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UK economic growth revised up in first quarter

UK economic growth has been revised up to 0.2% in the first quarter, as output from Britain’s construction sector came in higher than previously estimated.

Earlier readings of GDP by the Office for National Statistics (ONS) showed the economy grew just 0.1% – which would have been the slowest pace of growth in five years.

While the final reading means growth still halved from 0.4% in the final quarter of 2017, the slightly better measurement is likely to raise the prospect of a near-term interest rate hike by the Bank of England.

The ONS raised the figure in its final estimate after a notable upward revision in construction output, which mainly reflects improvements to the way the sector’s work is measured.

ONS head of GDP Rob Kent-Smith said: “GDP growth was revised up slightly in the first three months of 2018, with later construction data, and significantly improved methods for measuring the sector, nudging up growth.

“These improved methods, introduced as part of ONS’s annual update to its figures, will lead to better early estimates of the construction sector with smaller revisions in the future.”

UK economic growth revised up in first quarter Commercial Finance Network
Sterling rose against the US dollar in the wake of the data’s release (PA)

The pound spiked in the wake of the data, rising 0.7% against the US dollar to trade at 1.317. Versus the euro, sterling was nearly flat, at 1.130.

Construction output growth was revised up by 1.9 percentage points over the quarter to negative 0.8%, while production output was revised down by 0.2 percentage points to 0.4%.

Services sector growth was unrevised at 0.3%.

The ONS reiterated that the overall impact of extreme wintry weather caused by the Beast from the East on output in the first quarter “appears to be relatively small.”

The Bank of England’s Monetary Policy Committee (MPC) now be watched closely for hints that an interest rate rise may be pushed through sooner rather later, with some voting members having previously held off following the sharp slowdown in growth.

Howard Archer, chief economic advisor at EY ITEM Club, said the upward revision to GDP, as well as the recent evidence of a pick-up in retail sales in the second quarter, “fuels our belief that the MPC is more likely than not to hike interest rates from 0.50% to 0.75% at their August meeting.”

“There is likely to be only one interest rate hike in 2018, leaving interest rates at 0.75% at the end of the year.

UK economic growth revised up in first quarter Commercial Finance Network

“We expect the Bank of England to raise interest rates twice in 2019 taking them up to 1.25% as it looks to gradually normalise monetary policy.”

Other ONS data showed the squeeze on living costs triggered by the collapse in the pound following the Brexit vote is easing.

Real household disposable income in the first quarter increased by 0.3% quarter on quarter, as wages increased at a faster rate than price rises.

It represents the second consecutive quarter of positive growth following over a year of negative growth.

However, the household saving ratio fell 0.4% to 4.1% as spending grew faster than income, the third-lowest quarterly saving ratio since records began in 1963.

Business investment was estimated to have fallen by 0.4% to £47.7 billion between the fourth and first quarter

The UK’s current account deficit was came in £17.7 billion, below forecasts of £18 billion, a narrowing of £1.8 billion from a revised deficit of £19.5 billion in the previous period.

Source: BT.com

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Race to match London prices heats up as growth in the capital hits nine-year low

Annual growth in London is at its lowest level for nine years as five of the UK’s major cities are now seeing prices fall in real terms, Hometrack says.

Hometrack’s May UK Cities Index put annual growth in the capital at 0.4%, while four other major parts of the country – Belfast, Oxford, Cambdirge and Aberdeen – are all seeing returns below the 2.4% rate of inflation, meaning they are technically down in real terms.

The data, based on the UK’s 20 biggest cities, showed Aberdeen posted the largest annual fall at 5.7%, to £178,200.

Edinburgh topped the tables with growth of 7.1% to £225,300, closely followed by Manchester which was up 7% to £163,300.

London still has the highest house prices at £491,200 but Hometrack warned the gap was narrowing and would close further as growth in the capital continues to slow, while many regions are still well below their peak.

Overall, average prices across the 20 cities were up 4.6% to £257,200.

Richard Donnell, insight director at Hometrack, said he expects Manchester and Birmingham to close the gap on London first.

He said: “Naturally, the relative price gap between cities fluctuates over the course of the housing cycle as supply and demand is affected by factors such as economic growth, job creation, wage increases and the flow of new investment. This has certainly been evident in Aberdeen where the fall in the oil price has impacted housing demand and house prices.

“Hometrack expects that Manchester and Birmingham will close the gap to London fastest in the coming years as these cities are likely to see the strongest jobs growth.

“The level of house price inflation seen in large regional cities during the last peak, between 2000 and 2003, gives a good indication of how much prices may rise this time around. If history is to repeat itself and these cities are to get back to where they were, then prices could increase by as much as 20-25%.”

Source: Property Industry Eye

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Investment Property Buyers Urged To Seek Advice Before Incorporating

Buy to let property investors are being urged to seek the proper advice before incorporating their business into a limited company to avoid rushing into any changes.

Specialist buy to let broker Commercial Trust Limited has issued a warning to landlords following recent reports from the press which suggest that incorporation is becoming increasingly popular in the buy to let sector. There is a concern that landlords may rush into this decision without adequate consideration.

The reduction in mortgage interest tax relief and the introduction of stamp duty have both contributed towards the trend of landlords opting to incorporate in order to improve their finances. It was predicted by lenders that this trend will continue into the coming year as landlords aim to avoid paying taxes and increasingly see incorporating as a viable option.

Chief executive at Commercial Trust Limited, Andrew Turner, expressed concern about the trend: ‘Whilst it is understandable that buy to let landlords want to avoid paying more tax than is necessary, it is essential, as with any investment, that they fully investigate how their personal circumstances apply to buy to let taxation. Upon face value, many landlords are perhaps seeing the headlines and are considering incorporating their property investments, as limited companies are taxed differently to individuals. However, taxation is a complex issue and I would urge anyone considering this move, to seek advice from a tax specialist first, to ensure that their buy to let venture would actually be better off tax-wise, in a limited company.’

He continued: ‘Having done so, we would be delighted to help any landlords that then want to consider investing in buy to let as a limited company. There are a wide range of lenders and products that are available and based on individual circumstances. But the message should be clear to landlords thinking of taking the limited company option, to investigate fully first.’

Source: Residential Landlord

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UK housing market perks up in May but consumers subdued – BoE

Britain’s housing market perked up in May but there were more signs of caution among consumers ahead of Brexit next year, Bank of England figures showed on Friday.

The BoE is watching for clear signs that consumer spending has recovered before it raises interest rates, after Britain’s economy slowed sharply in the first three months of the year.

 It said the number of mortgages approved for house purchase rose to a four-month high of 64,526 in May from 62,941 in April — above all forecasts in a Reuters poll of economists that had pointed to 62,200 approvals.

Britain’s housing market slowed sharply last year and growth in property prices has cooled, but the BoE figures added to tentative signs that activity may be picking up again.

Still, the signals from Britain’s consumer economy remain subdued despite a modest pick-up in wage growth. Earlier on Friday, consumer confidence fell unexpectedly as Britons became more downbeat about the economic outlook, nine months before Britain is due to leave the European Union.

 The BoE data showed the growth rate in unsecured consumer lending slowed to 8.5 percent in the year to May, the weakest since November 2015, from April’s 8.7 percent.

This week a BoE survey showed growth in the consumer services sector slid to a five-year low in recent months.

Earlier this week the BoE said consumer credit continued to expand rapidly, but measures already taken to stop overheating were having an impact, with banks reporting a significant tightening of unsecured credit.

 Net mortgage lending rose by 3.861 billion pounds, while consumer lending increased by 1.405 billion pounds compared with a forecast rise of 1.5 billion pounds.

Consumer credit growth has been slowing gradually since it peaked at nearly 11 percent in January 2016.

Source: UK Reuters

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Interest rates will rise in ‘gradual and limited way’, according to Bank of England deputy governor Jon Cunliffe

A Bank of England boss this morning played down the chance of there being a rise in interest rates anytime soon.

When asked about the prospect of rates rising from 0.5 per cent to 2.5 per cent in a few years, deputy Bank of England governor Jon Cunliffe told BBC’s Wake Up to Money that rises would be delivered in a “gradual and limited way”.

It follows Bank of England chief economist Andy Haldane calling for an immediate rise earlier this month, igniting speculation that there could be a rise in August.

The Monetary Policy Committee voted by 6-3 in favour of holding interest rates at 0.5 per cent in May.

“Financial markets are assuming that interest rates go up by another three-quarters of a percentage point over the next couple of years,” Cunliffe said.

“We do our forecasting on the basis of where the financial markets have those interest rates and we think we have inflation at target at those sorts of levels.”

But he added British households with high debt could get into trouble if another recession hit the UK.

“Household debt is quite high by historical standards but households have worked hard to put those debt levels down. But within that there are areas that you do worry about,” he added.

“You worry about households that have high debt could be badly affected in a recession.”

Source: City A.M.

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Annual house price growth slows to five-year low in June

THE average house price has topped £215,000 for the first time – but annual growth in property values has slowed to a five-year low – according to an index.

Across the UK, the typical house price in June stood at a new record high of £215,444, up 0.5 per cent month on month, Nationwide Building Society said. House prices are 2 per cent higher than a year ago.

Robert Gardner, Nationwide’s chief economist, said: “Annual house price growth fell to its slowest pace for five years in June. However, at 2 per cent, this was only modestly below the 2.4 per cent recorded the previous month.”

Regionally, in the second quarter of this year, London was the only area where house prices are lower than a year ago – following a trend also seen in the first quarter of 2018.

In the second quarter, house prices in London stood at £468,845 on average – a 1.9 per cent annual fall.

Despite the downward price movement in London, house prices there are still more than 50 per cent above their 2007 peak.

By comparison, house prices in the UK generally are 15 per cent higher, Nationwide said.

The East Midlands had the strongest annual house price growth in the second quarter, with prices up by 4.4 per cent, followed by the West Midlands, which saw a 4.3 per cent increase, and Wales with a 4 per cent uplift.

In Scotland, house prices were 3.1 per cent higher than a year earlier, while in Northern Ireland they have seen a 2.1 per cent increase.

Mr Gardner continued: “Subdued economic activity and ongoing pressure on household budgets is likely to continue to exert a modest drag on housing market activity and house price growth this year, though borrowing costs are likely to remain low.

“Overall, we continue to expect house prices to rise by around 1 per cent over the course of 2018.”

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: “Tight supply, a healthy labour market and a continued lengthening of mortgage terms – 30-year loans now are common – will help to prevent prices from falling outright.

“But it is inevitable that house prices will grow at a slower rate than households’ incomes during a period of rising mortgage rates.”

He continued: “We expect the official measure of house prices to rise by just 1.5 per cent over the course of 2018 and a mere 2 per cent over 2019.”

Jeremy Leaf, a north London estate agent and a former residential chairman of the Royal Institution of Chartered Surveyors (Rics), said: “On the one hand, the squeeze on incomes and unrealistic asking prices is reducing activity and confidence to move, particularly in price-sensitive areas such as London.

“On the other hand, the market continues to be supported by low interest rates and overall supply shortages, although we have found recently that listings and viewings are on the rise. This will translate into more sales if buyers and sellers recognise the new market realities.”

Here are the annual house price changes regionally in the second quarter of 2018, according to Nationwide, with the average house price:

– East Midlands, £181,549, 4.4 per cent

– West Midlands, £188,516, 4.3 per cent

– Wales, £153,964, 4 per cent

– Scotland, £148,161, 3.1 per cent

– North West, £160,419, 3 per cent

– Outer South East, £281,752, 2.5 per cent

– East Anglia, £225,768, 2.5 per cent

– South West, £243,182, 2.4 per cent

– Northern Ireland, £136,211, 2.1 per cent

– Yorkshire and Humberside, £155,075, 2.1 per cent

– North East, £127,266 ,1.6 per cent

– Outer Metropolitan, £365,514, 0.9 per cent

– London, £468,845, minus 1.9 per cent

Source: Irish News

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This is the best UK city to be a landlord, new research finds

If you’re considering buying property to rent it out for profit, it’s important to be aware of several factors that will affect how worthwhile the venture will be.

New research from GoCompare has revealed the best places to purchase property for buy-to-let across the UK, determined by comparing average property price and rental yields, the population under the age of 35 in the area, number of properties available, number of letting/maintenance agencies, number of new housing developments, properties currently available for rent and rental price growth.

The study showed Manchester as the best place in the UK for buy-to-let, with the highest average yield in the country at 5.55 per cent. Gaining the most profit is the prime concern for buy-to-let landlords and this northern city is the top location to have higher profits long term. Manchester has also seen the biggest rental price growth in the country with an increase of 5.76 per cent.

This is the best UK city to be a landlord, new research finds Commercial Finance Network

Belfast is the worst city in the UK for renting property out, according to the research. Even though the average property price is one of the lowest in the country, average yield is low and there has only been a 2.19 per cent increase in rental prices over the last five years.

Find out the 31 best places for being a buy-to-let landlord in the infographic below…

This is the best UK city to be a landlord, new research finds Commercial Finance Network
Source: House Beautiful
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Buy-to-let investors told to widen search for yield

Buy-to-let investors may have to look to alternative regions if they want to secure a decent yield from their property.

Research by Direct Line for Business showed rental yields varied significantly depending on where investors bought.

Direct Line found that while house prices had risen 17 per cent over the past three years, rents were up just 4.7 per cent.

While the average yield achieved across the UK is 3.6 per cent, some buyers could earn as much as 7.1 per cent.

Burnley had the highest annualised rental yield in the country, according to the analysis. Average house prices in the town were £76,300 while the typical annual rent landlords could achieve was £5,388.

Making up the rest of the top three are the City of Glasgow and Belfast where yields were 6.9 per cent and 6.4 per cent respectively.

By comparison, homes in London, the south east and east of England had the poorest yields, largely because property prices were higher.

In London landlords achieve average annual rents of more than £20,000 but, with the average house price more than £480,000, the yield was 4.4 per cent.

In the east of England, where the typical property cost £289,000, the average rent was the lowest in the country at just 3.5 per cent.

Daniel Bailey, principal at Middleton Finance, said: “Most of my buy-to-let investors don’t tend to pay more than £125,000. If they go beyond that then the yield tends to not be as good.

“Purchase price is a major factor and some areas will attract a better monthly rent. I have some clients achieving yields of 7 to 10 per cent .

“There are still good yields to be achieved but it is important to speak to a broker and property tax expert to understand all of the implications.”

Direct Line said increased competition in the private rented sector was hitting yields.

Christina Dimitrov, business manager at Direct Line for Business, said: “While property prices have increased in recent years, it’s a different story for the rental markets where growth in rents in lower than wage growth.”

Source: FT Adviser

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Calls to cut Stamp Duty as mortgage approvals for house purchase slide

The boss of Spicerhaart’s mortgage broking arm has called for a Stamp Duty cut for everyone as bank data revealed yet another slump in mortgage approvals for house purchase.

Banking trade body UK Finance estimates that high street lenders approved 45,549 mortgages for home purchase last month, down 3.8% annually.

Meanwhile, remortgages continued to dominate the market, with approvals growing 18% annually to 31,748.

John Phillips, group operations director at Just Mortgages and Spicerhaart, said Stamp Duty was stifling the whole market so it would be better if that tax was cut for everyone.

He said: “This spike in remortgaging is most likely due to short-term deals coming to an end and home owners looking to lock in low rate fixed deals amidst ongoing speculation that rates will go up later in the year.

“For house purchase to really pick up, the Government needs to think about making some real changes. First-time buyers have seen some good initiatives – Stamp Duty cuts and Help to Buy – but they are obviously not enough to really get things moving.

“Data released by Hamptons International revealed that it now takes an average of ten and a half years for first time buyers to raise a 15% deposit, rising to 17 years for a single Londoner.

“This is crazy – it shouldn’t be that difficult for people to purchase their first home and more needs to be done to help. Ideally, I would like to see Stamp Duty cut altogether, for everyone, because it is really stifling the market.”

Eric Leenders, managing director of personal finance at UK Finance, said: “May’s increase in mortgage approvals was driven by strong growth in remortgaging, as a large number of fixed-term mortgages came to an end and home owners took advantage of a competitive market to shop around for attractive deals. Increased efforts by lenders to contact their customers before their current mortgage deal expires have also contributed to this rise.”

Commenting on the figures, Jeremy Leaf, north London estate agent and a former RICS residential chairman, said: “This is more of a spring bump rather than bounce as approvals for house purchases were lower at a time when we would have expected increased activity, even though gross lending is considerably higher, boosted by remortgaging.

“Many buyers and sellers are sitting on their hands and those that are recognising the new reality in this price-sensitive market are negotiating hard but transactions are taking longer as a result.

“Encouragingly, the number of listings and viewing appointments is rising, but choosy buyers are taking their time to make decisions.”

Source: Property Industry Eye

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UK House Price Data Beats Analyst Expectations, but Confirm Entrenched Slowdown is Here to Stay

The latest set of Nationwide house price data showed a rise in residential property prices to the tune of 0.5% on a month-on-month basis in June, beating the consensus forecast for 0.3%.

The year-over-year growth rate decreased to 2.0%, from 2.4% in May, but again the number exceeded the consensus forecast for a rise of 1.7%. Despite the beat, the number represents a five-year low in June and “is another milestone in the housing market’s slowdown,” says Samuel Tombs at Pantheon Macroecnomics.

On current trends Pantheon say the year-over-year rate will slow further, given that month-to-month gains in the first half of 2018 have averaged just 0.1%.

Note too that Rightmove’s measure of online asking price rose by just 1.7% year-over-year in June, while the balance of surveyors expecting prices to rise over the next three months was its lowest since the referendum in May, according to RICS.

“Slowing growth in prices largely reflects the impact of recent increases in mortgage rates on affordability. Tight supply, a healthy labour market and a continued lengthening of mortgage terms—30 year loans now are common—will help to prevent prices from falling outright. But it is inevitable that house prices will grow at a slower rate than households’ incomes during a period of rising mortgage rates,” says Tombs.

There was no notable reaction in Sterling to the data.

UK House Price Data Beats Analyst Expectations, but Confirm Entrenched Slowdown is Here to Stay Commercial Finance Network

“Looking further ahead, much will depend on how broader economic conditions evolve, especially in the labour market, but also with respect to interest rates,” says Robert Gardner, Chief Economist with Nationwide.

Concerning the outlook, Gardner says there are few signs of an imminent change. “Surveyors continue to report subdued levels of new buyer enquiries, while the supply of properties on the market remains more of a trickle than a torrent.”

Pantheon Macroeconomics meanwhile expect the MPC to provide the housing market with some relief by passing over the opportunity to raise Bank Rate in August, though they join markets in assuming the decision will be a close call.

“The MPC is committed to a tightening cycle and we see two rate hikes coming in 2019. As such, we expect the official measure of house prices to rise by just 1.5% over the course of 2018 and a mere 2.0% over 2019,” says Tombs of Pantheon’s forecast for UK house prices.

Source: Pound Sterling Live