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Communities Secretary calls for borrowing to invest in building new homes

A senior Cabinet minister has said the Government should borrow money to invest in hundreds of thousands of new homes in what appears to be a significant shift in Conservative thinking.

Communities Secretary Sajid Javid said ministers should take advantage of record low interest rates to deal with the housing crisis, which is “the biggest barrier to social progress in our country today”.

Asked if Chancellor Philip Hammond was on board with the idea a month away from his Budget, Mr Javid told BBC One’s Andrew Marr Show: “Let’s wait and see what happens in the Budget”.

But his call to borrow more cash to pay for spending on housing and other infrastructure appears to echo Labour’s own “fiscal credibility rule”, which states that the government should not borrow for day-to-day spending but be prepared use it to fund long-term investment.

Asked whether there would be a new housing fund to build homes, Mr Javid said: “We are looking at new investments and there will be announcements.

“I’m sure at the Budget, we’ll be covering housing but what I want to do is make sure that we’re using everything we have available to deal with this housing crisis.

Communities Secretary Sajid Javid
Communities Secretary Sajid Javid (Stefan Rousseau/PA)

“And where that means, so for example, that we can sensibly – you borrow more to invest in the infrastructure that leads to more housing – take advantage of some of the record low interest rates that we have, I think we should absolutely be considering that.”

He added: “I would make a distinction between the deficit which needs to come down and that’s vitally important for our economic credibility and we’ve seen some excellent progress, some very good news on that just this week.

“But investing for the future, taking advantage of record low interest rates, can be the right thing if done sensibly and that can help not just with the housing itself but one of the big issues is infrastructure investment that is needed alongside the housing.”

Mr Javid also suggested the Government would not relax protections for the green belt.

new homes

“I don’t believe that we need to focus on the green belt here, there is lots of brownfield land, and brownfield first has been a policy of ours for a while,” he said.

“There is a lot more that can be done, density is a big issue – if you look at the density of London for example, it won’t surprise your viewers to learn that London has some of the highest levels of demand in the country, the density in London is a lot lower than many other cities, Paris, Berlin, compared to most cities around Europe, so that’s one area where you can expand more.”

At the Conservative Party conference this month, Theresa May pledged to “dedicate” her premiership to fixing Britain’s housing crisis as she announced an extra £2 billion for affordable housing.

An extra 25,000 social homes could be built under the plans outlined by the Prime Minister but her promise was overshadowed by her mishap-strewn conference speech and subsequent Tory infighting, and the party remains under pressure to do more.

Environment Secretary Michael Gove appeared to back Mr Javid’s suggestions, tweeting that he was “v impressive on #Marr”.

Shadow housing secretary John Healey said: “If hot air built homes, ministers would have fixed our housing crisis.

“Any promise of new investment is welcome, but the reality is spending on new affordable homes has been slashed since 2010 so new affordable house building is at a 24-year low.”


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Pound Sterling Strengthens Vs Euro and Dollar As EU Summit Wraps Up On a Positive Note

Friday’s boost to the Pound comes closely on the heels of a sluice of bad news for the UK economy, which has recently seen consumer spending fall and the outlook for consumer credit deteriorate further.

The Pound rose strongly throughout the morning session Friday as October’s European Council summit looked set to conclude on a positive note.

Comments from German Chancellor Angela Merkel, Prime Minister Theresa May and a host of other officials were behind the lift, all of which seemed to suggest Brexit negotiations may soon move forward onto the subjects of trade and transition.

“My impression is that these talks are moving forward step by step,” Merkel told reporters. “From my side there are no indications at all that we won’t succeed.”

Markets have feared a possible delay to the progression of talks on to the subject of trade beyond December.

PM May reiterated her Florence promise that the EU will not suffer a budgetary black hole during the current spending period, as a result of Brexit, which runs into 2020.

“There is still some ways to go on Brexit,” says Theresa May. “I am ambitious and positive about the Brexit negotiations.” She also reiterated that the UK will “honour our commitments.”

Any delay of trade or transition talks beyond December is seen as raising the risk of a so called “hard Brexit”, or a “no deal Brexit”, given the time it is likely to take to agree details of a “transition deal” as well as the future relationship.

The PM’s statements on Brexit came closely on the heels of public sector net borrowing data that showed UK government borrowing rising to £5.3 billion in September, up from £5.1 billion the previous month.

Despite a rise in the headline measure, the latest borrowing figure was the lowest of any September month for a decade.

The Pound-to-Euro rate had risen 0.43% to 1.1145 a short time ahead of noon while the Pound-to-Dollar rate added 0.08% to 1.3159, making Sterling the best performer against the greenback out of the G10 basket.

Consumer and Credit Outlook Clouds Further

On Thursday, Office for National Statistics data showed retail sales falling sharply by -0.8% in September, much further than the -0.1% decline pencilled in by forecasters.

Despite this, economists still see consumer spending as having stabilised during the third quarter and are also predicting a steady performance from the economy during the period.

However, with inflation pressures already dampening spending, the outlook for consumers and credit supply to households appeared to darken further on Thursday.

“UK household debt levels are high and still growing,” says Annabel Schaafsma, head of Moody‘s EMEA consumer surveillance team. “As real income declines, UK consumers are vulnerable to an economic downturn and any increases in inflation or interest rates could cause problems for household finances, especially for those on lower incomes.”

Moody’s, the ratings agency, said the faltering outlook for the UK consumer will have an impact on credit providers who support their business using the securitisation market.

“Additionally, consumer credit has been growing in excess of the rate of household income. This suggests we will see a weakening future performance of some UK consumer securitisation deals,” says Schaafsma.

Securitisations are an important source of liquidity for banks of all sizes and also for some corporates. Even mobile phone contracts can be securitized and sold on to investors, unlocking capital and providing an instant return for originators.

However, investor demand for UK securitization deals looks set to weaken, particularly in the mortgage market.

“Moody’s expects higher delinquencies in newer, non-conforming RMBS, as opposed to older, more seasoned deals. The borrowers in newer deals are more likely to be paying higher interest rates and have a smaller safety net. Buy-to-let RMBS is very sensitive to a weaker economy and occupancy rates and rents are expected to decline,” the ratings agency says in a statement.

Bank of England Credit Survey Points To Tighter Supply 

Thursday’s Moody’s report came barely a week after Bank of England data showed default rates on credit cards and other types of unsecured loans rose during the third quarter.

Recent BoE changes to bank capital requirements for different types of consumer loans had been expected to slow the pace of lending to households during the months ahead.

But a rise in default rates over the third quarter looks as if it might accelerate the pace at which banks now cut back lending to consumers.

“Default rates on credit card lending were reported to have increased slightly in Q3, while those on other unsecured lending increased significantly,” the Bank of England says, in its latest quarterly Credit Conditions survey. “Lenders reported that the availability of unsecured credit to households decreased in Q3 and expected a significant decrease in Q4.”

Source: Pound Sterling Live

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The Bank of England Is Backed Into A Corner and the Pound Under Renewed Threat

“We expect a November hike because of what the BoE has said, not what the data have done,” – Bank of America Merrill Lynch.

The Bank of England has backed itself up against a wall with September’s interest rate warning, according to one economist, who says a November rate hike is necessary for the sake of the BoE’s credibility but the wrong move for the economy. 

Never before in the BoE’s history as an independent central bank has the case for action been so weak at the beginning of a hiking cycle, and markets so certain that policymakers will move.

“We expect a BoE rate hike on 2 Nov. because of what rate setters have said, not what the data have done,” says Robert Wood, chief UK economist at Bank of America Merrill Lynch.

The Monetary Policy Committee at the Bank of England said in September that it could withdraw stimulus from the market (hike rates) over the coming months if inflation continued to march north of its 2% target and the economy remained on an even keel.

“We only reluctantly changed our call from them staying on hold after several rate setters doubled down on their September guidance that a hike was coming,” says Wood.

Market prices of UK government bonds now imply more than an 80% chance of an interest rate hike in November while Wood says it would take a third-quarter GDP reading of 0.0% or worse to prevent the Bank of England from pulling the trigger.

Sterling has risen from the depths of its August lows in response to the evolution of market expectations around rates, posting a year to date gain over the US Dollar and halving its 2017 loss against a resurgent Euro to around 4.5%.

“Inflation has peaked we think and will drop below 2% next year,” says Wood. “We think the BoE inflation forecast is well off beam given fading pipeline inflation pressures.”

UK wage growth is currently trending at around 2% per year and, according to Wood, this is insufficient to deliver 2% underlying inflation on a sustainable basis.

In addition, retail sales growth is showing signs of stalling, with volumes the weakest in four years, while labour market gains have also slowed. But markets are still pricing a hike in November and more to come once into 2018.

“Tenreyro mentioned this in her testimony: if the BoE get it wrong they may need to cut more in the future than they would otherwise have done. It may be safer to wait and see. That would be our view too for what it’s worth,” says Wood.

In among the recent economic statistics, and the market implied predictions for interest rates in November and beyond, is a recipe for an accelerated economic slowdown that merely backs the Bank of England into another corner.

This corner will have the same above target inflation and slowing economy on the one side of it and plenty of damaged credibility on the other.

MPC Is Divided But Majority May Still Hike

Traders are nearly unanimous in their expectation of a November rate hike. But the Bank of England’s panel of interest rate setters, the Monetary Policy Committee, is not nearly as unified.

“Jon Cunliffe’s recent comments suggesting he would not support a November hike have put the cat among the pigeons. We assume no hike is perhaps a 25% probability event, but it’s hard to know,” says Wood. “Mark Carney and the MPC could have been leading us on a merry dance here.”

All of the indications are that a simple majority will vote for a rate hike in November, although there could be a number of dissenters, which isn’t a good thing for Sterling.

“Based on their testimony to MPs this week, David Ramsden and Silvana Tenreyro seemed to us more likely than not to call for no change in policy in November,” says Wood. “Jon Cunliffe’s recent comments on BBC Wales suggested he would not support a hike in November.”

This means three of the nine voters on the MPC may depart from the herd and vote against a rate hike. Andy Haldane and Ben Broadbent are both internal members of the MPC and so, according to Wood, are likely to vote with governor Mark Carney for a hike.

Michael Saunders and Ian McCafferty’s hawkish views, favouring higher rates, are well known and so it is probably safe to say these two are quite likely to vote for a hike. Gertjan Vlieghe, who has historically opposed a tightening of policy, dropped his opposition in September and suggested he might back a rate rise too.

“This leaves us expecting a 6-3 vote, though we are more than usually uncertain about that. It could be a 5-4,” says Wood. “The vote will matter for how we interpret the Inflation Report.”

November or December?

A narrow majority of the MPC may seem likely to support a hike in November but, with recent data taken into account, at least one strategist is suggesting the Bank of England will kick the can down the road.

“Inflation as measured by the consumer price report is on the rise but as some U.K. policymakers including Governor Carney pointed out this past month, CPI could have peaked in October,” says Kathy Lien, a managing director of foreign exchange strategy at BK Asset Management in New York City.

Lien notes the recent pickup in wage growth in the UK and forecasts that rising pay levels will eventually mean a recovery in consumer spending and a consequent pickup in underlying inflation pressures. But she also flags uncertainty over when this is likely to happen.

“Investors may be pricing in a rate hike in November but based on the big drop in retail sales last month, they may delay the move to December,” she warns.

Meanwhile, with no major economic reports due from the UK in the week ahead, and policymakers set to remain silent, the Pound’s fate will be determined by Brexit headlines, the direction of the US Dollar and the European Central Bank’s eagerly anticipated monetary policy announcement.

“On a technical basis, GBP/USD has found support at the 50-day Simple Moving Average, so if there’s a place for a reversal, it would be off those levels,” says Lien.

Source: Pound Sterling Live

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Bridging loan volume dips in Q3

Bridging volumes fell by 4.9% in Q3 but remain some 2% higher than last year, data from Bridging Trends has shown.

The firms that contribute to Bridging Trends reported that gross lending had dropped to £142.75m

The split between first charge and second charge lending stood at 82% and 18% respectively indicating consistent investment in residential properties-to-let.

And Joshua Elash, director at MTF, said in regards to unregulated bridging continuing to dominate the landscape: “The implementation of the Prudential Regulatory Authority’s rules relating to the treatment of portfolio landlords means this upward trend is likely to continue for the foreseeable future.

“Increasingly larger number of professional property investors will consider bridging finance when purchasing a new property which they otherwise intend to refurbish and sell.”

Chris Whitney, head of specialist lending at Enness Private Clients, added: “I think when you keep in mind the fact that this was over the summer holiday, a drop of only about 5% in lending volumes compared to the last quarter is actually quite impressive.

“I was surprised the average interest rate hadn’t fallen further than it has. We have seen pricing under quite a bit of downward pressure as certain lenders fight to increase market share and protect what they already have from new entrants.”

Additionally the data found that mortgage delays were the most popular reason for taking a bridging loan and the average duration of a loan stood at 12 months.

Average LTV levels reached almost 50% with the average monthly interest rate across first and second charge lending decreasing to 0.82% from 0.84%.

Source: Mortgage Introducer

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Value of British property market has fallen by £62.7 billion since July, report finds

The average home across Britain has lost nearly £24 a day in value over the past three months, according to analysis by a property website.

Zoopla said a house price dip between the start of July and the end of September means the average property has decreased in value by £2,188 over the quarter, which equates to a fall of £23.78 per day.

Spokesman Lawrence Hall said: “We’ve seen a decline in house prices during the last quarter, which is potentially good news for first-time buyers.”

Zoopla calculates that the total value of the British housing market fell by £62.7 billion during the third quarter of 2017, making it now worth around £8.1 trillion.

But while values have fallen across England in the past three months, Scotland and Wales have bucked the downward trend, according to the website.

In Wales, the average home is worth £393 more than three months earlier, while in Scotland values have seen a £54 increase on average.

Caernarfon in North Wales was identified as the top-performing area in the third quarter, with price growth of 1.57% or £2,563 on average.

Within England, the North West has been the most resilient in terms of price falls, with values there edging down by 0.59% or £1,120 since July.

London, where housing affordability has become particularly stretched, has seen the biggest price falls over the period, with an average decline of 0.99% or £6,633.

Alton in Hampshire was identified as having the weakest house price growth in Britain in the third quarter, with property values falling by 2.17% or £10,900 on average.

Here are average property values across Britain in September, followed by the increase in cash and percentage terms over the previous three months, according to Zoopla:

  • Wales, £182,773, £393, 0.22%
  • Scotland, £187,084, £54, 0.04%
  • North West England, £189,552, minus £1,120, minus 0.59%
  • North East England, £186,765, minus £1,341, minus 0.71%
  • South West England, £295,011, minus £2,358, minus 0.79%
  • East of England, £355,941, minus £2,988, minus 0.83%
  • South East England, £406,271, minus £3,575, minus 0.87%
  • East Midlands, £209,416, minus £1,867, minus 0.88%
  • Yorkshire and the Humber, £172,199, minus £1,572, minus 0.9%
  • West Midlands, £218,398, minus £2,130, minus 0.97%
  • London, £665,605, minus £6,633, minus 0.99%

Source: iTV

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Historic UK/US agreement by development finance bodies

Transatlantic exchange will benefit responsible finance providers

The two national bodies representing the development finance industries in the UK and US have today signed a historic partnership agreement.  The US-based Council of Development Finance Agencies (CDFA) and the UK’s Responsible Finance are establishing a transatlantic exchange that will boost finance practitioners in both nations.

The exchange will help foster best practices, collaboration, learning and a greater understanding of how economic development and infrastructure is financed in the two nations.

The CDFA and Responsible Finance represent a total of 500 finance providers, which all support economic development and have an impact on their local economies. International collaboration and agreements are currently hot topics, and this new exchange will strengthen understanding as well as supporting growth.

Responsible Finance supports a strong network of responsible finance providers who are increasing access to fair finance across the UK. Jennifer Tankard, CEO of Responsible Finance, commented:

“The transatlantic exchange is a great opportunity for responsible finance providers in the UK to learn from US peers and share our own experiences. We have a special relationship with the CDFA and this new agreement means that by working together we can achieve more than the sum of our parts. Our research, webcasts and visits will enable finance providers to take advantage of learning, funding and training opportunities. This is good news for the businesses, communities and people they serve – those that can’t access finance elsewhere and that need a strong national network of finance providers.”

Source: London Loves Business

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Finding solutions to the UK’s housing crisis

Larry Elliott suggests five steps to fix the housing market (Britain’s broken housing market – and how to fix it, 9 October) which include Kate Barker’s idea of “acquiring” large sites abutting urban areas at a modest premium to their existing use. That would effectively part-nationalise development value and might help supply, although the Tories wouldn’t do it because they reversed Labour’s two attempts at taxing development value, the Land Commission Act 1967 and the Community Land Act 1975/Development Land Tax 1976. Increased housing supply doesn’t automatically lead to lower prices of course (unless builders were to build at a rate that forced them to drop their own prices, which they wouldn’t) because, as Elliott says, the housing “market” isn’t a market at all in the traditional supply-and-demand sense.

Before more of this crowded country’s open space is concreted over and its amenity value taken from those abutting urban areas, other expedients could be deployed, like penal taxation of empty property and progressive taxation of inherited property wealth, the latter of which continues to snowball for the haves and push prices further beyond the have-nots. Those two measures would do more to bring prices back closer to a manageable multiplier of local earnings and improve the rising generation’s chances of ownership. Whether the banks’ loan books could stand the strain of falling prices – and how hard the Treasury would fight to avoid them – is another question.
John Worrall
Cromer, Norfolk

 Larry Elliott’s incisive analysis of the housing market missed a trick or two. We urgently need to move jobs where the people are, not the opposite. That just inflates southern house prices. And please stop blaming planners. America realised 20 years ago that sprawl is not the answer to housing problems; it doesn’t lower prices, it just increases greenhouse gas emissions. The US smart growth movement’s growing influence demonstrates that compact urban development produces better housing and vibrant communities. Of course the big measure that would reduce house prices would be extending right to buy to the private rented sector – politically impossible, of course.
Jon Reeds
Smart Growth UK

 Analysis of possible solutions for fixing the housing market seem to overlook a key point: an understanding of what housing should be about – ie community. A home for our families, a roof over our heads and a secure base for the rest of our lives from birth to old age. We need less reliance on large builds by multimillion pound faceless corporations making huge profits, and more local planning in favour of self-builds to serve inter-generational families and communities. In France there seems to be a lot of one-unit building on the edge of villages and towns, often they appear to be small bungalows for the elderly. In the UK this is frowned upon. Second, we need to examine the way house prices soared when two full incomes became more the norm. This was a gift to those who benefitted from inflated housing values. It proved a disaster for households at the stage of raising children when (out of necessity) couples’ earnings go down to one and a half incomes or less, due to the need to meet important care responsibilities at home. It’s time to put families first and recognise that housing is a basic need. Let’s invest in construction of decent social “community” housing for young and old. Stop encouraging people to overstretch themselves. Only then will equilibrium be restored.

Elliott’s solution number five – the need to boost wages will, I fear, just mean forcing mothers and fathers to both work longer hours with no time to care for children or older relatives. This in turn means a house is no longer a home, just a place to sleep.
AM Lewis
Salisbury, Wiltshire

 Anna Minton’s concern about developers’ “artwash” is just the tip of an urban mountain of bling: “iconic”, “placemaking”, “cultural quarter”, the urban realm as theme park (Developers are using culture as a Trojan horse in their planning battles, 11 October). Meanwhile, city dwellers suffer chronic housing shortages, appalling air quality, gridlocked transport, increasing inequality and marginalisation. Why? Planners morphed into seeing cities as service centres, reflecting the shift since Margaret Thatcher to a service economy. Then Tony Blair brought the bling to the great neoliberal game, along with the expectation of remuneration. A whole generation of local politicians, responsible for taking bread-and-butter planning decisions, have grown up expecting to spread jam. They are too easily seduced by developers’ art-bling, even believing it ethical to join the revolving door of persuasively dazzling development consultancies. Perhaps the most egregious live example is at land secured for social housing at Coin St on London’s South Bank: Bjorn Ulvaeus’ application for an Abba nightclub is currently enjoying fair wind, following the collapse of the infamous garden bridge proposal on an adjacent site. The lessons from that debacle have yet to be learned.
Michael Ball
Waterloo Community Development Group

 Your supplement Rebuilding social housing (20 September) described some of the efforts being made to fill the housing gap. All of these are to increase supply. With more than 300,000 immigrants per annum, a smaller number leaving, and with natural increase, there is no chance without addressing demand. We need more than to limit the number coming in to the country. The ideal would be a population policy with a cabinet minister responsible for population.
David Hurry
Hurstpierpoint, West Sussex

 Regarding “insulting” levels of “affordable” housing at a development in Ilford (Report, 16 October), the really insulting thing is how no one really nails the government and developers on the massive lie inherent in every definition of “affordable” they use. Rather than fig-leaf approaches based on already unaffordable levels of rent, affordability can only be properly based on average incomes and standard mortgage lending criteria. Given average nationwide incomes and typical four-x income multiples, the actual number of truly “affordable” new homes built in the UK today – and for many years – is probably zero.
Norman Miller

Source: The Guardian

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Bath Landlords Fined For Operating HMO Without Licence

Two Bath private landlords have been told that they must pay more than £16,000 due to their failure to obtain the correct House in Multiple Occupation (HMO) licensing.

Elizabeth Vowles, 48, and Hayley Book, 55, both from Weston pleaded guilty at Bath Magistrates’ Court to their licensing failure, deemed an offence under the Housing Act 2004.

The court was told that the two landlords had been caught operating a pair of HMOs in Bath’s designated Additional Licensing Area without the adequate licensing. Their flouting of the regulation was discovered in January 2017, despite the fact that it had been a legal requirement in certain locations in Bath since 2014. The licensing scheme was introduced to enable officers to know the location of HMOs and place conditions on the landlord to enforce minimum standards of safety, as well as making sure that the property’s management is maintained.

The pair of private landlords were also managing a third HMO in the Additional Licensing Area, so both landlords would have been well aware of the additional licences that were required for houses of multiple occupation licensing, the court was told.

Vowles and Book were each fined £4,000 for each property. They were also ordered pay prosecution costs of £550, as well as a victim surcharge of £170. In the Bath designated licensing area, operating a property without a licence is an offence punishable by a fine up to £20,000

Councillor Paul Myers commented on the case: ‘Our Housing Services will try to work in partnership with landlords to improve housing standards wherever possible. Additional licensing helps to ensure that occupants of HMOs are able to live in safe and well managed properties. Where landlords fail to licence their properties such as the case here, they are undermining the objectives of the additional licensing scheme.’

Source: Residential Landlord

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Strong regional growth keeps UK asking price growth more or less unchanged year on year

Strong regional market performances outside of London and the South East are supporting the national property asking price growth in the UK, the latest index shows.

Asking prices increased by 3.2% in England and Wales in October and by 3% in Scotland year on year but in Greater London they are down by 0.7% on an annual basis, according to the data from

Annual growth is led by the East Midlands with prices up 6.6% to £225,258, followed by the East of England up 5.3% to £361,073, then the West Midlands up 5.8% to £238,829 and the South West up 5% to £324,739.

Asking prices were up by 4.5% year on year in Yorkshire and the Humber and in the North West to an average of £189,535 and £195,214 respectively, up by 3.2% in the South East to £407,550, up by 2.9% in Wales to £192.133, but by just 1.4% in the North East to £157,772.

On an month on month basis it was more of a mixed picture with asking prices up 0.4% in England and Wales to an average of £307,424 but down by 0.1% in Scotland to £183,927.

The biggest monthly gain was 1% in the South West and the West Midlands while they increased by 0.9% in the East Midlands and 0.7% in the North West and the East of England.

The index report says that overall the North West and Yorkshire continue to gain additional momentum and this will help boost national figures going forward and the North East and Wales show improved confidence too, both displaying increased momentum but improvements are cautious and incremental thus far.

According to Doug Shephard, director of, overall, the UK property market is showing remarkable resilience and stability despite significant political uncertainty and a raft of costly disincentivising legislation.

He pointed out that in Oct 2016 the annualised rate of increase of home prices was 4.4% and a year on it has hardly changed at 3.2% with a third month in a row of declines in Greater London pushing the national average down.

The data also shows that the typical time on the market in England and Wales increased by two days to 89 days, two days less than in October 2016 and the total number of properties on the market in England and Wales remains down by 3% year on year.

Shephard said that the cool down in London had to happen and the process is not due to Brexit as it had begun long before the vote to leave the European Union. ‘Five years of massive house price inflation inevitably ended in the spring of 2016 with the beginning of the current corrective phase. Prices, of course, are not plummeting in the capital and surrounds, but rather sliding gently whilst monetary inflation does the rest,’ he explained.

‘Indeed, while interest rates remain ultra-low there is no panic, no rush for the exit. Supply is up on previous years but is not in any way extreme. Just enough to prevent further price rises in the immediate future. The South East and the East hit their price ceilings later than London did but the pattern is very similar and we expect prices to go sideways for some time in these regions. Supply has already risen and these markets are now slowing down from their previous feverish pace,’ he said.

‘On the other hand, the trends indicate that the northern markets look poised to put in the best performances they have shown for many years. The North West and Yorkshire are entering a boom phase, followed by the East and West Midlands which are currently the UK’s most vibrant regional property markets,’ he pointed out.

‘Looking towards 2018 it is as yet uncertain how far the London correction will go, but we do not expect major falls as the weak pound is attracting significant foreign investment in the region most favoured by international buyers. But despite this and talk of raising interest rates, the UK property market is showing remarkable robustness and looks set to continue to do so for the immediate future,’ he concluded.

Source: Property Wire

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Five ways to harvest sustainable UK income

Since the financial crisis, investors and savers have seen meagre yields from cash and gilts, with rates anchored at historic lows.

For investors accessing markets to extract additional income, it is more important than ever to navigate stretched valuations across many asset classes. Furthermore, investors must carefully consider the sustainability of income generated from equity and fixed interest investments.

Despite mounting doom and gloom over the UK economy, the outlook for dividends remains sound, recently buoyed by the rapid pound depreciation, which has benefitted overseas earners. Investors should remain wary of dividend concentration, but the UK will continue to be a strong and reliable long-term source of income.

Taking a long-term, value-driven approach, here are five income opportunities in equity and fixed interest markets:

Value opportunities in unrated gems

We have maintained a large exposure to unrated and subordinated debt, mostly in the form of preference shares and Permanent Interest Bearing Shares (PIBS). Just because these types of instruments don’t have a credit rating, does not make them low quality. There are plenty of companies which have taken the decision not to pay for a credit rating and are considered robust businesses – John Lewis a good example.

Which Isa platform should you chose? We compare the different brokers

Insurance company preference shares are a neglected and under-researched area of the market. It is permanent capital for these companies and can provide a rich seam of value and additional yield – for example Royal Sun Alliance, Aviva and General Accident.

Separating the casino from the utility in UK banks

We carried a large underweight to UK banks since the crisis. UK banks entered the financial crisis with very low capital ratios, found dubious ways of complying with Basel III requirements and were, by and large, an ethics-free zone. Furthermore, many banks continue to be encumbered with high-risk investment banking operations. When investing in banks, it is important to separate the casino from the utility.

A decade on, we have seen positive developments among some UK banks, in terms of restructuring and regulatory scrutiny. Following a period of close analysis, we recently took a position in Lloyds – our first domestic UK bank since the crisis. It is a relatively low-risk bank, with 95 per cent of its lending book exposed to the UK and a 25 per cent share of the UK’s current account market. Lloyds is also trading at a historic low – well under half of its pre-crisis share price.

Rock-solid insurance companies

Most of our financial exposure is in insurance, where solvency ratios have been rock solid.  While low interest rates are a drag on performance, we can expect this to turn into a tailwind when rates slowly lift. Strong names in this space include General Accident and Legal & General.

Strong real yields in commercial property

Commercial property also looks solid value. Since the crisis we have seen low levels of property development and vacancy levels remain close to record-low levels. Yields are a very robust 4.5-5 per cent, while rental growth remains positive driven by strong tenant demand. Property rents tend to keep pace with GDP growth over the long-term, so it can be argued this is a 4.5-5 per cent real yield. Picton Property and Londonmetric Property are great ways to gain exposure to this asset class.

Look to Asia’s growth engine

China looms large in the Asia region and for good reason – it is Asia’s growth engine. Every few years we hear a scare story about China – the currency devaluation being the latest – but its economy remains resilient.

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The service sector is faring well and consumer sentiment is strong. GDP growth of 6-8 per cent looks achievable to support a more balanced and transitioning economy. While the obvious cheapness has evaporated, Asia remains attractive on a relative global basis. We are currently invested in the region through HSBC, which earns most of its profits in Asia – as well as local companies such as dominant telecom China Mobile. Both yield more than 5 per cent.

Source: Money Observer