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

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

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

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

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

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

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

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

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

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

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

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

Source: City AM

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House price growth slows to six-year low

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Source: FT Adviser

north's housing market
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North’s housing market remains buoyant, but signs of Brexit-related slowdown

THE north’s housing market remains among the best performing in the UK, but there are signs activity is slowing, according to new figures.

The latest RICS (Royal Institution of Chartered Surveyors) and Ulster Bank Residential Market Survey shows that Northern Ireland maintained its position as the part of the UK with the highest balance of respondents reporting rising prices.

The survey further points to a rise in new instructions to sell, indicating that the supply of homes coming onto the market has picked up.

However there are signs that activity in the local market is slowing down, with new buyer enquires falling for a second month in succession and newly agreed sales broadly flat in January after a December decline.

In the short-term respondents in the north expect house prices to continue on an upward trajectory in the next three months, however the outlook for sales over the same period is subdued.

Looking further ahead and there is an expectation among surveyors that sales activity will be higher over the year.

RICS residential property spokesman in Northern Ireland, Samuel Dickey said Brexit is affecting the local housing market.

“Across the UK, Brexit is affecting surveyor confidence, and whilst sentiment in Northern Ireland has been stronger than other regions for some months, there is now some more caution evident in the market,” he said.

“However, whilst Northern Ireland surveyors suggest that sales activity may be lower in the three months ahead, they are much more positive when looking a year down the line, suggesting that they think any impact on the market from Brexit will be short-lived.”

Terry Robb, head of personal banking at Ulster Bank added:

“A lack of supply has characterised the Northern Ireland housing market in recent years, so a rise in new instructions is welcome and should provide more choice for buyers. Whilst it is perhaps not surprising that the wider environment is tempering sentiment amongst potential buyers at preset, surveyors in Northern Ireland remain confident about the market in the mid-term.”

Source: Irish News

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UK house price growth slows to lowest level since 2013 as uncertainty rattles market

House price growth fell to its slowest pace in almost six years in December as uncertainty continues to weigh on the housing market.

UK house prices rose just 2.5 per cent year-on-year, marking the slowest annual growth since July 2013, according to new figures from the Office for National Statistics (ONS) and the Land Registry.

Growth was dragged down by a 1.1 per cent drop in prices in the east of England, while prices in the south also remained sluggish. Prices in London rose just 0.1 per cent.

The latest figures take the average property value in the UK to £230,776, while London retains the top spot for house prices, with an average value of £473,822. Across the UK, prices ticked up just 0.2 per cent month-on-month.

Mike Hardie, head of inflation at the ONS, said: “House prices continued to grow, albeit at the lowest UK annual rate since July 2013, with growth in the north east and London lagging behind Northern Ireland, Wales and the West Midlands.”

The figures are the latest reminder of the challenges facing the housing market, as both buyers and sellers have been impacted by economic and political uncertainty.

Data published yesterday by Lon Res showed prime property prices in the capital fell 5.7 per cent year-on-year in the fourth quarter.

More than 50 per cent of prime properties had their asking price slashed before being sold, the research stated.

Marc von Grundherr, director of estate agent Benham and Reeves, said the slowing market has been largely impacted by the decline in the value of flats.

“Whilst Brexit remains farcical, we should expect some volatility of course,” he said. “But our view is that given the relatively robust London market, there is cause for significant optimism in both values and transactions from the second quarter onwards.”

But Howard Archer, chief economic adviser to the EY Item Club, warned of continued difficulties as Brexit draws nearer.

“If the UK leaves the EU at the end of March without an approved Brexit deal, house prices could well fall by up to five per cent in 2019 amid heightened uncertainty and weakened economic activity,” he said.

Source: City AM

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‘It’s happening again’: UK property funds adjust pricing ahead of Brexit

Asset managers are reportedly getting tetchy about scrutiny of the Investment Association UK Direct Property sector in the lead up to Brexit despite the fact they argue they are better placed to deal with redemptions than summer 2016, when the UK voted to leave the European Union.

In December, the sector faced £315.6m outflows – the worst redemptions since July 2016, when a raft of funds gated due to a mass exodus of client money.

The Threadneedle UK Property Authorised Investment and Kames Property Income funds both switched to bid pricing in December, essentially wiping out returns for the year for investors exiting the funds. However, the funds attracted £10.8m and £2.6m respectively in a month where all other funds, bar MGTS St Johns High Income Property, faced outflows ranging all the way up to £92.6m for the Janus Henderson UK Property Paif.

Portfolio Adviser understands concerns have been raised in the industry that media coverage of liquidity positions could trigger a run on funds, despite the fact funds are raising cash levels and the market is more liquid than 2016.

The Financial Conduct Authority made headlines this month when it was revealed the regulator is monitoring property funds daily for liquidity.

UK property fund returns since Brexit

Fund Performance
Scottish Widows HIFML UK Property 28.85%
TIME Investments Freehold Income Authorised 25.94%
Janus Henderson UK Property PAIF 17.25%
L&G UK Property 15.28%
Sector: IA UK Direct Property 13.68%
TIME Investments Commercial Freehold 13.47%
Kames Property Income 12.93%
Royal London Property Inc 10.82%
BMO UK Property 2 Inc 10.72%
MGTS St Johns High Income Property 10.47%
Standard Life Investments UK Real Estate 9.89%
Aberdeen UK Property 8.85%
M&G Property Portfolio 8.15%
Threadneedle UK Property Authorised Investment 7.99%
Aviva Inv UK Property 7.30%
Source: FE Analytics for period between 24 June 2016 to 12 February 2019

‘It’s happening again’

In early July 2016, less than two weeks after the Brexit referendum, Standard Life, Aviva Investors and M&G gated funds followed shortly after by Columbia Threadneedle and Janus Henderson. Investors pulled £5.7bn from the sector in the period from January to July 2016, according to Morningstar Direct.

“It’s starting to happen again,” says Morningstar director for manager research ratings Jonathan Miller about December outflows and pricing adjustments. He attributes recent adjusted pricing at Kames and Threadneedle to outflows and “presumably a feeling that their rainy-day cash, part of keeping their powder dry to meet redemptions, wouldn’t suffice”.

Brexit uncertainty is largely cited as the driving force behind investors pulling money although other factors have compounded outflows. “Property managed a respectable 7.5% total return over the year so it seemed the investment community did trim quite aggressively,” says Architas investment manager Jen Causton.

She expects funds in the sector would have to gate if there is a no deal Brexit.

Chelsea Financial Services managing director Darius McDermott points to a slowing UK economy as a poor environment. “When the UK is slowing down, commercial property is not a go-to asset class. It’s quite correlated to the economy.” UK GDP growth slowed to 0.2% in Q4 2018 and the economy contracted in December, the Office for National Statistics this week revealed.

Total assets in the sector have shrunk from £14.0bn in May 2016, in the midst of outflows but ahead of the Brexit vote, to £11.9bn in December 2018, the last date for which Morningstar Direct has data.

UK Direct Property funds – AUM pre-Brexit vote versus now

Fund May 2016 December 2018
M&G Property Portfolio £4.8bn £3.7bn
L&G UK Property £2.5bn £3.3bn
Aviva Investors UK Property £815.0m
Janus Henderson UK Pty PAIF £1.6bn £2.8bn
BMO UK Property £305.0m £554.4m
Scottish Widows HIFML UK Property £479.1m £446.3m
SLI UK Real Estate Platform £608.0m £438.0m
Royal London Property £399.5m £408.4m
Aberdeen UK Property £625.5m £427.6m
Kames Property Income £203.4m £315.1m
Threadneedle UK Prpty Authrsd Invmt £270.9m £304.1m
TIME Freehold Inc Authorised £289.8m
MGTS St Johns High Income Property £38.9m £111.9m
VT Redlands Prpty £96.4m
Source: Morningstar Direct

Adjusted pricing wipes out returns

Architas holds L&G UK Property or Kames Property Income funds in its multi-manager range and a handful of investment trusts for more specialist exposure, like doctor surgeries and ecommerce.

“One of the funds we invest in moved to a bid price and it effectively wiped out last year’s returns,” says Causton. “You crystallise that if you come out of the fund. It does affect the performance quite a lot, particularly when returns are quite hard to come by.”

Kames and Threadneedle were the worst performers in 2018 falling 2.6%, the only funds with negative performance, compared to 3.9% gains in the IA UK Direct Property sector. In the period from 24 June 2016 to the end of November 2018, before the price adjustment took place the Kames fund returned 19% and Threadneedle delivered 15.1%, both outperforming the sector return of 13.5%.

Chase de Vere favours open-ended funds for its bespoke portfolios and discretionary models. Bid pricing is part and parcel of investing in the sector, says research manager Justine Fearns. “If you can time it right, or get lucky, then all good and well but if you are investing for the longer term then ultimately it should be the investment case that is the driver of purchases and redemptions, although there could be other considerations to take into account.”

IA UK Direct Property returns in 2018

Fund Performance
TIME Investments Freehold Income Authorised 8.07%
Scottish Widows HIFML UK Property 7.84%
TIME Investments Social Freehold 5.21%
TIME Investments Commercial Freehold 5.00%
L&G UK Property 4.65%
Standard Life Investments UK Real Estate Platform 4.57%
Aberdeen UK Property 4.36%
M&G Property Portfolio 4.17%
Janus Henderson UK Property PAIF 4.10%
Sector: IA UK Direct Property 3.91%
BMO UK Property 3.66%
Aviva Inv UK Property 3.65%
Royal London Property 3.40%
MGTS St Johns High Income Property 3.37%
LF Canlife UK Property ACS 3.30%
VT Redlands Property Portfolio 1.94%
Kames Property Income -2.57%
Threadneedle UK Property Authorised Investment INI GBP TR in GB -2.57%
Source: FE Analytics

Cash allocations march upwards

Kames Property Income fund co-manager Richard Peacock tells Portfolio Adviser two sales due to complete this week are due to take liquidity from 17.3% to 19%.

“Given the market outlook we are targeting a liquidity position of around 25%. With return prospects slowing, holding an elevated cash position will have less of a dilutive impact on fund performance,” Peacock says. The fund has had bid pricing in five of the 59 months since launch, he adds. “By comparison, the majority of the peer group swung to bid price in 2016 due to outflows and have remained on that pricing basis ever since due to continued outflows.” Kames introduced a 10% pricing adjustment to the fund following the Brexit vote.

Threadneedle holds 12.3% in cash “the upper end of its liquidity corridor”. “Whilst this plays an important role in the context of meeting potential redemptions, as markets stabilise it can provide a valuable buying opportunity as well,” a spokesperson says.

The M&G Property Portfolio is holding cash above its 7.5% to 12.5% range at 15%, which it describes as a prudent measure to manage any client flows during uncertain market conditions.

It has been reducing retail assets in a similar move to Janus Henderson. Ainslie McLennan, co-manager of the Janus Henderson UK Property Paif, says: “Our long held view has been that the retail sector, particularly traditional retailers and high street assets, would come under pressure.” Instead they are seeking an “appropriate, diversified mix of assets we believe to be best suited to the conditions ahead”, McLennan says.

Fearns lists L&G UK Property as her fund pick for the sector. The team has been engaging with clients regularly to help its liquidity management and it was one of the few funds that did not gate in the aftermath of the referendum, she says. Chase de Vere prefers property funds to hold cash over property securities for liquidity due to it being the more stable and liquid asset class, she says.

LGIM did not wish to comment when contacted by Portfolio Adviser but it has the highest cash allocation in the sector at 25.5%, according to FE Analytics. It made a 15% ‘fair value adjustment’ to L&G UK Property in the aftermath of the EU referendum.

In contrast, Royal London Property holds 8%. Head of property Gareth Dickinson highlights that the fund, which requires a £100,000 minimum investment, consists of a” relatively small number of institutional investors” and redemption requests require three months’ notice, which influences the shareholder base. The fund has not adjusted pricing since the Brexit referendum.

More liquid market

While redemptions are picking up, asset managers say the UK property market is more liquid than the lead up to the Brexit referendum.

“It is difficult to make a simple comparison between the two periods and the impact on liquidity management,” says Peacock, who describes the referendum as a binary risk event whereas recent outflows have been spread over several months.

He adds: “The levels of sales completed by the peer group already is encouraging and demonstrates that we still have a liquid market for those investors looking to sell which is a contrast to Q3 2016 when transaction volumes fell and liquidity dried up for many funds.”

Outflows may actually benefit the sector, according to Willis Owen head of personal Adrian Lowcock. “All that hot money is now out; all that shorter-term money is now out. What you’ve got left should be longer-term investors.”

However, outflows leave funds in the position of having to sell assets to increase cash positions, Lowcock says. Willis Owen currently favours passives for property exposure, such as the iShares Global Property Secs Equity Index and L&G Global Real Estate Dividend Index.

Investment trust versus open-ended debate rings on

Morningstar’s Miller says pricing adjustments highlight “what can happen overnight given the illiquidity in the space”. “We believe there’s a mismatch in having daily dealing for bricks and mortar property funds, given the illiquidity profile.”

McDermott says he currently only holds property via specialist investment trusts, but despite the swings that can occur when property funds adjust pricing, he warns investment trust volatility can be higher.

He says investors can only be penalised to the extent of the property fund’s spread, which is “typically 5%, sometimes 5.5%”. “Investment trust discounts can go much wider than that. After the Brexit vote when all the property sector was under stress, some of the investment trusts were trading at 20 or 30% discounts. You could get your money back but you were getting it back at 30%,” he says.

Association of Investment Companies data shows the Schroder Real Estate Investment trust discount was 19.7% on 30 June 2016 compared to a 1.6% premium three months earlier. It was trading at a discount of 16.3% at the end of December 2018. The UK Commercial Property Reit was the next highest discount at the time of the Brexit vote at 17.1%. It now trades at a 10.9% discount.

Source: Portfolio Adviser

UK economy Commercial property investment
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UK economy to make modest post-Brexit recovery if deal agreed – economists

UK economy will barely grow in the run-up to Brexit amid concern the UK will leave the European Union without an agreement, but if there is a deal there will be a modest post-divorce upturn, according to economists polled by Reuters.

Economists mostly said a free-trade deal between the two will be made and expectations that Britain will leave on March 29 without an agreement have barely changed over the past month.

Growth slumped to 0.2 percent last quarter as Brexit worries hammered investment by companies and a global economic slowdown weighed on trade. The February 8-12 Reuters poll said it would expand at the same rate this quarter.

Polls conducted by Reuters since the June 2016 referendum decision to leave the EU have consistently said a no-deal Brexit would be the worst outcome for the British economy.

The chance of a no-deal Brexit nudged up only to 25 percent in the latest poll from the 23 percent given in January and, with a deal expected, growth is forecast to accelerate to 0.3 percent next quarter and to 0.4 percent in the third.

“If there’s a silver lining from the mounting signs that the uncertainty caused by Brexit is holding back GDP growth, it’s that the economy could enjoy a decent rebound if a Brexit deal is agreed,” said Paul Dales at Capital Economics.

The likelihood of a recession in the coming year held firm at 25 percent and the probability of one in the next two years at 30 percent.

“Although the economic headwinds have increased in recent quarters, the most likely way in which a recession will be triggered is if Brexit goes badly wrong,” said Peter Dixon at Commerzbank.

Prime Minister Theresa May is trying to convince the bloc to amend a divorce deal that she agreed with it in November but that was rejected by her own parliament. As it stands, the UK will leave the EU in 44 days without a deal.

May told British lawmakers from all parties on Tuesday she wanted them to back the Brexit deal she is aiming to strike, citing the need to pass further legislation to prepare for Britain’s exit. May said she believed she could reach a Brexit deal parliament could support.

European Union Brexit negotiator Michel Barnier said on Monday the bloc would agree to tweak the political declaration on EU-UK ties after Brexit that forms part of the exit package.

FREE-TRADE DEAL

As in all Reuters polls since late-2016, the vast majority of economists said the two sides would settle eventually on a free-trade deal.

Holding again in second place was Britain being a member of the European Economic Area, paying into the EU budget to maintain access to the EU’s single market.

The third and fourth spots flipped, with Britain leaving without an agreement and trading under basic World Trade Organization rules now in third place and Brexit being cancelled last.

Apart from January’s poll, Brexit being cancelled was in last place every time Reuters has asked.

The Bank of England said last week Britain faces its weakest economic growth in a decade this year, but also said interest rates would eventually rise if an EU divorce deal is done.

Other major central banks have signalled they will hold off on raising borrowing costs but BoE Governor Mark Carney stuck to his message that gradual and limited rate rises are coming if a no-deal Brexit is averted.

Economists polled by Reuters took him at his word and medians suggest a 25 basis point increase to Bank Rate to 1.00 percent would come in the fourth quarter, later than thought last month. Another 25 basis point was predicted in the second half of next year, also later than previously thought.

“The combination of Brexit uncertainty, slowing world – and UK – economic growth and lower forecasts for inflation suggests a far slower normalisation of policy,” said George Buckley at Nomura, who pushed back his expectation for the first hike to November from May.

Carney said on Tuesday a modest tightening of monetary policy over time would likely be sufficient to achieve the Bank’s 2 percent inflation target. The poll pegged inflation to average the target this year and next.

Source: UK Reuters

Stamp Duty
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Government unveils plans for 1% Stamp Duty surcharge on overseas property buyers

The Government has finally announced how an extra Stamp Duty surcharge on foreign investors would work.

The idea was first proposed by Prime Minister Theresa May at the Conservative Party conference last October and then mentioned in the Budget later that month, but a consultation has only just been released.

The charge would add an extra 1% to the existing rates for both standard and additional residential purchases in England and Northern Ireland.

It would apply to non-UK residents, which the consultation defines as anyone who has spent fewer than 183 days in any part of the UK – including Scotland and Wales – in the 12 months prior to the transaction completing.

Overseas buyers will be able to apply for a refund if they spend 183 days or more in the UK in the 12 months following day of transaction.

The charge will also apply to companies based overseas as well as UK limited companies under the direct or indirect control of one or more non-UK resident persons.

It will also apply to joint purchases where at least one party is a non-UK resident.

The Government said it is considering exemptions for those who work for the Crown, Armed Forces or Civil Service to support those based overseas.

Additionally, first-time buyers who are non-UK residents will still get to use some of the Stamp Duty relief up to £300,000, but will have to pay 1%.

The consultation said: “The Government believes that introducing an Stamp Duty surcharge of 1% on non-UK resident purchasers of residential property in England and Northern Ireland will help to control house price inflation, thereby assisting residents in getting on to the housing ladder in line with the Government’s wider objectives on home ownership.”

Mel Stride, financial secretary to the Treasury, said: “The UK is and will remain an open and dynamic economy, but some evidence shows that non-UK resident buyers of UK property could be inflating house prices.

“A 1% surcharge could help more people own their own homes in the future, and its proceeds will go towards tackling rough sleeping, boosting our plan to halve the numbers of rough sleepers by 2022.”

The consultation closes on May 6.

Source: Property Industry Eye

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London house prices: Prime postcodes dip as Brexit uncertainty weighs on market

House prices in London’s most expensive neighbourhoods tumbled in the run-up to Christmas, continuing on a downward trend in the wake of uncertainty from both buyers and sellers.

According to new data from Lon Res, prime property prices in the fourth quarter of 2018 fell 5.7 per cent when compared with the same period in the previous year.

More than 50 per cent of prime properties on the market underwent a price reduction before being sold, with homeowners lowering the value of their houses in a bid to lure in buyers.

In a fresh sign of the subdued activity within some of the capital’s most expensive postcodes, Lon Res also found that £2.9bn of housing stock was sold in prime central London last year, sliding from £3.5bn in the year before.

“In an uncertain market the response by both buyers and sellers in prime London has been to hunker down and observe rather than participate. This is impacting on both transaction levels and prices. However for those willing to buy, there are opportunities to be had and purchasers are negotiating accordingly,” said Marcus Dixon, head of research at Lon Res.

Dixon added: “The prime rental market continues to benefit as would-be buyers become tenants. Despite fewer new lets agreed, owing to an increase in renewals, stock levels are low and competition among prospective tenants is leading to increases in achieved rents in most central London areas. Fewer landlords are needing to reduce their asking prices and discounts have fallen back.”

According to a survey carried out as part of the Lon Res research, some 69 per cent of respondents reported that Brexit remained the biggest drag to demand in the year ahead.

The news comes despite recent data showing that wealthy buyers have been on a spending spree for multi-million pound trophy houses during the last year, with demand for London’s ‘super prime’ residences bucking a wider slowdown in the capital’s property market.

Despite political uncertainty ahead of Britain’s imminent departure from the EU and plans for a new stamp duty on international buyers, activity in London’s ultra high end housing scene has been heating up in the wake of price falls and a drop in the pound that has lured in foreign investment.

Source: City AM

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UK economic growth slowed in fourth quarter

UK economic growth slowed in the final quarter of last year as car manufacturing declined at its steepest rate in just under a decade.

Gross domestic product (GDP) growth fell to 0.2% between October and December, according to the Office for National Statistics (ONS).

This compares to 0.6% growth in the previous quarter, when warm weather and the World Cup contributed to a boost in economic activity.

Meanwhile, annual GDP increased by 1.4%, the weakest it has been since 2009.

Sterling tumbled following the news, dropping 0.4% versus the US dollar to 1.28. Against the euro, the pound was down 0.1% at 1.14.

But Prime Minister Theresa May’s official spokesman said: “The UK economy continues to grow and remains fundamentally strong.”

Car production was down 4.9% in the period, marking the biggest decline since the first quarter of 2009.

Total production output slipped by 1.1%, the largest decline since the end of 2012. This included a 0.9% dip in manufacturing.

Construction was also lower, dropping 0.3% in the fourth quarter. This follows two consecutive quarters of growth during the summer, when companies caught up with work delayed by adverse weather early in the year.

Although services output was up, growth slowed to 0.4% following a relatively strong performance during the summer.

UK economic growth slowed in fourth quarter Commercial Finance Network
(PA Graphics)

The ONS said it reflected a slowdown across a number of industries, as Brexit-related concerns weighed on business-to-business spending at the end of 2018.

Speaking about the impact of a potential no-deal Brexit on the economy, Chancellor Philip Hammond told ITV: “Business is challenged, I accept that, but we can’t convey information that we don’t have. We don’t know how some of our partners on the other side of the channel will behave in the event of no-deal Brexit.

“My judgement is that we are likely to get the (Prime Minister’s) deal through Parliament but I can’t be 100% certain, and that is why we are doing the contingency planning we are doing. Once businesses have clarity, they will invest again.

“No deal would be a very bad outcome for economy,”

Rob Kent-Smith, head of GDP at the ONS, said: “GDP slowed in the last three months of the year with the manufacturing of cars and steel products seeing steep falls and construction also declining. However, services continued to grow with the health sector, management consultants and IT all doing well.

“Declines were seen across the economy in December, but single month data can be volatile meaning quarterly figures often give a better indication of the health of the economy.”

Compared with the same quarter in 2017, the UK economy is estimated to have grown by 1.3%, the weakest in six years. It was last weaker in the second quarter of 2012.

On a month-to-month basis, GDP fell 0.4% in December. This was the biggest monthly drop since March 2016.

Howard Archer, chief economic adviser at EY Item Club, said the figures were “disappointing”.

“The UK economy clearly changed down into a much lower gear in the latter months of 2018 as heightened economic, political and Brexit uncertainties fuelled business caution in particular,” he said. “There are also signs of consumers becoming more cautious despite a pick-up in their purchasing power.”

Samuel Tombs of Pantheon Macroeconomics warned against interpreting the data as evidence of an impending recession.

He said: “On the face of it, the sharp fall in GDP in December looks alarming, but it isn’t unprecedented — it also fell by 0.4% in March 2016 — and it was driven by sectors which have historically been volatile.”

Separately, the ONS data dump showed that Britain’s total trade deficit widened slightly in the last three months of the year by £900 million to £10.4 billion, due to a rise in goods imports including cars and chemicals.

Source: BT

Average rents
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Average rents up 2.5% in January

Average rents across the UK rose by 2.5% in January 2019 when compared to the same month a year previously, HomeLet’s Rental Index has found.

The average monthly rent is now £932. Rents in London increased by 3.7% in January 2019 from the same month of 2018; the average rent in the capital now stands at £1,588 a month.

When London is excluded, the average UK rental value was £775 in January 2019, up 2.0% on last year.

Martin Totty, chief executive at HomeLet, said: “Positively for both tenants and landlords, this year we’ve seen stability in UK rental price growth, with increases remaining broadly in line with the rate of consumer inflation.

“For landlords there remains a sustained demand for property, with the private rental sector continuing to provide the market with both flexible and long term housing options.

“The slowdown in the rate of house price growth, as reported by the Nationwide House Price Index is being driven by the depressed London market, which saw house prices decline by 0.8% during the last four months of 2018.

“In contrast, we have seen average rental values in the capital rise by over 4% in the latter stages of the year. Ultimately, we would expect this theme to continue in London, if the demand for property outweighs supply.”

Rents rose in 11 out of the 12 regions covered in the research. In January average rental values in London (£1,588) were 70.4% higher than the UK (£932).

When London is excluded the average rent in the UK was £775 in January and average rents in London (£1,588) were 104.9% higher than the rest of the UK.

Totty added: “Private residential landlords will continue to play a key role in the wider UK housing market. Whilst the outlook for property investors remains positive, one of the key concerns for the market in 2019 would be a potential lack of supply in certain regions.

“The government’s squeeze on private landlords via taxation changes and more regulation could discourage their continued participation in this important sector. Unlike the trends we saw in 2018, any reduction in supply could lead to rental increases that are above the rate of consumer inflation.

“The data used in the HomeLet Rental Index provides us with a forward-looking view of the rental market, so it will be interesting to see how this theme develops in early 2019.”

Source: Mortgage Introducer