Confidence
Marketing No Comments

Confidence in the UK economy among financial services professionals hits record low

Confidence in the UK’s economic prospects among financial services professionals is at a record low, a new survey showed today.

A poll of its members by trade body the Chartered Institute for Securities & Investment (CISI) showed confidence was at its lowest level since it began the survey in 2012.

Of the 1,062 respondents, 55 per cent were less optimistic about the UK’s economic prospects, up from 35 per cent a year earlier.

Twenty one per cent of respondents felt more optimistic and 24 per cent were unchanged, compared to 30 per cent optimistic and 25 per cent unchanged a year previously.

The confidence indicator (the sum of positives less the sum of negatives) is -34, which is the lowest score since the survey started.

Simon Culhane, CISI chief executive, said: “Our survey results match those of the latest Association of Chartered Certified Accountants (ACCA) member survey which showed confidence in the UK’s economy is at its lowest level since their report first launched in 2009.

“In addition, the CBI’s latest survey showing confidence of UK manufacturers’ outlook has dropped to -23, the lowest level since the Brexit referendum. Business’s abhor uncertainty, they can’t plan, they can’t invest and they can’t recruit and now, with less than two months before the UK plans to leave, we have complete uncertainty, so this survey result is no surprise.”

The survey ran from 28 September 2018 to 21 January and had 1,062 responses.

Source: City AM

UK construction
Marketing No Comments

UK Construction Sector Signals Soft Start to the Year for Economy

– The UK construction industry saw a soft start to 2019. 

– As Brexit uncertainty hit commercial building segment.

– Economy and BoE rate outlook hinged on Brexit outcome.

The UK construction sector saw a soft start to the New Year, according to IHS Markit PMI data released Monday, with both current activity and new order growth slowing during the January month in a manner that could bode ill for other sectors of the economy.

January’s IHS construction PMI came in at 50.6, down from 52.8 in December, when economists had anticipated a decline to only 52.6. That’s the lowest level for the index since March 2018 when a fortnight of snow and inclement weather brought the industry to a standstill.

All three subsectors of the industry saw current activity levels soften this January, with commercial construction firms seeing the most notable deceleration. Companies told IHS that uncertainty over Brexit and the impact an EU exit will have on the economy is the main thing holding them back.

Growth in the civil engineering sector continued in January although at a reduced pace from the 19-month high seen back in December, while the supply and demand disparity in the UK housing market meant residential construction firms saw only a modest deceleration last month.

“Uncertainty about Brexit has snuffed out the recovery in the construction sector. The total activity index dropped to its lowest level since the March 2018 snowstorms and now is below the 52 level which in practice has separated rising from falling construction output in the past. Builders have become more pessimistic about the outlook too,” says Samuel Tombs, chief UK economist at Pantheon Macroeconomics.

UK Construction Sector Signals Soft Start to the Year for Economy Commercial Finance Network

Above: IHS Markit activity index.

PMI surveys measure changes in industry activity by asking respondents to rate conditions for employment, production, new orders, prices, deliveries and inventories. A number above the 50.0 level indicates industry expansion while a number below is consistent with contraction.

Markets care about the data because it is an important indicator of momentum within the economy. And economic growth has direct bearing on consumer price pressures, which dictate where interest rates will go next.

Despite the downbeat tone of survey responses addressing conditions in January, most firms are still optimistic about the outlook for the year ahead. However, this could easily change during the months ahead if the UK leaves the EU without any formal agreement governing life after exit day.

Prime Minister Theresa May failed on the first attempt to pass her highly contentious Withdrawal Agreement through the House of Commons, although the bill will be put to another vote before MPs next week.

If it is not ratified before March 29, 2019 the legal position is the UK will leave the EU and default to trading with it on World Trade Organization (WTO) terms. Most economists now say that would weigh on UK economic growth in the short and long term.

“The outlook for the construction sector is quite binary, based on the Brexit path chosen by politicians. In the unlikely event of a no-deal Brexit, the sector likely will slide into another recession, amid weaker business confidence and tighter credit conditions. But provided a deal is signed off, the construction sector likely will enjoy strong growth soon,” Pantheon’s Tombs adds.

UK Construction Sector Signals Soft Start to the Year for Economy Commercial Finance Network

Above: Construction PMI alongside ONS construction output measure. Pantheon Macroeconomics.

UK manufacturers also saw conditions deteriorate at the beginning of the New Year amid heightened uncertainty over the outlook for international trade, given the U.S trade war with China and almost the trajectory of the Brexit process.

January’s survey of the all-important services sector will be released on Tuesday, which means analysts will then have an idea of just what kind of start to the year the UK’s three largest economic sectors saw. This will be important for the Bank of England (BoE)interest rate outlook and Pound Sterling.

Bank of England officials have said repeatedly in recent months that they see inflation pressures building in the economy and that further interest rate rises will be necessary over the coming quarters if the consumer price index is to sustainably return to the 2% target over the coming years.

However, the exact trajectory of inflation will depend on the performance of the economy over the coming quarters, which itself will be heavily influenced by the outcome of the Brexit process in parliament. The deal-or-no-deal question is most key to the outlook.

“This week’s BoE Inflation Report will see growth and inflation revised lower and the Bank playing up Brexit uncertainty as a policy constraint, but SONIA is still biased strongly toward higher rates this year,” says Adam Cole, chief currency strategist at RBC Capital Markets. “We expect PM May’s “new ideas” to amount to little and the EU to remain intransigent on the backstop.”

UK Construction Sector Signals Soft Start to the Year for Economy Commercial Finance Network

About: Market expectations of BoE base rate. Source: Pantheon Macroeconomics.

The BoE has raised its interest rate twice since November 2017, taking the Bank Rate up to 0.75%, but BoE officials are still saying that further rate hikes will be necessary if inflation is to remain under control in the coming years.

Unemployment has reached its lowest level since 1975 in the UK during recent months, as the post-referendum economy continues to create new jobs, and the number of unfilled job vacancies is still at a record high according to the Office for National Statistics.

This is forcing employers to raise wages and salaries for workers, which the BoE says will lead to even higher inflation further down the line. And the consumer price index is already above the bank’s target of 2%.

Inflation came in at 2.1% for December, down from 2.3% previously but in line with the consensus among economists. However, core inflation rose from 1.8% to 1.9% during the same month.

Core inflation excludes volatile commodity items like fuel, food, alcohol and tobacco from the goods basket so is thought to provide a more accurate reflection of domestically generated price pressures.

The latest economic forecasts suggest the consumer price index will fall again in January but that it will average 2.1% in 2019 even after one more rate hike.

The BoE will announce its latest interest rate decision and economic forecasts at 12:00 on Thursday 07, February.

Source: Pound Sterling Live

Marketing No Comments

Will we finally crack the UK’s housing crisis in 2019?

We are in an era when one topic alone – the dreaded ‘B’ word – dominates not just the media and Parliamentary timetable but conversations at dinner or chatting over lunch at work.

Although the fact that MPs were debating low-level letterboxes right before voting whether to accept the Prime Minister’s Brexit deal is a good example that life continues even in the most adverse of circumstances!

No matter how trying the circumstances, it is vital that the government does not allow important topics like the mortgage market and supply of new housing to fall by the wayside, especially given the continued uncertainty in the market.

We are still a long way from the 300,000 new homes we need to be producing every year to get a handle on our housing crisis.

The government’s own preferred measure for housing delivery is net additional properties, for the simple reason that this measure takes into account new builds, conversions and where commercial units have a change of use to residential.

These figures come out annually and the latest ones show a large uptick in the volume of homes produced. From 124,000 units in England in 2012/13 to a more respectable, but still inadequate 222,000 in 2017/18.

A 79% increase in production in five years is obviously a good sign. However, relaxing the rules around changes of use and conversations played a big part.

Can private house builders now expand sufficiently to build the volume of homes required?

The good news is that latest quarterly figures for the house building sector show new build starts to be growing.

In Q3 2018 there were 38,000 new starts over the quarter alone, up from 33,000 the previous quarter. The last time quarterly levels were this high was 2007 when quarterly new starts of just under 40,000 were typical.

The blot on the landscape for new house building is the demographic trends facing the house building sector. The Federation of Master Builders’ House Builders’ survey for 2018 showed skills shortages for bricklayers, carpenters, joiners and site managers.

The FMB survey found 44% of small and medium-sized house-builders in England considered a shortage of skilled workers to be the major barrier to their ability to build more new homes.

All of which makes expanding the percentage of housing delivered by offsite construction a key priority.

The BSA published its study two years ago on the barriers facing Modern Methods of Construction (MMC). The government has made good on its commitment to assist the wider industry finding a solution by setting up a technical working group on MMC.

It is vital that in 2019 the group delivers a solution that the market as a whole can have confidence in to ensure we see the quantity of housing this country desperately needs.

Why open banking has not opened the floodgates (yet)
The anniversary of open banking has been and gone with, much like open banking itself (so far), little consumer interest.

Regulators are similarly ambivalent about open banking, with the Bank of England’s deputy governor recently arguing that the “jury is still out” on whether open banking and PSD2 will ultimately be a gateway to a bigger change.

Our assessment of consumer attitudes suggests that, unsurprisingly, consumers who like using digital services for banking are generally interested in new technology and have a good understanding about financial services in general.

The big question will be how interest in open banking broadens out from the early adopters to the wider public. There is still widespread consumer discomfort in sharing their personal details via an app, though this may gradually be receding.

Likewise, there remains nervousness among many using an app or digital-only service for mortgages. However, any nervousness about sharing their data with a third party firm may start to dissipate once borrowers see the services that are being offered.

For example, consumers will see it as a more attractive prospect if it provides a service that gets the best deal, one that can monitor and manage their money or uses technology to offer a faster service than other providers.

For many of the new fintechs that are looking to offer new services to consumers using open banking, the slow take up is no bad thing.

The BSA hosted three of the new fintechs looking to shake up UK financial services using open banking at our Digital Mutual event last year. The message coming loud and clear from all three firms, was that the gradual roll out and even the low visibility of open banking itself, were all advantages (at the moment!).

The true value of open banking will ultimately be if it can provide a personalised service to consumers and for the industry, a better understanding of customers, so that they can serve them better. If it can do these things, a quiet revolution will be inevitable.

Source: Mortgage Finance Gazette

Marketing No Comments

Just over half of private landlords do not use an agent at all – survey

Just over half of landlords do not use an agent to let or manage their properties.

A third (34%) use an agent for let-only, and just 9% use an agent for both letting and management.

The remaining 5% use an agent for management services only.

The finding emerges in a new survey of private landlords in England published yesterday by the Government – the first time the exercise has been carried out since 2010.

During that time, the number of households in the private rented sector has risen by 25% from 3.6m to 4.5m.

There have also been major changes since 2010, including tax changes, a Stamp Duty surcharge of 3% on the purchase of buy-to-let properties, and tougher lending criteria on buy-to-let mortgages.

The new Private Landlord Survey says: “These changes were made as part of the Government’s wider efforts to make the housing market work for everyone and to ensure the housing market delivers the homes the nation needs.”

The survey questioned almost 8,000 landlords and agents registered with one of the three tenancy deposit protection schemes.

It found a total of some 3.4m live deposits registered, equating to 1.5m landlords. Of that number only about 360,000 had registered the deposits themselves.

The survey also paints a picture of a cottage industry, with 94% of landlords operating as individuals rather than as part a company, and almost half (45%) owning just one property. Only 17% own five or more properties.

The average gross rental income that a landlord earns is £15,000.

After tax and other deductions, the average that a landlord gets is 42% of their total gross income.

According to the survey, half (53%) of landlords plan to keep their portfolios the same size, 11% plan to increase the number of properties, and 10% plan to reduce. A further 5% plan to sell all their portfolio.

Agents are more likely than landlords to raise the rent when there is a new tenancy, and also to take a larger deposit.

However, landlords (52%) are more reluctant than agents (37%) to let to certain groups of tenants, including those on housing benefit.

The survey also found that 25% of landlords and 10% of agents are unwilling to let to non-UK passport holders, while 18% of landlords and 6% of agents are unwilling to let to families.

Three-quarters of landlords and agents are willing to offer longer tenancies, but 70% said they would do so if it became easier to remove problem tenants.

The report also found that agents were more likely than landlords to be legally compliant – for example, 87% of agents carried out Right to Rent checks, compared with 62% of landlords for their most recent letting.

More agents than landlords provided tenants with the How to Rent guide, and with a copy of the EPC. Agents were also more compliant about fire safety and annual gas inspections.

Speaking about some of the findings, NALS chief executive Isobel Thomson said: “The results of this survey make for interesting reading, particularly given some of the anti-landlord and agent rhetoric that we have seen recently. In fact, we see that only 7% of tenancies end in eviction, that agents and landlords are willing to offer longer tenancies, and that most deposits are returned in full or part.

“NALS wants a better, safer private rented sector for all. These results show that in the main, agents and landlords are working hard to achieve that, and that the many tenants who rely on the sector do have a good experience.”

At 62 pages, this is a report dense with market information, insights and charts – and essential reading for agents, especially if there won’t be another one for eight years.

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/775002/EPLS_main_report.pdf

Source: Property Industry Eye

Marketing No Comments

No-deal Brexit could harm EU economy

A no-deal Brexit could have serious consequences for the European economy even if the direct impact on international trade may prove limited for the European Union as a whole, Bank of Italy governor Ignazio Visco said on Saturday.

In a speech delivered in Rome, Visco, who sits on the European Central Bank governing council, also said that “any financial markets malfunctions could have major repercussions for all the countries involved and this issue is currently being looked at very closely”.

Source: UK Reuters

Marketing No Comments

Annual house price growth stagnates in January

Annual house price growth almost ground to a complete halt in January, with prices just 0.1% higher than the same time last year, Nationwide’s House Price Index has found.

This follows a subdued December when price growth slowed to 0.5%. There was a modest 0.3% increase month-on-month after taking account of seasonal factors.

Robert Gardner, Nationwide’s chief economist, said: “Indicators of housing market activity, such as the number of property transactions and the number of mortgages approved for house purchase, have remained broadly stable in recent months, but forward-looking indicators had suggested some softening was likely.

“In particular, measures of consumer confidence weakened in December and surveyors reported a further fall in new buyer enquiries towards the end of 2018.

“While the number of properties coming onto the market also slowed, this doesn’t appear to have been enough to prevent a modest shift in the balance of demand and supply in favour of buyers in recent months. Uncertainty exerting a drag on the market.”

Gardner added: “It is likely that the recent slowdown is attributable to the impact of the uncertain economic outlook on buyer sentiment, given that it has occurred against a backdrop of solid employment growth, stronger wage growth and continued low borrowing costs.

“Near term prospects will be heavily dependent on how quickly this uncertainty lifts, but ultimately the outlook for the housing market and house prices will be determined by the performance of the wider economy – especially the labour market.

“The economic outlook remains unusually uncertain. However, if the economy continues to grow at a modest pace, with the unemployment rate and borrowing costs remaining close to current levels, we would expect UK house prices to rise at a low single-digit pace in 2019.”

Jeremy Leaf, north London estate agent and a former RICS residential chairman, thought these figures confirmed a market struggling to weather the Brexit storm but not collapsing.

He added: “The fall in December has been replaced by a modest rise in January but this is probably just as much to do with shortage of stock as release of some inevitable pent-up demand in the post-Christmas period.

“Looking ahead, there are probably too many potential bumps on the road to give a clear steer as to the future direction of prices and activity but what is apparent is that there remains a determination among a good number of serious buyers and sellers to find a way of moving on.”

Similarly, Mark Harris, chief executive of mortgage broker SPF Private Clients, said that uncertainty is the main issue affecting the housing market with potential buyers and sellers sitting on their hands and waiting to see what happens with Brexit.

He said: “However, lenders won’t be put off. They have started this year the way they finished the last one – keen to lend and offering some competitive products to encourage borrowers to take the plunge. Those who are in the market for a new mortgage or remortgage will find plenty of attractive deals, with many lenders cutting rates in the past couple of weeks or tweaking criteria.

“We expect pricing to remain low in the coming weeks as lenders compete for somewhat limited business in very uncertain times.”

Source: Mortgage Introducer

Marketing No Comments

First Brexit, now global slowdown to weigh on Bank of England

The Bank of England will have more than Brexit on its mind when it meets next week, as a slowdown in the global economy tests its plan to return to raising interest rates before too long.

Governor Mark Carney and his fellow interest rate-setters are expected to keep borrowing costs on hold at 0.75 percent on Thursday, with Britain at risk of leaving the European Union just 50 days later without a transition deal in place to ease the shock.

Prime Minister Theresa May, trying to placate lawmakers in her Conservative Party, is pushing for concessions from EU leaders on a key part of the Brexit deal that she agreed with them last year. That is something the bloc has said it will not do.

On top of the uncertainty about the Brexit stand-off, the loss of momentum in the world economy and in particular in the biggest EU countries is likely to exert a drag on Britain’s stumbling economy.

On Wednesday, the U.S. Federal Reserve signalled its three-year run of raising rates might be ending, and the European Central Bank has sounded more worried that the euro zone’s recovery has run out of steam.

“Is the global slowdown just temporary? We think so, but it has lasted quite a long time. Maybe we are at the peak of the cycle,” George Brown, an economist with Investec, said. “Perhaps that’s the view that the BoE takes, although it’s not our view.”

The BoE – which bases its forecasts on the assumption of a smooth Brexit – will try to balance the drag on Britain from a weaker global economic outlook with the potential boost from finance minister Philip Hammond’s relaxation of his grip on public spending.

The BoE’s forecasts for Britain’s economic growth might therefore be little changed when it publishes its quarterly Inflation Report alongside its decision on rates on Thursday.

But some economists say there is a chance of a higher inflation forecast that makes investors rethink their bets against a BoE rate hike until the end of 2019 at the earliest.

Although inflation has fallen to within a whisker of the BoE’s 2.0 percent target, the wages of British workers are rising at their fastest pace in a decade, surprising the BoE and potentially pushing up prices.

A minority of economists think one member of the nine-strong Monetary Policy Committee will vote for a rate hike next week.

That, plus the chance of the BoE turning even more pessimistic about the inflationary “speed limit” of Britain’s low-productivity economy, “would set the UK apart as a hawkish story in an increasingly dovish world,” HSBC economist Elizabeth Martins said. “It might come as a surprise to the market.”

By the time the MPC announces its next policy decision on March 21, a few days before the scheduled Brexit date of March 29, the picture could look very different.

By then it should be clearer if the United States and China have avoided the prospect of a trade war, and – more importantly for the BoE – whether Britain will avoid a damaging no-deal Brexit, at least in the immediate future.

The BoE has warned that a worst-case Brexit scenario could hurt Britain’s economy more than the global financial crisis.

Paul Dales, an economist with Capital Economics, said a deal on Brexit could lead to the unusual situation of the BoE raising interest rates at a time when the U.S. Fed is cutting them.

“It doesn’t happen often, but nor does Brexit,” he said. “Yes, the global economy seems to be turning. But the BoE has room for catch-up.”

Source: UK Reuters

Marketing No Comments

Scottish Rents Rising On Buy To Let Property Investments

Scottish rents grew by 0.9 per cent over the course of 2018 according to the latest Your Move Scotland Rental Tracker.

Average Scottish rents now stand at £576 per calendar month (seasonally adjusted). On a non-seasonally adjusted basis the average Scottish rent was £584 per calendar month.

The stand out performers for Scottish rent growth were the Glasgow and Clyde area and the Highlands and Islands region.

Rental growth in Glasgow and Clyde surged in 2018 by 12.7 per cent over the year, putting the area slightly ahead of the Highlands and Islands at a growth rate of 12.1 per cent.

Growth in the Highlands and Islands region, and Inverness particularly, was seen top be driven by the University of Highlands and Islands and Raigmore Hospital creating demand from students, doctors and nurses relocating to the area.

Scottish rents in the remaining three regions did not fare as well in 2018.

Edinburgh and Lothian saw rents increase by 4 per cent over the past year, to reach an average of £691.

The East of Scotland saw rents fall by 1.2 per cent in 2018, to reach the lowest average Scottish rent of £532. Southern Scotland fared even worse, with a drop of 3.4 per cent to an average rent of £535.

However, on a monthly basis the East of Scotland showed more promise with 0.4 per cent month-on-month growth from November, bettered only by Edinburgh and the Lothians at 0.5 per cent, while Glasgow and Clyde came in third at 0.3 per cent.

Rental yields on investment remained fairly strong for Scottish landlords, with the average yield on a rental property standing at 4.6 per cent.

This represents only a small annual drop from the 4.8 per cent enjoyed a year ago and remains higher than the average south of the border in England and Wales which stood at 4.3 per cent in December.

All in all, Scottish rents seem to have remained strong in 2018.

Source: Residential Landlord

Marketing No Comments

Is a slowdown on the horizon for the housing market?

KPMG’s latest UK quarterly Economic Outlook Report has revealed that the prospects for the UK housing market remain consistent with the broad slowdown in house-price growth identified in the firm’s September edition of its Economic Outlook.

Overall, house prices in the UK increased by 3.5% in the 12 months to September 2018 and the strongest growth, of 6.1% and 6%, was in the West and East Midlands – which is a real boon for the region.

Siobhan Lodder, partner and head of real estate at KPMG in the Midlands, said: “Our analysis reinforces the importance of local infrastructure and connectivity, with billions being invested to improve roads, rail lines, schools and hospitals in the region and these continue to be crucial drivers for house price growth.

“A number of towns and cities across the Midlands are undergoing regeneration and deemed ‘up and coming’ and already these are noting rising house prices. These factors drive perceived attractiveness and ultimately create a virtuous circle of growth. Regional business hubs like Birmingham, Nottingham and Coventry are benefiting from the exodus of talent leaving London to start a life where the job prospects are good and the cost of living is cheaper.”

The analysis also showed that the London region remains the most affected, house prices fell over the same period by 0.3%. KPMG continue to expect that the fastest growth of house prices will take place in Scotland, increasing by 4.9% in 2018. This is in line with the latest data and would represent a moderation from a current rate of growth of 5.8%.

Lodder continued: “The rebalancing of property prices appears to be a key takeaway of the latest house price projections for the next five years, but we know that the UK’s housing market is a complex affair with multiple moving parts. The supply and demand of affordable housing continues to be out of kilter for the time being, however the government has been very vocal about its efforts to counter this.

“Local infrastructure and connectivity are increasingly incentivising would-be homeowners to look beyond London. Whilst places like Scotland, the West Midlands and the East Midlands have not yet reached the levels of London and the South East, they are relatively more affordable. London house prices by comparison, have stagnated somewhat, no doubt the result of high valuations set against a backdrop of an uncertain economic outlook.

“Expectations of further interest rate increases and wider uncertainty will continue to temper price rises, particularly in the second hand home market which does not benefit from the artificial buoying of help to buy.”

Source: The Business Desk

Marketing No Comments

New Electrical Safety Rules For Buy To Let Property Sector

Buy to let investors renting properties out will soon face new electrical safety rules on all properties they rent out in the private rental sector, following a government announcement.

Minister for housing and homelessness Heather Wheeler MP announced this week that mandatory electrical safety inspections will have to be carried out by ‘competent and qualified’ inspectors, with landlords facing tough financial penalties if they don’t comply with the new electrical safety rules.

Government ministers are due to publish new guidance which sets out the minimum level of competence and qualifications necessary for those carrying out the electrical safety inspections to ensure let private rental properties are safe from any electrical faults.

The minister said that the new guidance will provide clear accountability at each stage of the electrical safety inspection process, making it clear what is required and whose responsibility it is to put it in to place, but without placing excessive cost and time burdens on private sector landlords.

She said: ‘Everyone has the right to feel safe and secure in their own home. While measures are already in place to crack down on the small minority of landlords who rent out unsafe properties, we need to do more to protect tenants.

‘These new measures will reduce the risk of faulty electrical equipment, giving people peace of mind and helping to keep them safe in their homes.

‘It will also provide clear guidance to landlords on who they should be hiring to carry out these important electrical safety checks.’

The new electrical safety rules are part of the government’s continuing efforts to drive up standards in the private rented sector. Gas safety checks have long been in place in the private buy to let sector, and carbon monoxide alarms are required by law wherever there are solid fuel appliances.

Source: Residential Landlord