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U.K. House Prices Surged in January as Few Homes Come to Market

by International Commercial Investment on February 1, 2018

Source: Bloomberg

U.K. house prices rose in January as a shortage of properties coming up for sale offset an underlying slowdown in the market.

Values increased 0.6 percent from December, lifting the annual gain at 3.2 percent, Nationwide Building Society said on Thursday. While that’s more than the December rate of 2.6 percent — and the fastest since March — it’s still well below the pace of recent years.

The property market has been hurt by slower economic growth and a squeeze on consumers’ incomes since the referendum to leave the European Union in 2016. The Royal Institution of Chartered Surveyors said last month that activity remains subdued, and mortgage approvals fell to a three-year low last month.

“The acceleration in annual house price growth is a little surprising,” said Robert Gardner, chief economist at Nationwide. “The lack of supply is likely to be the key factor providing support to house prices.”

The average house price in the country rose to 211,756 pounds ($300,000) from 211,156, the report showed.

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International Commercial InvestmentU.K. House Prices Surged in January as Few Homes Come to Market

UK economic growth exceeds forecasts, ONS says

by International Commercial Investment on February 1, 2018

Source: BBC News

The UK economy expanded by a better-than-expected 0.5% in the last three months of 2017, official figures say.

Economists had expected a 0.4% expansion in the three months to December.

However, the Office for National Statistics (ONS) said the broader picture was “slower and more uneven” growth.

In 2017 as a whole, growth was 1.8% compared with 1.9% in 2016 – the slowest since 2012, the ONS said.

The services sector, which accounts for the bulk of the economy, expanded by 0.6% in the fourth quarter – stronger than the 0.4% rise in the three months to September.

“The boost to the economy at the end of the year came from a range of services including recruitment agencies, letting agents and office management,” said Darren Morgan, head of GDP at the ONS.

Carney calls for ‘deeper relationship’ with Europe

Mortgage approvals at five-year low

Yet consumer-facing parts of the services sector, which include distribution, hotels, catering, transport and communications, posted much slower growth, he said.

Manufacturing also grew strongly, but construction contracted by 1% – its third consecutive fall and worst quarterly performance since the third quarter of 2012.

John Hawksworth, chief economist at PwC, said construction appeared to be the sector most affected by Brexit-related uncertainty, deterring commercial property investment and dampening the housing market, particularly in London.

Samuel Tombs at Pantheon Macroeconomics said the “undeniably strong” quarterly figures increased the chance of the Monetary Policy Committee raising interest rates again as soon as this summer.

However, Hargreaves Lansdown senior economist Ben Brettell described growth as anaemic and doubted there would be more than one rate rise this year, “probably in the autumn”.

Sterling jumped 0.8% to $1.4253 following the release of the GDP figures.

Analysis: Andy Verity, economics correspondent

Choose your comparator. You might, like Bank of England governor Mark Carney, point out that the economy is about 1% smaller than the Bank predicted it would be before the Brexit vote. But that was in the event of a “stay” vote.

Pro-Brexit critics might point out the economy is doing a lot better than his own warnings about the risk of a “technical recession” if the UK voted to leave.

Annual growth of 1.8% may be less than we would like, but so far there is little sign of the Brexit-induced disaster that some predicted.

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International Commercial InvestmentUK economic growth exceeds forecasts, ONS says

London Beats New York Among Foreign Investors in Real Estate

by International Commercial Investment on January 8, 2018

Source: Bloomberg

New York City took a double hit in an annual survey of real estate investors, which saw London overtake it in first place globally and Los Angeles tie it for top U.S. city.

The annual survey of the Association of Foreign Investors in Real Estate asks its members, who are estimated to have more than $2 trillion in real estate assets under management, to rank markets by various measures, such as stability and opportunity for capital appreciation. This year’s poll, the 26th, also saw pricey San Francisco, which had been one of the top five global cities since 2011, fall to 11th place, and Washington, D.C., skid to 25th from 15th place last year, part of a long slide.

Foreign investors are less worried about the impact of Britain’s exit from the European Union than they were a year ago, association Chairman Edward M. Casal said in a statement, referring to London’s jump from third to first place — although Britain did fall from third to fifth among countries offering the best opportunity for appreciation.

The U.S. was first for planned real estate investment in 2018, followed by the U.K., Germany, Canada and France. And New York is no slouch, as the chart shows.

New York’s tie with Los Angeles was a surprise, association Chief Executive Officer Jim Fetgatter said. It was L.A.’s first time in the top spot for U.S. cities, while New York had been named the top U.S. city for the last seven years. Los Angeles can thank its mighty port for the honor.

“With the growth of online shopping, foreign investors continue to rank industrial/logistics properties as their No. 1 investment opportunity,” Fetgatter said in the statement.

In an interview, he said that the recent U.S. tax overhaul is “not necessarily a boon” to real estate, preserving much of the status quo for the industry, but is generally a positive development. Investors will benefit from the far lower corporate tax rate, which will create jobs and increase income, he predicted.

The survey was conducted in the fourth quarter of last year by the James A. Graaskamp Center for Real Estate, at the Wisconsin School of Business.

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International Commercial InvestmentLondon Beats New York Among Foreign Investors in Real Estate

UK productivity grows at quickest pace in six years

by International Commercial Investment on January 8, 2018

Source: Financial Times

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The hourly productivity of British workers jumped at the fastest rate for six years during the third quarter of 2017, raising hopes for a turnround in one of the UK economy’s most persistent weaknesses.

Output per hour increased by 0.9 per cent compared to the previous quarter — the biggest increase since the second quarter of 2011, when productivity grew by 1 per cent, according to the Office for National Statistics.

But the figures released on Friday also showed that growth in UK workers’ productivity over the past decade was the worst since the 1820s and the level of output remains only barely above where it was before the financial crisis.

Britain has experienced a “lost decade” of productivity growth, the main driver of long term economic growth and higher living standards, since the 2008 crisis; the recovery in economic growth has been slower than expected while unemployment has fallen to levels not seen since the mid-1970s.

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Chancellor Philip Hammond welcomed the latest figures. “We’re investing in skills, housing and transport to improve productivity, which is vital for raising wages and making our economy fit for the future,” he wrote on Twitter.

The most recent growth in productivity was due to the number of hours worked falling rather than an acceleration in the growth of output. The data suggest that the UK’s jobs boom lost momentum during the quarter.

But economists will take heart from evidence that the slowdown in employment growth was not accompanied by a dramatic slowdown in the rate of overall economic growth. The UK economy grew by 0.4 per cent during the quarter, up slightly from the 0.3 per cent quarterly growth during the second quarter.

Howard Archer, chief economic adviser to the EY Item club, said the rise in productivity during the quarter was likely to continue in the final three months of 2017 but it needed to be seen in the context of a poor first half.

“There needs to be sustained improvement to ease concerns over the UK’s overall poor productivity record since the deep 2008-09 recession,” he said.

While many advanced economies have seen a drop in productivity growth, the UK has seen a particularly dramatic fall. The lack of a sustained increase in productivity has become one of the central problems for its economy, blamed for disappointing wage growth and the government’s struggle to close its deficit.

Mr Hammond made improving productivity the centrepiece of its November budget when he launched a £23bn national productivity fund. However economists said the scale of the investment was nowhere near enough to tackle Britain’s longstanding problems.

The Office for Budget Responsibility, the government’s fiscal watchdog, lowered its forecast for future productivity growth in November. It now predicts that the underlying productivity of the UK economy will only increase by 1.5 per cent a year, compared to more than 2 per cent before the 2008 financial crisis.

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A breakdown by sector, published alongside the ONS figures, showed that financial services and non-manufacturing production, a category that includes utilities and the UK’s North Sea oilfields, have reduced Britain’s overall productivity growth since the crisis.

Other sectors of the economy contributed to productivity growth but not at the same rates as they did before the crisis. Productivity in non-financial services contributed just 4 percentage points over the past nine years.

Economists and commentators have fiercely debated why productivity growth has fallen over the past decade. Theories include low levels of investment, mis-measurement and the low cost of labour allowing companies to hold on to unproductive workers.

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International Commercial InvestmentUK productivity grows at quickest pace in six years

Stock markets hit record highs – here are three reasons why

by International Commercial Investment on January 5, 2018

Source: BBC News

Goldilocks’ requirements for the perfect bowl of porridge are similar to the requirements of an attractive economy.

Not too hot – growth busting out the lights raising fears about sustainability and rampant inflation.

And not too cold – economic slowdowns and recessions pulling down business profitability and weighing on equity valuations.

Market investors certainly sense that 2018 will see a continuation of a global “Goldilocks economy”. Why?

Firstly, there is the gentle recovery in economic growth and increasing demand for companies products across the major drivers of the world economy – Japan and the Asian emerging markets; the Eurozone and, most importantly, America.

Secondly, there is the continuing stable expansion of that other engine of the world economy – China.

It is the first time since the financial crisis that such a growth “synchronisation” has happened.

Thirdly, there is little evidence of increasing inflationary pressures, meaning interest rates are likely to remain at close to historically low levels.

That leads to the economically benign sum: growth (leading to higher company profits) + low inflation + easy monetary policy.

Which equals good news for equities.

On Thursday, the Dow Jones Industrial Average in America pushed through 25,000 for the first time in its history.

And on Friday the FTSE 100 index of leading companies listed in the UK closed at a new record high.

There’s another codicil to this story, which is minimising investor jitters over when does “very high” turn into its well-known cousins “scarily high” and “unsustainably high”.

Although markets are hitting record levels, the day-by-day increases are relatively modest.

Unlike at the time of the dotcom boom in the late 1990s, when we last saw such a sustained run of market growth, overall volatility (the rate of increase or decrease) is low.

That is easing any fears that there is a sudden correction downwards around the corner.

Now, it is of course just at the time of heightened calm that we need to be at our most vigilant.

And anyone who says “it is different this time” should be gently pointed towards the rapid stock market sell-offs of 2015 and early 2016, led by the precipitate collapse of the Chinese markets.

And the fact that the dotcom boom and the supposed “new normal” of sustained growth in the 2000s ended in crisis and market carnage.

Bear markets follow bull markets like seagulls follow trawlers, ready to feast on the overconfident exuberance of investors chasing valuations ever higher.

For now, the bulls are in charge and the bears are quiet.

And Goldilocks is enjoying her porridge, at just the economically right temperature.

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International Commercial InvestmentStock markets hit record highs – here are three reasons why

Manufacturing growth jumps to four-year high

by International Commercial Investment on December 1, 2017

Source: Sky News

Britain’s factories enjoyed their strongest growth for more than four years last month thanks to an upturn in the global economy, closely-watched new figures showed.

The IHS Markit/CIPS manufacturing purchasing managers’ index (PMI) suggested the sector was growing at a quarterly rate of nearly 2%, delivering a much-needed boost to the sluggish wider UK economy.

November’s reading of 58.2 – on a measure where the 50-mark separates growth from contraction – was up from 56.6 in October and the highest level since August 2013.

Britain’s manufacturers have been boosted in recent months by the weakness of the pound following the Brexit vote, which makes UK goods more attractive to overseas buyers.

The latest figures suggested that the currency impact was still helping, though this was less of a factor than earlier in the year in the growth of exports – which was instead mainly attributed to the strength of global economic growth.

Domestic growth also remained strong with an encouraging surge in demand for investment goods such as plant and machinery suggesting UK firms were ploughing capital into their businesses with renewed vigour, the report said.

Firms increased recruitment at the strongest level since 2014.

Rob Dobson, director at IHS Markit, said: “UK manufacturing shifted up a gear in November, with growth of output, new orders and employment all gathering pace.

“On its current course, manufacturing production is rising at a quarterly rate approaching 2%, providing a real boost to the pace of broader economic expansion.”

Latest official figures showed the UK’s gross domestic product (GDP) grew by 0.4% in the third quarter, continuing the sluggish pace seen earlier in the year.

The economy is being held back by a squeeze on consumers thanks to higher inflation – which has been driven up by the collapse in the pound since the Brexit vote making imports more expensive.

Manufacturing represents a much smaller proportion of output than the sprawling services sector – which ranges from bars and restaurants to law and accountancy firms.

James Smith, economist at ING Bank, said: “The manufacturing sector is a clear bright spot in the UK economy at the moment.

“But the larger service sector is still flagging and is why we don’t expect a sharp pick-up in growth next year.”

Daniela Russell, at Scotiabank, said: “With manufacturing making up only 10% of the economy, we shouldn’t get too excited just yet before we get the key services survey next week.

“But if that does paint a similarly positive picture, then it would suggest that momentum is still strong as we head towards the end of the year – and perhaps growth in 2018 won’t be quite as bad as the OBR is forecasting.”

The Office for Budget Responsibility sharply downgraded the UK’s growth outlook last week.

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International Commercial InvestmentManufacturing growth jumps to four-year high

House prices continue to rise as homeowners reap rewards of high demand

by International Commercial Investment on November 30, 2017

Source: The Express

HOUSE prices remained steady from October to November according to the influential Nationwide November House Price Index released today.

The news defies the doom-laden expectation of economists who cited ‘Brexit uncertainty’ and interest rate rise as potential triggers for a slowdown.

House prices increased a steady 2.5 per cent in November from the same month in 2016. However this is a significant decline to the 4.4 per cent rise recorded last November.

The monthly price rise percentage in the UK was 0.1 percent for November and 0.2 percent for October, with the year on year price rise taking the average worth of a British home from £209,988 to £211,085, according to the index.

Robert Gardner, Nationwide’s chief economist, said: “Low mortgage rates and healthy rates of employment growth are providing support for demand, but this is being partly offset by pressure on household incomes, which appears to be weighing on confidence.”

Mr Gardner adds the scarcity of homes on the market is boosting house prices adding the big Budget news to abolish stamp duty for first time buyers will only have a “modest impact on overall demand”.

Jonathan Samuels, CEO of the property lender Octane Capital told Express.co.uk: “Despite the uncertainty of Brexit, prices overall are being supported by strong employment, cheap mortgages despite the recent rate rise and the ongoing shortage of homes for sale.

“Compared to the volatility of Bitcoin, the UK’s property market is starting to look positively Victorian.”

Paresh Raja, CEO of MFS told Express.co.uk Britain’s property prices remain “impressive, given the uncertainty gripping all markets at present as a result of Brexit and this year’s general election”.

The news comes in wake of research by Halifax claiming that the total value of Britain’s privately owned housing stocks has reached over £6trillion for the first time.

The value of housing stock has grown by close to £2trn over the last decade and the research also points to an ever-widening gap between the south and the rest of the country.

Properties in London are now worth a staggering £1.3trn of the £6trn sum and the value of homes in the capital is now greater than the combined total worth of every house in Scotland, Wales and the north of England.

In the long-term Nationwide index highlights the work needed to be done to tackle the UK’s housing supply issues.

With construction of new homes still “too low”, Nationwide argue for swelling Britain’s living abodes through “change of use” – chaining offices and shops to home – as “providing the biggest boost, driven by a shift in government policy”.

Since 2014 “change of use” or “office-to-resi” conversions has provided 18,000 much-needed homes merely by making it easier for developers to cut through the thicket of red tape and allow people to live in the UK’s vacant spaces.

Mark Dyason, managing director of Thistle Finance told Express.co.uk that: “So called ‘office-to-resi’ conversions have breathed life into the London market in particular. Change of use is delivering real change across the capital.

“The reduction in red tape on ‘change of use’ developments has been a green light for developers across the country,” Mr Dyason said.

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International Commercial InvestmentHouse prices continue to rise as homeowners reap rewards of high demand

Value of UK’s housing stock soars past £6tn

by International Commercial Investment on November 28, 2017

Source: The Guardian

The total value of all the houses in the UK has passed the £6tn mark for the first time, according to research by Halifax which also highlights the vast concentration of property wealth in London and the south-east.

The value of homes in London is now more than all the houses in Scotland, Wales and the north of England combined. The research also reveals how property values in the south have escalated since the financial crash of 2007-08, despite incomes remaining relatively flat.

In 2007 Halifax estimated that the UK’s housing stock was worth a total of £4,077bn, but over the past 10 years the figure has risen to £6,015bn.

To put the £6tn figure into context, it is nearly four times the size of the UK’s national debt, which is currently just over £1.8tn, and three times our total national output in 2016 (around £2tn). But even if every house in Britain was sold, the money raised would pay off less than half of the US’s national debt.

The big rises in the value of the UK’s housing stock have mostly taken place in the south. In 2007, the value of housing in the north-east was estimated at £114bn, but today it stands at £136bn – an increase of £22bn.

But in London, houses have jumped in value from £718bn in 2007 to £1,338bn today, a gain of £620bn. Over the same period the value of properties in Northern Ireland actually fell.

In total, 68% of private property wealth, amounting to £3.8tn, is concentrated in the south, up from 62% in 2007.

The stock of privately owned homes in Britain also increased in number from 21.5m to 23.4m.

Among the biggest gainers of property wealth in the south have been landlords and second home owners. Halifax said that while the average rate of owner-occupation in the UK was 63%, it stands at just 48% in London.

The vast majority of housing wealth is owned by the over-55s. Halifax estimated that under 35-year-olds own just 3.3% of the UK’s net property wealth, while the over-55s hold 63.3%.

Russell Galley, managing director at Halifax, said: “The value of housing stock has grown by close to £2tn in the past decade, and with the equity rich regions of London and the south-east largely responsible, it highlights a considerable regional imbalance in the distribution of housing wealth.

“Within the capital there is also a mix of fortunes. While more than a fifth of total property wealth is in London, lower levels of owner-occupation reflect a major barrier to the property ladder with a far greater number of people renting where house prices are at their highest.”

The property market has bestowed much higher levels of housing equity – the difference between the value of a home and the outstanding mortgage – on people living in the south. Halifax estimated that the average homeowner in London has net equity worth £360,193, compared to £134,273 in the north-west of England.

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International Commercial InvestmentValue of UK’s housing stock soars past £6tn