unlisted stocks from his portfolio onto the Channel Islands Stock Exchange.

The idea was that his holdings in each of these firms would be then counted as listed. This is not the first time someone has done this – but it is highly unorthodox. Of course, the stocks are not really proper listed stocks, no one is buying and selling, so they are not being traded.

And then, what is this? It turns out that the Channel Islands Stock Exchange was not quite so happy with that arrangement after all.

What a mess. All because guidelines say he must not have more than 10 per cent of his fund counted as listed. The reason this proportion has grown so much is because of the vast redemptions on his equity fund.

What is more, the sentiment seems to be that Mr Woodford is well positioned for Brexit. But with Brexit looking further away every day, the day people think his portfolio will be suddenly transformed gets pushed back. He really cannot catch a break.

Clear advantage

What do plumbers and financial advisers have in common?

One of my favourite businesses is Pimlico Plumbers. Their staff are polite, honest, completely upfront. Their fees are utterly transparent, though not cheap.

Their service is brilliant. Despite the fact the firm’s boss Charlie Mullins is a bit annoying, they are rather wonderful.

There is a lesson here for all businesses. Transparency over charges and brilliant service mean customers feel happy paying higher fees. Sadly all too often in financial services, the transparency and the service are all too lacking, while the high fees remain.

James Coney is money editor of the Sunday Times

Source: FT Adviser

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British Pound Still too Risky to Buy, Downside Risks vs. Euro and Dollar Still Evident

An analyst at Swiss investment bank UBS suggests investors limit their allocation to UK assets – Pound Sterling included – until the current uncertainty around Brexit clears.

If the suggestion is heeded by investors, Pound Sterling could be in for a slow summer as professionals remain on the sidelines until the official exit day nears in October.

“Literally 100% of the conversations I have had with our clients, especially those based outside of the UK, have been about whether it is time to get back in, back into UK property, stocks and Sterling. But we just need the uncertainty to clear,” says Geoffrey Yu of UBS Wealth Management’s UK Investment Office.

The call by Yu comes as Sterling, like the broader currency market, enters a period of depressed volatility, with the Pound-to-Euro exchange rate seen hovering in the 1.15s and the Pound-to-Dollar exchange rate maintaining a small range around 1.30.

Evidence of the market’s desire to steer clear of Sterling is also apparent in positioning data that shows the market is now neutral after bets against the currency were steadily closed out over recent weeks.

In short, taking a directional bet on the currency is proving a hard ask for uncertain currency traders at present.

Analysts at UBS maintain “a long-term bearish Sterling bias”, noting it is 10% overvalued according to one of their preferred models used to gauge a currency’s valuation.

The suggestion that investors avoid Sterling and other UK assets comes despite strong wage data being released last week which some analysts had taken as a sign the Bank of England (BoE) might be tempted to raise interest rates sooner than previously expected. Typically steadily improving data – particularly wage data and inflation – plays positive for a currency as they signal the need for higher interest rates at that currency’s central bank.

As a rule-of-thumb, currencies tend to rise when central banks raise interest rates, and fall back when they cut.

Many economists however see policymakers leaving interest rates unchanged until the Brexit fog clears.

“Given the current uncertainty around the ‘B-word’ I think the BoE will probably remains on hold,” says Yu in an interview with Bloomberg News.

UK wages raced higher by 3.4%, and 3.5% including bonuses, in March but economists says this does not provide enough cause to expect the BoE to immediately ponder raising interest rates in the current political environment. “The UK labour market remains very tight which should be reflected in a further pick-up in wage growth,” says Elsa Lignos, a foreign exchange strategist with RBC Capital Markets. “The problem is that it cannot translate into expectations of BoE hikes while Brexit uncertainty persists, and so it is hard to make it a positive GBP story.”

Some economists have even suggested the strong wage growth is in fact another symptom of Brexit uncertainty with businesses opting to invest in staff instead of investing in more expensive new equipment. “In a period of acute uncertainty over Brexit, firms chose to invest in people – who remain relatively cheap – rather than make long-term bets on expensive capital, such as new premises, machinery or software,” says Mike Jakeman, senior economist with PwC.

The BoE will therefore arguably be quite content to allow a ‘nice buffer’ of real earnings to exist between inflation and income growth. This will allow the “BoE to probably focus on other things,” says Yu.

Indeed, Sterling barely reacted to the release of strong labour market data on April 16, suggesting the market wants to see a substantial move for the better in UK data before it bids Sterling.

What would have driven the Pound in the past simply doesn’t have the same clout in 2019.

Concerning the Pound’s outlook, UBS are forecasting a lower Sterling against the Euro over coming months with the Pound-to-Euro exchange rate forecast to trade at 1.1236 by year-end.

The Pound-to-Dollar exchange rate is however forecast to trade at 1.35, reflecting a broadly softer Dollar environment.

“Risks of a ‘no deal Brexit’ have subsided and Eurozone political tensions appear contained. We are however still cautious on the GBP as continued uncertainty weighs on the macro outlook and prevents a more meaningful Sterling recovery,” says Vassili Serebriakov, a strategist with UBS.

A Stronger Pound Ahead say Citi Eyeing an August Interest Rate Rise

Once Brexit is resolved, and assuming not by a hard-Brexit, the Pound is at risk of a strong appreciation since UK assets are a ‘buy’ candidate on the basis of raw economic fundamentals.

Analysts at Citibank, the largest foreign exchange dealer in the world, are a little more optimistic and have shifted from a ‘wait-and-see’ on interest rates to envisaging the possibility of a rate hike in one of the five remaining Bank of England meetings this year.

Citi analysts see domestic inflationary pressures rising in the UK, citing strong wage growth driving up prices.

“There are 5 BoE meetings left in 2019. The fresh Brexit extension (to October 31) allows for some breathing space and if UK data holds up, the August meeting might then become more ‘live’ than markets anticipate,” say Citi in a recent client briefing. “A grab-and-go BoE rate hike may be possible in August.”

Pessimistic global growth forecasts had been a major headwind to the outlook for the UK economy but these too have eased since the release of better-than-expected data from China out last week, which showed GDP, retail sales and trade data, all rising strongly, and helped negate hard-landing concerns for the world’s second-largest economy.

The BoE cited the global growth slowdown as a temporary negative factor for the UK economy in its February policy statement.

“Global growth is expected to dip below trend in coming quarters, weighing on UK net trade, before rising to around potential rates. Activity is projected to be supported by the more accommodative monetary policies in all major economic areas that markets now expect,” says the February policy statement from the Bank of England.

If these concerns ease, therefore, the Bank might raise their forecasts.

An improved outlook for global trade as a result of positive reports from negotiations between the U.S. and China has further supported the outlook for global growth, the UK included.

These exogenous factors are likely to support the outlook for Sterling and possibly raise the chances of an earlier BOE rate hike than previously expected.

Currently, the market is discounting only one 25bp hike over the next 3 years, “and will likely look for signals at the May board meeting where the majority of members will probably reject a rate hike, but could send “hawkish” forecasts and a dissenting vote (as a signal for a possible August hike,” say Citi.

Therefore, the view that the market is under-appreciating a rate rise at the Bank of England is a bullish one for Sterling, if proven correct.

Citi are forecasting the Pound-to-Euro exchange rate to trade higher at 1.1765 in three months, and 1.16 in six to twelve months.

They are forecasting the Pound-to-Dollar exchanage rate to trade higher at 1.34 in three months, and 1.37 in six to twelve months.

Source: Pound Sterling Live

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London landlords look north to beat stamp duty

Growing numbers of landlords who live in London are looking beyond the capital for buy-to-let returns.

Analysis by Hamptons International – based on activity at Countrywide branches – found that 59 per cent of London-based landlords purchased their buy-to-let property outside the capital during the past 12 months.

In contrast, in 2010 just one in four London-based landlords purchased their buy-to-let outside the capital, with 75 per cent investing in London.

However high house prices in London mean that the 3 per cent Stamp Duty surcharge is particularly significant in the capital, and are pushing buy-to-let investors further out.

The proportion of London-based investors purchasing buy-to-lets in their home region has fallen 17 per cent since 2015, the agent said.

The capital is still the most common area, favoured by 41 per cent of London landlords, but 34 per cent now invest in the north and the midlands, which is up 19 per cent on 2015.

Meanwhile, the analysis found the average cost of a new let in Great Britain rose 1.9 per cent annually to £969 per month in March.

This was driven by a 3.7 per cent rise in Greater London to £1,737 per month, the highest level on record.

Scotland was the only region where rents fell, down 0.1 per cent year-on-year.

Aneisha Beveridge, head of research at Hamptons International, said: “April marks the three-year anniversary of the Stamp Duty surcharge introduction for second-home owners.

“Following the tax hike, landlords have been adapting their strategy to find new ways to make their returns. Lower entry costs and higher yields outside of the capital are enticing investors to look further afield than they have previously.”

Source: Simple Landlords Insurance

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London house price crash: is it all down to Brexit?

House price growth across the country has slowed to just 0.7%, according to the most recent Nationwide release. That’s a drop in real (after-inflation) terms.

Meanwhile, transaction levels have risen slightly in the last year – 64,340 new mortgages were approved for house purchases in March, just 430 more than in the same month in 2018 – but they remain decidedly sluggish.

What dread apparition has rattled Britain’s favourite asset class? Could it be possible that you can go wrong with bricks’n’mortar?

“Brexit” is the go-to excuse for those in the property business, much as “unseasonal weather” is the go-to excuse for troubled fashion retailers.

But the reality is that the problems in the UK housing market are a lot bigger than mere Brexit…

The increasing weakness of the UK housing market

Earlier this year, London estate agent Foxtons issued yet another set of grim results. The group abolished its dividend as profits were wiped –  down from £6.5m in 2017 (which was itself half what it was in 2016) to a loss of over £17m in 2018. The big hit came from the what the chairman, Gary Watts, called the “prolonged downturn” in the London property sales market to “record lows” (although lettings business revenue rose by 1%).

London has certainly been the hardest hit part of the UK housing market.  At the high end, discounts on asking prices are at their highest levels since the financial crisis, according to LonRes.

However, according to the most recent survey by the Royal Institution of Chartered Surveyors (Rics), activity is slowing across the country.

You can put it down to Brexit; you can put it down to political uncertainty. And both of those might be affecting the higher end of the market, in that the globally mobile super-rich are becoming less willing to buy luxury property in an era where populist governments might be tempted to tax non-portable assets.

But there’s a much more specific reason for house prices to be struggling, and it’s one that isn’t going to change any time soon. It’s the fact that one of the biggest and most powerful purchasing forces in the UK market of the past decade is being squeezed out of the market.

Between changes to buy-to-let taxation and higher levels of stamp duty, becoming a landlord is no longer seen as the sure route to riches it once was. And that is having a big effect on the UK property market.

Landlords are going to keep feeling the squeeze

The additional rate of stamp duty on those buying second homes is one factor putting off would-be landlords. But more important is that the ability for higher-rate taxpayers to offset their mortgage interest payments against their tax bills is being withdrawn in stages. The squeeze began in 2017, and it will be entirely withdrawn by April 2020.

The upshot is that it’ll be far harder for landlords to make the sums add up. It’s also become harder to secure a mortgage as a buy-to-let landlord, partly as a result of this and partly as a result of generally tighter mortgage lending rules. The figures make it clear that this is already having an effect.

In 2017, according to estate agency Countrywide, landlords bought 12.5% of homes sold in the UK – a nine-year low – compared to 14.7% in 2016, and 16.3% in 2015. The biggest drop was in London. Meanwhile, the proportion of landlords buying in cash has been rising sharply.

The abolition of tax relief isn’t the only issue facing landlords. Buy-to-let mortgages are typically interest-only loans. That is great news when interest rates are this low – your monthly payments amount to buttons because you aren’t repaying any of the original capital.

However, it means you feel the pain of rising interest rates much more acutely than anyone with a repayment mortgage: because your entire payment is made up of interest, your bills will go up proportionately more when rates rise.

In short, if rates do rise – even a little – between now and 2020 (which seems very likely at the moment), then landlords are going to be squeezed even harder, between falling tax relief and rising rates.

While some landlords have already woken up to this, human nature means that many others will only realise just how much their property is costing them when they fill in their tax returns in years to come. For some, the resulting figures will come as a nasty shock. (The nice thing is that the government can expect a capital gains tax bonanza, according to accountancy group RSM, which may partly account for the current relative health of the public finances).

The only realistic conclusion is that we’ll see a bigger exodus from the sector and more than likely, the end of the era of the “accidental-turned-permanent landlord”. And the point is, this is not going to change any time soon. Soft Brexit, hard Brexit or no Brexit, this is a structural change.

A house price crash seems unlikely – but a boom seems even less likely

The good news is that this leaves the field open to potential owner-occupiers. The tricky bit is getting from where we are now to a point where those first-time buyers can actually afford to buy the property.

You see, landlords always had more buying power than first-time buyers. Not only were they generally already property owners and both older and more established, they also enjoyed big tax advantages.

With that gone, competition on the demand side of the property market has fallen. Meanwhile, on the supply side, at the margins, some landlords will be squeezed out of the market – some may even be forced sellers.

What will happen to house prices? As long as interest rates stay relatively low (and they could go up a bit from here and probably still not do too much damage), then the idea of a huge house-price crash still seems unlikely.

But equally, there’s little reason to expect prices to rise. Whichever government runs the country for the next ten years or so, it’s clear that increasing housing supply is a major policy goal now. Interest rates can’t get any lower, so it’s hard to see how credit conditions can get any easier. And physical property is going to remain a tempting target for taxation.

In market terms, most of the risk is to the downside. And just to be clear, we’d heartily welcome lower house prices and a more sensible UK housing market. Let’s just hope the adjustment happens gently enough for our financial system to cope.

By: John Stepek

Source: Money Week

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Remortgage market predicted to grow

The number of people opting to remortgage is expected to reach a peak later this year.

Research from Moneyfacts, published today (April 23), showed the interest rates for those who took out a two-year fixed mortgage in 2017 would more than double when they were transferred to the lender’s standard variable rate.

For example, the average two-year fixed rate in May 2017 of 2.30 per cent is set to hike to the current SVR of 4.89 per cent in May of this year.

Moneyfacts reported the average two-year fixed rate reached a record low of 2.2 per cent in October 2017.

Therefore, the projected average difference in the revert rate will increase from 2.59 per cent to 2.69 per cent, increasing the motivation to remortgage.

By comparison, the revert rate was less than 1.5 per cent at the start of 2017 and from 2009 to 2012, consumers made money when switching to the SVR from their fixed rate.

Last week, lending trends from UK Finance showed the remortgage market was on the rise. About 18,200 people remortgaged their home to gain extra funds in February — 10 per cent up on February 2018 — and those remortgaging without borrowing money increased by 7.8 per cent to 18,360.

Darren Cook, finance expert at Moneyfacts said: “Two years ago, the average two-year fixed mortgage rate fell notably, reducing from 2.31 per cent in January 2017 to a record low of 2.20 per cent in October the same year.

“The following month, the Bank of England increased base rate from 0.25 per cent to 0.5 per cent and the average two-year fixed rate increased to 2.35 per cent by December 2017. In comparison, the average two-year fixed rate currently stands at 2.47 per cent.

“Over the next six months, it is likely many mortgage borrowers who secured a two-year mortgage deal two years ago may see their record low interest rate expiring and will have no intention to revert to a rate that could see their interest rate double overnight.

“This significant increase in motivation for borrowers to switch mortgage deals, and the subsequent potential increase in remortgage business as a result, may push some mortgage lenders to marginally cut rates over the next few months to maintain a competitive edge.”

Daniel White, of White Financial Services, said he was not convinced the low rates would lead to a boom in the remortgage market.

He said: “Two-year fixed rates have been low for some time, so when someone is faced with reverting to a SVR it will of course have a huge impact on the expenditure the consumer has budgeted for.

“However, whether or not the remortgage market will see a huge increase remains to be seen. Given that rates are very low and very competitive, it seems that current lenders are offering very competitive rates to keep hold of the existing client which may then prevent them from remortgaging to a new provider.

“In addition, any change in circumstances may well prevent a client from switching providers and therefore will need to remain with the current provider and switch onto a new product with them.”

By Imogen Tew

Source: FT Adviser

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UK wage growth finally outstrips house price growth

Despite the continuing uncertainty about the UK’s exit from the European Union, there are signs of optimism, at least where the UK’s job market is concerned. UK employers are continuing to hire, and wages are growing at a higher rate than house prices, giving potential homeowners some hope of catching up with the high UK housing prices and at least narrowing the property affordability gap.

According to the latest Rightmove Property Index, UK wage growth currently stands at 3.4 per cent, as opposed to house price growth of two per cent. Of course, these figures have different implications at different regional levels, with prospective home buyers in some parts of the country in a particularly strong position.

While asking house prices are lower this year than last  year in three out of four regions in southern England, the higher (and rising) costs of living there means that not all potential homeowners will have benefited from the wage increase rates. This is particularly true of rail commuters, since the costs of rail travel went up by 3.1 per cent in January.

The people who are likely to benefit the most from wage growth outstripping house price growth are those in areas with a generally better income to living costs ratio, notably the North West of England, which remains a property hot spot for both buyers and investors.

House prices in Manchester are growing at Brexit-defying rates, but, with the average price of £195,000, property there is still highly affordable in comparison with the South East, especially in conjunction with the lower costs of living in this city compared to London. Manchester is being constantly redeveloped, too, making it an attractive city for investor buyers. For instance, Manchester’s already iconic MediaCity UK development in Salford is entering its second, £1 billion stage that will see the site double in size.

Jonathan Stephens, MD, of  specialist property investment agency  Surrenden Invest, comments, ‘Such vast developments bring a wealth of opportunities, both for those who live in the city and for those looking to invest there. They can also trigger fundamental shifts in demand in the local housing market, with sudden increases in the need for rental accommodation meaning that the private sector has to rapidly up its game in terms of the number of properties on offer.’

BY ANNA COTTRELL

Source: Real Homes

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New Wrexham developments feature as part of £63m affordable housing plans across region

A social housing provider has unveiled plans for new developments in Wrexham County Borough.

Clwyd Alyn says it is set to create 380 affordable, sustainable homes for local people across the region costing around £63 million.

The developments have been financed with £37 million of Welsh Government funding secured in partnership with local authorities, together with private finance arranged by Clwyd Alyn.

In Wrexham this involves new developments in both Pontfadog and the Brymbo areas.

Clwyd Alyn, which currently manages over 6,000 homes and employ more than 700 people across seven county areas, completed a total of 277 new homes and one community hub in the last financial year, including 200 specialist extra care apartments across North Wales.

Locally this includes Maes y Dderwen, a million pound extra care housing scheme for older people in Wrexham, which welcomed its first tenants in 2018.

Located on Grosvenor Road near the town centre, it is specifically designed for local people aged 60 or over who wish to live independently in a home of their own with the peace of mind of 24-hour access to care support.

The total number of homes developed by the organisation over the last two years, combined with those currently being built, or proposed for the years ahead, represents a total investment of £221 million covering the creation of a of 1,435 homes.

Commenting on both current and future developments locally, Craig Sparrow, executive director of development for Clwyd Alyn said: “In Wrexham County last year we completed Maes Y Dderwen, a state-of-art extra care development with 60 apartments, promoting independent living for older people and we’ve recently also welcomed new residents to a development of 50 general apartments in Rivulet Road.

“We’re also currently creating new homes in Pontfadog and we are proceeding with proposals for 70 homes in Brymbo.”

Clare Budden, group chief executive of Clwyd Alyn added: “We know there is a significant shortfall of social and affordable housing across Wales, with increasing levels of homelessness, growing waiting lists and too many people living in poor quality and short-term housing.

“We are working in partnership with local authorities and other agencies and working hard to deliver our mission; – ‘Together to beat poverty.’

“We firmly believe that by building new affordable homes, working in partnership, and through delivering a range of support services, we can encourage and help people to live well and build their own strong communities.

“We have a total of 792 homes either completed during the last two years, in progress, or about to start on site. We have proposals for another 643 homes for the years to come, representing an overall investment total of £221 million and 435 homes.

“We would like to thank the Welsh Government and all our Local Authority partners from across the region for their support in helping us to provide these vital homes bringing hope and joy to local people for generations to come.”

Source: Wrexham

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GBP Forecast: Will Sterling Stabilize with Brexit Risk in the Distance?

GBP FORECAST – TALKING POINTS:

  • All has been quite on the Brexit front over the last two weeks with British MPs on recess and the UK’s departure deadline getting pushed back until October 31, but recent lack of news could change with Parliament back in session
  • The latest retail sales data out of UK could bolster the British Pound, but uncertainty surrounding EU Parliamentary elections as well as cross-party talks between Theresa May and Jeremy Corbyn pose as potential headwinds
  • Download the free DailyFX Q2 GBP Forecast for comprehensive fundamental and technical insight over the second quarter covering various Pound Sterling currency crosses
  • Check out this Brexit Timeline for a chronological list of events surrounding the UK’s withdrawal from the EU and how negotiations have impacted the markets

Since Theresa May suffered a third defeat over her Brexit Withdrawal Agreement, the Prime Minister has been conducting cross-party talks with Labour party leader Jeremy Corbyn. As British Parliament struggles to overcome its ongoing impasse regarding the next path for Brexit, the European Council agreed to extend Article 50 for a second time in order to avoid a hard-Brexit where the UK departs the EU without a deal. With the Brexit deadline now pushed back until October 31 and British MPs on recess for the last two weeks due to the Easter Sunday holiday, GBP price action has stabilized alongside collapsing implied volatility.

While Parliament is due to resume its session this coming week, the House of Commons has little on the schedule. Although, there will be some Parliamentary business on Tuesday, but the motions are regulatory in nature and are not expected to directly impact ongoing Brexit negotiations. On Wednesday at 11:00 GMT, the Prime Minister will address the Main Chamber and take questions from British MPs which will hopefully provide an update on the latest Brexit developments.

That being said, the next Brexit steps and upcoming EU Parliamentary elections will likely prove pivotal for GBP prices over the short and medium term. Forefront risks highlight the ongoing cross-party talks between May and Corbyn as well as the possibility of Tories ousting the Prime Minister from her position.

FOREX ECONOMIC CALENDAR – GBP

GBP Forecast: Will Sterling Stabilize with Brexit Risk in the Distance? Commercial Finance Network

Honing in on the Pound Sterling economic calendar we can see that next week will be relatively quiet on the data front. Financial reports covering the public sector net borrowing released on Wednesday at 8:30 GMT and loans for house purchases expected Friday at 8:30 GMT will likely take the spotlight for upcoming UK economic data.

Also, with GBP bulls overlooking tepid inflation data, robust employment and retail sales numbers last week data could provide the British Pound with a positive tailwind. It is probable and should come as no surprise, however, that the progression of Brexit talks and related headlines will overshadow macroeconomic data and serve as the primary driver of GBP performance.

by Rich Dvorak

Source: Daily FX

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UK lenders see big drag from house prices on mortgages: BoE

UK lenders think a slowdown in house prices will exert the biggest drag since 2012 on how many mortgages they offer, a Bank of England survey showed on Thursday, as Brexit uncertainty continues to depress the market.

Lenders surveyed by the central bank last month expected to provide around as many mortgages in the second quarter as in the first three months of the year.

But they predicted that expectations for house prices would be the biggest drag on mortgage supply, rather than the economic outlook or financial conditions.

Expectations for demand for mortgages in the prime market — dominated by London which has been hardest hit by the chaos surrounding Britain’s exit from the European Union — fell to their lowest level since late 2010, the BoE said.

Other surveys have shown Brexit to be a major drag on the property market in the capital, which is sensitive to flows of migrant workers from the European Union. A surge in prices in London in previous years has also stretched affordability.

Official data on Wednesday showed British house prices rose at the weakest rate in six-and-a-half years in February, dragged down by London’s biggest price fall in a decade.

The BoE’s survey took place between March 4 and 22.

Reporting by Andy Bruce, editing by William Schomberg

Source: Reuters

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Experts shed light on what might happen to property market

The UK property market has been going through a confusing time lately, with buyers and sellers trying to work out what uncertainty surrounding Brexit will mean for property sales.

But while all isn’t yet clear, some housing reports have been giving clues about current market trends.

To get a snapshot of what’s been happening in recent weeks, and what might happen in the coming months, here’s a look at what some experts have been saying.

◆ If you’re looking for a home, you may not find too much choice. Average stock levels on estate agents’ books were close to a record low in March, a monthly survey from the Royal Institution of Chartered Surveyors (Rics) recently found.

There were slightly over 42 properties on average per branch in March, edging up from just under 42 in February. February’s figure was a record low for this part of the Rics survey, which started in April 1994.

Rics also found it now takes 19 weeks on average for a home to sell, from it going on the market to the sale being completed.

◆ With Brexit uncertainty still hanging over the market and recent general signs of prices drifting downwards, Rics says this indicates a modest fall in house prices over the coming months.

But not everywhere is experiencing price falls – in Scotland and Northern Ireland Rics says house prices have continued to grow.

Meanwhile, surveyors expect prices to generally be higher in 12 months’ time – with Northern Ireland, Scotland and Wales leading the way in terms of surveyors’ expectations.

◆ The strength or weakness of a housing market can depend on all sorts of factors – such as the strength of demand and the supply of properties in a particular area, and how close an area is to popular schools.

While London and the surrounding south east of England have been seeing a slowdown, other parts of the UK have been affected by the impact of other factors.

For example, the Office for National Statistics recently said there has been some strong house price growth in south east Wales “likely linked to the abolition of the Severn Bridge tolls”.

◆ The prime housing market, which includes homes in the top 5 per cent price bracket, held up “better than expected” in the first quarter of 2019, according to real estate adviser Savills.There is a growing pool of demand developing among buyers who are taking “a wait and see approach”, it said. This could mean sales pick up when the political situation becomes clearer. Savills says the prime market in Edinburgh has been performing particularly well recently, while Oxford, Cambridge, Bristol and Bath have all seen prime property prices fall annually.

◆ Some sellers may need to watch out for “gazundering”, where a buyer lowers their offer at the last minute. Some 45 per cent of people surveyed think gazundering is a serious problem, up from 40 per cent when similar research was carried out last year, the report from the HomeOwners Alliance, BLP Insurance and Resi.co.ukarchitects found. Gazundering can happen just before a sale is set to go through, with sellers sometimes feeling under pressure to accept the lower price to stop the deal collapsing.

Source: Scotsman