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UK construction grows as housing market stabilises

by International Commercial Investment on May 4, 2017

Source: The Telegraph

Britain’s builders are getting back to work as housebuilders try to meet demand for new homes and large civil engineering projects get under way, following a modest slowdown at the start of the year.

Last month growth accelerated in the construction sector, encouraging companies to hire more staff to meet the rising demand.

Overall construction output grew at its fastest pace so far this year, according to the purchasing managers’ index from IHS Markit.

The current level of growth is still relatively modest, however – in January 2014 the PMI reached 64.6.

“The housing sector offered up the best news recovering from last month’s minor blip and building on its strongest performance since the end of last year,” said Duncan Brock of the Chartered Institute of Procurement and Supply.

“Employment growth rose to its highest since May 2016, though continued disquiet about the lack of highly skilled labour availability persisted, and must be addressed if the future strength of the sector is to be assured.”

Building firms rely heavily on imported materials, which are becoming more expensive due to the fall in the pound. The price pressures eased a touch in April but remain uncomfortably high.

Those inflation pressures are also limiting households’ spending power, which could hit the market. As a result, the industry may rely on the Government to fund its growth.

“Construction companies will be hoping that recent Government measures aimed at boosting infrastructure and housebuilding (including in last November’s Autumn Statement) have a material beneficial impact,” said Howard Archer, chief UK and European economist at IHS Markit.

“Measures announced include £2.3bn being earmarked for a new Housing Infrastructure Fund, which will be used to support the infrastructure needed to support the building of up to 100,000 new homes.”

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International Commercial InvestmentUK construction grows as housing market stabilises

Brexit not deterring Asian investors from UK property market

by International Commercial Investment on April 28, 2017

Source: BBC News

Investing in property is a mainstay of most Asian portfolios and the UK has typically been among the most desirable of destinations.

Recent data suggests that despite the uncertainty created by Brexit and the upcoming general election, Asian investors are flocking to the UK’s shores more than ever before.

Research from property investment firm JLL indicates that Asian investors accounted for 28% of the transactions in the UK property market in 2016, up from the 17% the year before.

London in particular continues to be a strong attraction, especially for Asian families who have long had a link to the city.

Pamela Kirpalani’s family is originally from India, but she now lives and works in Singapore and runs her own training consultancy, Singapore Inner High Living. Her family are long time investors in the UK property market.

‘London is London’

“London for us will always be a safe haven,” she told me.

“Our families are spread across India and Singapore and eventually we would like our kids to go to college [in the UK].”

Pamela’s family has recently bought their third place in the heart of the city.

“London is London,” she said. “Even with the panic of Brexit, and things go up and down in the economy, property prices in the centre of London just always bounce back. So you just can’t go wrong with that kind of investment.”

It’s investors like Pamela that led Manchester-based Select Property to set up an office in Singapore in 2015.

Elliot Vure is the Asia sales manager for the firm. He showed me a model of the latest development – Affinity Living – that the company is building in Manchester, and selling in Asia. On average one of the flats in the building costs about £275,000.

“We’ve probably seen 30% to 40% of the development being sold to Asian investors,” he told me as we toured the firm’s offices in Singapore.

Mr Vure added that there’s a unique aspect to the way Asians buy their property in comparison to other buyers.

“The vast majority of almost all of the investors in this region are cash purchasers. There’s no real desire to get a mortgage,” he said.

“People in the UK look for financing and a mortgage, but in Asia it seems to be the opposite.”

A lot of that wealth is coming from China, which has been one of the biggest buyers of UK property in the last year, buoyed by the weaker pound in the wake of the uncertainty caused by Brexit.

According to Juwai.com, which calls itself China’s leading international property portal, growth in the enquiries into UK property in the last 12 months has jumped 60%, and Chinese buyers are increasingly interested to the UK.

“A lot of our buyers are the average Chinese mom and pop looking to invest overseas,” Sue Jong, the chief operating officer of Juwai.com told me.

“The large portion is the middle to upper middle class, that’s interested in a good stable investment and may be thinking about emigrating or sending their kids to school there.”

The demand for property amongst Asian investors has convinced many that this is a market worth expanding in.

But it’s not just physical properties that Asians may be interested in buying.

Prop-X is a property exchange launching later this year, offering Asian investors a shot at owning a share of a property, without so many of the risks.

“What seems to be a fundamental part of the culture is that Asian investors have had a preference for investing in bricks and mortar,” chief executive Rohin Modasia told me.

“It’s a long standing trend. Post the global financial crisis, the UK has performed pretty well. And Asian investors now are more willing to say I’ve seen it happen, I’ve seen my friends do it, and I’m keen to get in on the action.”

By some estimates, two thirds of the global middle class by 2030 will be living in Asia. They’ve been the driving force behind investor appetite in global real estate markets, including the UK’s.

As Asia’s middle classes get richer and more aspirational, that appetite is only likely to grow.

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International Commercial InvestmentBrexit not deterring Asian investors from UK property market

UK house asking prices hit record average high of £313,000 as property market recovers from Brexit blip

by International Commercial Investment on April 24, 2017

Source: The Independent

Property asking prices have recovered from a Brexit blip, hitting an all-time high of £313,655 in April after rising 1.1 per cent month-to-month.

Property website Rightmove found average asking prices increased £3,547 from March, surpassing the previous peak of £310,471 reached in June 2016, at the time of the EU referendum. Prices are up 2.2 per cent over the year and more houses are now being sold than at almost any point since before the financial crisis, Rightmove said.

First-time buyers have been particularly active, helping to push asking prices in this market up 6.5 per cent, Rightmove said.

Miles Shipside, director of Rightmove, said a “strong spring market”, will help to offset uncertainty resulting from the general election on 8 June.

Despite this, there are signs that the market is slowing with the annual pace of price increases at its lowest level for four years.

In London and the North East of England, prices have decreased in the last twelve months. Prices in the capital slipped 1.5 per cent, to £636,777.

Wales and the East of England saw particularly strong growth, up 4 per cent and 5.3 per cent respectively.

Mr Shipside said: “Strong buyer activity this month has led to 10 per cent higher numbers of sales agreed than in the same period in 2016.

“This large year-on-year disparity should be viewed cautiously as the comparable timespan in 2016 saw a drop in buy-to-let activity with the additional second home stamp duty.”

But he said the number of sales agreed is also up 3.8 per cent compared with two years ago.

Mr Shipside added: “With the growth in household numbers and new-build supply struggling to keep pace, demand is strong and has led to the highest sales agreed numbers at this time of year since the heady pre-credit crunch levels.”

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International Commercial InvestmentUK house asking prices hit record average high of £313,000 as property market recovers from Brexit blip

IMF ratchets up UK economic growth forecast to 2%

by International Commercial Investment on April 24, 2017

Source: The Guardian

The International Monetary Fund has revised up its UK growth forecast for the second time in three months after admitting that the performance of the economy since the Brexit vote last year had been stronger than expected.

In its half-yearly World Economic Outlook, the IMF said it now envisaged the British economy expanding by 2% in 2017 – making it the second fastest-growing advanced economy after the US..

It noted that growth had “remained solid in the United Kingdom, where spending proved resilient in the aftermath of the June 2016 referendum in favour of leaving the European Union [Brexit]”.

The IMF said it was becoming more optimistic about the prospects for the global economy – expected to expand by 3.5% in 2017 and 3.6% in 2018 – but issued a renewed attack on the protectionist policies championed by Donald Trump and Marine Le Pen.

“The global economy seems to be gaining momentum – we could be at a turning point,” said Maurice Obstfeld, the IMF’s economic counsellor. “But even as things look up, the post–world war two system of international economic relations is under severe strain despite the aggregate benefits it has delivered – and precisely because growth and the resulting economic adjustments have too often entailed unequal rewards and costs within countries.”

The IMF penciled in 2017 growth of 1.1% for the UK in its previous outlook in October 2016 but subsequently revised up that forecast to 1.5% in January this year. Growth is expected to slow to 1.5% in 2018 – slightly weaker than the IMF’s previous prediction.

“The 0.9 percentage point upward revision to the 2017 forecast and the 0.2 percentage point downward revision to the 2018 forecast reflect the stronger-than-expected performance of the UK economy since the June Brexit vote, which points to a more gradual materialisation than previously anticipated of the negative effects of the United Kingdom’s decision to leave the European Union,” the IMF said.

The IMF was also more cautious about the longer-term impact on the economy from Brexit than it was in the run-up to last June’s referendum.

“Though highly uncertain, medium-term growth prospects have also diminished in the aftermath of the Brexit vote because of the expected increase in barriers to trade and migration, as well as a potential downsizing of the financial services sector amid possible barriers to cross-border financial activity.”

The IMF added that the challenge for the UK was to “successfully navigate the exit from the European Union and negotiate the new arrangements for economic relations with the European Union and other trading partners”. The adverse medium-term impact on growth would be lower if the two years of negotiations avoided putting up new economic barriers.

The IMF said record low interest rates of 0.25% were appropriate given that growth was expected to slow and inflation was likely to peak at 2.5% this year. It signaled, however, that the end of the Bank of England’s ultra-low monetary policy was coming to an end, predicting a “less gradual normalisation” of interest rates than six months ago.

Responding to the UK’s upgraded forecast, chancellor Philip Hammond said: “The fundamentals of our economy are strong and we continue to invest in the skills needed for a stronger and fairer Britain … In Washington this week ‎I will be talking to our international partners about how we can carry on increasing global economic growth, with Britain again playing an active and engaged role in the global economy.”

The IMF’s Obstfeld tempered his more upbeat assessment for the global economy with a warning that the recent improvement might not last.

“Consistently good economic news since summer 2016 is starting to add up to a brightening global outlook,” he said.

“At the same time, however, the upgrade to our 2017 forecast is modest, and longer-term potential growth rates remain subdued across the globe compared with past decades, especially in advanced economies. Moreover, while there is a chance growth will exceed expectations in the near term, significant downside risks continue to cloud the medium-term outlook, and indeed may have intensified since our last forecast.”

The Fund listed six downside risks including: protectionism; faster than expected interest rate increases in the UK leading to financial market disruption; an aggressive rolling-back of financial regulation leading to excessive risk taking; and the vulnerability of China’s financial system after a period of rapid credit growth.

Obstfeld said: “One salient threat is a turn toward protectionism, leading to trade warfare. Mainly in advanced economies, several factors – lower growth since the 2010–11 recovery from the global financial crisis, even slower growth of median incomes, and structural labour-market disruptions – have generated political support for zero-sum policy approaches that could undermine international trading relationships, along with multi-lateral cooperation more generally.”

Avoiding a new trade war will be a central theme of this week’s spring meetings of the International Monetary Fund and the World Bank. Both organisations have been alarmed at the growth in protectionist pressures in the past few years.

“Capitulating to those pressures would result in a self-inflicted wound, leading to higher prices for consumers and businesses, lower productivity, and therefore, lower overall real income for households,” Obstfeld said.

Speaking at a press conference following the publication of the report, Obstfeld said the snap general election could create short-term uncertainty but the outlook could stabilise after polling day.

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International Commercial InvestmentIMF ratchets up UK economic growth forecast to 2%

Brexit is definitely happening, but here’s why it won’t deter overseas buyers in London’s prime property market

by International Commercial Investment on March 31, 2017

Source: City A.M.

Foreign investors – and, in particular, those from the Middle and Far East – have played a prominent role in transactions at the high end of London’s property market for decades.

Having founded and managed a super-prime property development firm since 2009, we experienced first-hand the impressive amount of capital this buyer-type could deploy. From the Grosvenor House Hotel to The Shard, international purchasers have snapped up some of the city’s finest real estate assets.

For instance, CBRE estimated Hong Kong investors had accumulated £4.5bn to target Prime London assets by 2016’s close. Developments we have recently been involved with in Belgravia and Chelsea also continue to attract interest from overseas buyers post-referendum. So why this unshaken confidence?

The benefits of a weakened sterling

Put simply, nothing has really changed for foreign investors – except, crucially, the pound’s value, which slumped after the referendum.

Combined with a better than expected economic environment, this equates to a win-win for foreign investors who still enjoy the security of UK property law reinforced by EU legislation, but at a cut-price, owing to weaker pound versus dollar/euro ratios. As a result, these buyers have capitalised by purchasing now and the signs are that they will continue to, even after the Prime Minister chose to formally invoke Article 50 on Wednesday.

What’s next?

Whether foreign investor activity in London’s prime property market can continue at its current pace hinges on the looming Brexit negotiations and subsequent economic policy. Detailed predictions are fairly pointless at this stage but, in general, there are two outcomes which we think are reasonable possibilities.

The first is that the Government attempts to tax and regulate overseas buyer activity more heavily, as a politically easy way of recouping money lost elsewhere.

Taxes on vacant homes or on foreign nationals purchasing property (such as operates in Vancouver) would likely cool international demand in the short-term. However, long-term effects would be more muted, as the new levies are factored into financial planning.

The second outcome is one whereby foreign buyer activity is more actively encouraged, as the Government fears losing its status as a world-class investor capital. Stamp Duty at the top end of the market may be cut – and the same goes for Corporation Tax.

The eternal investor?

Regardless of what happens next in terms of Brexit, we don’t foresee overseas buyer activity in the capital entering terminal decline in favour of another European city.

Great cultural and commercial centres like Paris and Milan cannot offer foreign buyers the returns they have become accustomed to in prime London. Foreign buyers are here to stay – time to, as the PM remarked, “make a success of it”.

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International Commercial InvestmentBrexit is definitely happening, but here’s why it won’t deter overseas buyers in London’s prime property market

Sales in UK property market reach 10 year high

by International Commercial Investment on March 30, 2017

Source: Property Wire

The number of sales agreed in the UK rose to a 10 year high in February but sales to first time buyers fell, according to the latest figures from estate agents.

The data from the National Association of Estate Agents (NAEA) shows that transactions increased to 11 per branch and the last time this figure surpassed 10 per branch was in September 2007.

The NAEA says it is an indication that buyer confidence is growing as it is up from eight sales per branch in January and six per branch in December 2016.

The figures also show that while there were higher sales in February, some 74% were below the original asking price suggesting sellers are taking a pragmatic approach to their property transactions.

But fewer first time buyers were active with the proportion of sales which were agreed for them falling to 22% in February from 30% in January.

Meanwhile, supply has increased with more properties coming onto the market. The number of properties available to buy on estate agents’ books increased to 44 in February, up from 38 in January. But this is up 26% from a year ago when agents had just 35 properties available per branch.

Demand for properties was unchanged with the number of house buyers registered per member branch at 425 for the second month in a row.

The NAEA asked its members about the recently published Government housing white paper and found that 43% don’t believe it will make a difference while 39% think the proposals could positively impact the market but can’t yet tell how.

‘The number of sales agreed reaching a 10 year high indicates the housing market is moving in the right direction. However, first time buyers need to be a priority as the number of sales made to the group dipped in February when it should be growing,’ said Mark Hayward, NAEA chief executive.

‘As house prices continue to rise, the market’s most vulnerable buyers are being priced out and the only way to address this is to increase housing stock. The Government have pledged yet again to build more homes, but our members aren’t feeling optimistic about the plans,’ he pointed out.

‘If promises are kept and we see construction sites set up across the UK, we’ll be in a better position in a few years than the stark reality we will be facing if this doesn’t happen,’ he added.

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International Commercial InvestmentSales in UK property market reach 10 year high

Qatar announces £5bn UK investment

by International Commercial Investment on March 27, 2017

Source: BBC News

One of the largest investors in the UK has committed £5bn of new money to invest in transport, property and digital technology.

The Middle Eastern state of Qatar said that it was optimistic about the future of the British economy.

It made it clear that the UK leaving the European Union had little bearing on its decision.

Qatar has already invested £40bn in the UK – it owns Harrods and a 95% stake in the Shard in London.

It also has a stake in Canary Wharf in the capital’s Docklands, as well as an interest in the Milford Haven liquefied natural gas terminal in South Wales.

It also bought the Olympic Village following the London 2012 Olympics.

“Currently the UK is our first investment destination and it is the largest investment destination for Qatari investors, both public and private,” Ali Shareef al Emadi, the country’s finance minister, told the BBC.

“We have more than £35bn to £40bn of investments already in the UK.

“We’re announcing an additional £5bn of investment in the next three to five years.

“Mainly this investment will focus on infrastructure sectors, technology, energy and real estate.”

Mr Al Emadi will join International Trade Secretary Liam Fox in Birmingham on Tuesday where UK firms will showcase projects, including in sport, cyber-security and healthcare.

The government relies on foreign investment to support infrastructure projects such as the new high speed rail link between London, Birmingham and Manchester – HS2.

Although no final decisions have been taken on the Qatari investments, Mr Al Emadi did not rule out putting money into HS2.

“We will look at those deals; we will look at electricity, roads, bridges, railways,” he said.

The announcement of the Qatari investment is likely to be welcomed by Number 10.

It comes two days before the triggering of Article 50, the official process for leaving the European Union.

Theresa May has made it clear she believes the British economy remains a positive place to invest and the Qatari announcement follows UK-focused investment decisions by Sir James Dyson, Google and Nissan.
‘Confident’

The decline in the value of sterling has made UK assets more attractive to overseas investors – though many economists argue that leaving the EU will damage trade with Britain’s largest market and therefore damage growth.

“We always like the UK market, it has always been a good market,” Mr Al Emadi told me.

“The way we look at our investment in any market, and especially in the UK, it is a very long term investment, so we don’t look at any cycles up or down

“So if you are talking about Brexit, I can go back to the financial crisis and tell you the same stories.

“We will do what we think is good for us, it is commercially viable, it has a good vision and a good impact.”

I asked him whether the UK economy outside the EU was likely to be stronger or weaker.

“It is a lot to do with the policy the UK will take, but I think, knowing the UK market, I am very confident they will have a good future,” Mr Al Emadi answered, saying that it was important that Britain was welcoming to high skilled foreign workers and students from Qatar and elsewhere.

Qatar has faced controversy over a fundraising for Barclays Bank at the time of the financial crisis and – more recently – allegations that poor labour conditions have marred the preparations for the 2022 World Cup which is being held in the country.

Mr Al Emadi said that Qatar had supported job creation in the UK.

“If you look at what we have done here, it has always been a win-win situation, whatever investment we do in the UK,” he said.

“When you talk about labour in Qatar, I think a lot of these things have been taken out of proportion and [are] inaccurate news.”

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International Commercial InvestmentQatar announces £5bn UK investment

Stock market boom helps keep economy growing

by International Commercial Investment on March 20, 2017

Source: The Telegraph

Surging share prices are making households wealthier, boosting confidence and offsetting some of the squeeze from rising inflation and sluggish wage growth.

Britons’ net financial wealth has jumped by 12.5pc in the past year according to economists at the EY Item Club – rising four times more quickly than wages.

This “should provide some prop to spending this year” and so keep the economy growing, they hope.

However, this only benefits the relatively well off who own shares and other financial assets. As a result rising inflation will hit lower-paid households the hardest.

Low earners also spend more of their income than high earners, meaning they receive a second bigger blow from rising prices.

Prices are expected to increase by 2.8pc this year, almost eclipsing pay growth and leaving household incomes rising by just 0.1pc in real terms over 2017, the Item Club believes, down from 1.8pc in 2016.

That inflation is driven in large part by the fall in the pound which is pushing up the cost of imported goods.

“Higher inflation will be the key culprit in the sharp slowdown in consumer spending growth this year, cutting off what has been an all-too-brief revival in real pay growth and continuing the dismal picture for real earnings seen since the financial crisis,” said Martin Beck, senior economic advisor to the EY Item Club.

“There should be some improvement in 2018, as inflation begins to cool, but even then we anticipate real wage growth of just 0.7pc. It is likely to be 2019 before workers begin to enjoy more ‘normal’ rates of real wage growth again.”

Inflation rose even more quickly back in 2011 with price rises peaking at more than 5pc, as high oil prices and VAT hikes pushed up living costs.

Economists do not expect this period of inflation to be that severe, and say consumer spending is “not heading for bust this year, [but] certainly faces the ingredients for a sharp slowdown”.

Other parts of the economy are more upbeat.

Executives at the world’s biggest financial services firms believe “the UK economy is on course for a resilient 2017, and could outperform other developed nations” according to a survey by Lloyds Bank.

Three-quarters of those surveyed said the UK’s economic growth will match or exceed the average in the G7 this year.

“Financial services firms are an important barometer of the UK economy – and despite uncertainties such as the future of our relationship with the EU and new regulatory pressures, they are confident that the outlook for the UK over the coming year is better than had been expected,” said Edward Thurman from Lloyds’ commercial banking arm.

Despite their confidence over the economic outlook those financiers still have some worries over the UK’s future relationship with the EU, however.

Almost two-thirds said they are concerned about the potential loss of the system of passporting which allows finance firms to do business across EU borders, while 50pc are concerned about barriers to trade and 35pc about the future of regulatory equivalence between the UK and the EU.

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International Commercial InvestmentStock market boom helps keep economy growing