News Headlines – Sunday 22nd December

Property

The Royal Institution of Chartered Surveyors predicts average house prices will rise in Britain by 8% next year and last Thursday the Council for Mortgage Lending revealed that the amount of money lent to borrowers in November rose to £17bn, up by more than 30% on the same period last year. Andrew Bailey, deputy governor of the Bank of England warned homebuyers there will be a clampdown on house purchases if there is any evidence that rising prices are spiralling out of control. Mortgage lending is overseen by the Prudential Regulatory Authority (PRA) which has the power to make banks hold back more money on balance sheets for every mortgage offered and can reduce loan-to-value ratios, making products such as 95% mortgages more expensive for homebuyers. Mr Bailey said controls could include strengthening the tests buyers have to go through before acquiring a mortgage and increasing the amount of capital banks have to hold against household lending.

Economy

Advanced economies will get their ‘mojo’ back in 2014 as the UK wins back medal as the fastest growing major European economy next year according to recent headlines. PwC said Britains; brighter growth prospects could also move it in line to be the fastest growing economy in the G7. The UK economy is expected to grow by 3% next year which would move it closer in line with America for the title of the strongest growing advanced economy in the world. There’s an air of optimism, as improving consumer confidence is expected to result in higher business investment. Despite the long journey towards recovery, for the first time people feel things are really starting to pick up.

Personal Finance

Shoppers are expected to splash out more than £5 billion in just four days in a boost for flagging retailers. Last weekend was said to be the busiest of the year for the high street with 31 million visits over two days. Barclays predicts that £5.2 billion will be spent on credit cards between yesterday and Christmas Eve and more than £1.1 billion will be spent on Tuesday alone as a vast proportion of people have left their Christmas shopping late due to the fact Christmas falls midweek.

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Paper Summary: 18th December 2013

Property
A new record 400,000 property owners are now property millionaires, that’s translates as twice as many as five years ago according to Zoopla. The number of homes worth £1 million or more has increased by a third over the past twelve months, thanks to soaring house prices in London and South East. The lack of supply of new homes in the capital was to a great extent responsible for driving forward a further 57,120 over the £1 million mark which equates to 156 new property millionaires a day in the capital throughout 2013, as shown by Zoopla. Prices are still rising according to the latest ONS figures, by 5.5% in the past 12 months, and the rise is even higher in London, jumping by 12%. Marsh & Parsons highlighted that prices are at more than double the rate of other areas , while Prime London continues to be a honeypot for UK and overseas buyers, as demand remains intense. As a result, LSL highlights that first time buyers are still having to leap higher than ever before to join the property ladder.

Personal Finance
Over half of UK shoppers are heading to discount shops, visiting an Aldi or Lidl figures revealed, for the first time ever. More than 13 million used the budget stores in the past three month, up from 46.1% a year ago. As a result all of the big four grocers have lost market share, as the so-called budget shops now make up a combined seven per cent of the total market. Credit crunch bargains are proving attractive across the country, as value continues to be a great incentive. Although Lidl and Aldi may not be as prevalent in London, more common in regions where shoppers can drive to do a food shop, this is likely to change, as more shops are expected to open next year. The type of customers are also said to be changing – those known as ABC1s (the traditional middle classes) make up just 25% of shoppers in 2011. Last year that rose to 41%, proving that Aldi is no longer the store of the cash strapped student.

Economy
Britons believe that securing growth as their top economic priority is more significant than higher wages according to a survey for the Independent. The ComRes survey findings suggest that the Conservatives message on the economy may resonate more than Labour’s campaign on reducing the cost of living. Their competing messages will lead to a fierce battle in the run up to the 2015 election. It’s interesting to note that in a list of important priorities over the next five years from a range of options, at the top was ensuring the economy continues to grow, followed by ensuring wages increase faster than prices, thirdly keeping inflation down and finally reducing the deficit. Now that the economy is growing the Tories will take comfort in the fact that that the findings show people view growth as the top factor.

Recruitment
More than half of the UK is said to be ripe for fracking according to a new Government report by engineering giant Amec, that shows a shale gas boom could create up to 32,000 new jobs. These plans have been met with mixed responses with some arguing it will cast a dark shadow over many communities in Britain who could now face the threat of fracking in their backyard. A new licensing round to enable firms to search for shale gas will begin in the summer. There could be between 14 and 51 vehicle movements to a fracking site each day over a 32 to 145-week period which could have a serious impact on traffic congestion, noise or air quality, depending on existing roads, traffic and air quality.

LSL / Acadata Scotland HPI News Release

Scottish house prices up £1,368 since October 2012

  • On a monthly basis prices fall marginally by £206
  • House prices in Aberdeen set another record high
  • Sales over the last three months are 23% higher than last year

 

House Price

Index

Monthly Change %

Annual Change %

£144,084

195.4

-0.1

1.0

Richard Sexton, director of e.surv chartered surveyors, part of LSL Property Services, comments: “It’s clear the Scottish housing market is being restored to health. Sales are substantially better and prices are entering a period of prosperity, fuelled by rising consumer confidence and demand. October is the second consecutive month in which the annual change in prices has been positive, a trend that has not been visible since early 2011. Average prices have risen £1,368 over the past year in Scotland, while lending levels are improving rapidly as economic conditions perk up as is being seen across the UK.

“With the easing of mortgage lending conditions, first-time buyers are having a much easier ride. There is now a better range of competitively priced products with lower deposit requirements, thanks in part to the backing from the government’s schemes. So far 2013 is seeing the greatest amount of sales recorded over the last five years. Record low interest rates have sent the market into another realm. Sales have shot up by 23% for the three months of August, September and October 2013 compared to the same period last year. At the bottom end, shoots of first-time buyer activity mean the market is blossoming, a factor that’s giving the whole market a lift.

“After a period of slow movement, it is reassuring to see home mover and remortgage lending is also showing a boost in levels. People are now more confident in their plans to sell their current homes and buy somewhere else as signs show the path ahead in 2014 looks stable. The Help to Buy scheme will take on more prominence early next year and will be the main driving force pushing up house price growth and buyer activity.

“The recent news that the Funding for Lending scheme will be axed has created an element of uncertainty. But the underlying fact is that the recovery has only just begun. Lending is still only slightly above half the levels seen at the peak of the market, so there is much space for growth. The referendum next year on independence from the UK could have an impact on Scotland’s housing market. But if investors hold on to see what the effect will be, it may unsettle the market and hamper its ability to create the much needed new housing supply in the meantime.”

UK SME Population Hits A Six Year Post-Recession High

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The number of active small and medium enterprises (SMEs) in the UK reached a six-year high of 2.16 million in 2013, according to the SME Growth Monitor from the National Association for Commercial Finance Brokers (NACFB).

The UK now has the most SMEs in business since before the downturn after two successive years of growth. Following the loss of 80,615 small businesses between 2008 and 2011, SME numbers have swelled by 4.2% in the last two years (+86,435) compared with a 3.3% rise among large employers (+285).*

England leads the way with 4.6% SME population growth since 2011, closely followed by Scotland on 4.5%. In both cases the revival of small business fortunes has outstripped larger businesses whose numbers have grown by 3.3% and 3.9% respectively.

In contrast, Wales has experienced just 0.3% SME growth in the last two years (vs. 5.5% for large employers). Small business numbers in Northern Ireland have fallen by -1.9%, while its big business population has shrunk even further (-2.5%).

SME growth rate strongest in England and Scotland since 2011

UK

England

Scotland

Wales

N. Ireland

SME growth

4.2%

4.6%

4.5%

0.3%

-1.9%

Large business  growth

3.3%

3.3%

3.9%

5.5%

-2.5%

Nine in ten UK industries see SME growth – outpacing large employers

The post-2011 boom has seen SME numbers grow in 18 out of 20 UK industries*, with the only exceptions being construction (-2%) and wholesale (-1%). In contrast big business numbers have risen in just three quarters of UK industries.

Professional, scientific and technical industries have seen the biggest SME population growth of any sector (+35,905), followed by information and communication (+18,025), health (+6,535), property (+5,580), agriculture (+4,765), education (+3,540) and manufacturing (+3,435).

The greatest shift in sector demographics has been in public administration and defence which boasts nearly twice as many SMEs (+97%) as in 2011 but fewer large employers (-3%).

Adam Tyler, CEO of the NACFB, commented:

“SMEs are the stalwarts of the economic recovery: they have made the early running and played a vital role in brightening the UK’s future prospects. By fuelling activity in greater numbers across the majority of UK industries, they have helped rebuild a strong foundation for further growth. This not only opens up more jobs but also boosts those larger employers who count SMEs in their supply chain or rely on the essential services they provide.

“Uneven growth across the British Isles still shows more work needs to be done to support the revival of small business fortunes. SMEs in England and Scotland have benefitted from innovative business lending, which has increased the mix of commercial finance available to entrepreneurs. Commercial brokers can often unlock new routes to funding on a local level, and a renewed commitment from lenders in Wales and Northern Ireland can satisfy regional appetite for investment to kick-start their SME recovery.”

SMEs most affected as yearly growth rate slows

Despite the positive two year figures – and increasingly upbeat reports on the future of the economy – NACFB analysis reveals the growth of the UK business population slowed between 2012 and 2013, with a greater impact on SMEs than large employers.

While big business numbers maintained a consistent annual growth (1.7% in 2012 and 1.6% in 2013) the yearly rate of SME expansion fell from 3.3% to 0.9%: a slowdown mirrored across the UK.

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England’s SMEs visibly outgrew big businesses in number during 2012 (3.5% vs. 2.2%) but were pegged back to 1.1% growth in 2013: the same rate achieved by large employers.

The yearly growth of Scotland’s SME population also slowed during 2013 and fell behind in Wales for the first time since 2011, while Northern Ireland saw a sixth year of SME decline.

In contrast, big business numbers in Scotland, Wales and Northern Ireland each bucked the overall UK trend for 2013 by growing at a faster annual rate than in 2012.

Adam Tyler, CEO of the NACFB, continued:

“The SME population has been the first to bounce back after the financial crisis, suggesting an ability to adapt quicker than some larger businesses and respond to customers’ changing needs. But their small size also leaves them vulnerable to funding shortages, legislative change and the ebb and flow of the economy.

“As the UK recovery moves into second gear, SMEs will need a further hand to sustain their early growth. There are far more funding sources available to SMEs now than before the crash – alternative finance has already stepped up its game and the revised Funding for Lending Scheme should prompt greater volumes of business lending in 2014.

“Business leaders need the reassurance that there are many answers out there to satisfy a call for investment. A carefully chosen mix of commercial funding can solve many business challenges. With NACFB’s online Small Business Finance Directory now connecting thousands of businesses to a network of specialist commercial brokers, work is well underway to join the dots that will lead to greater growth.”

LSL / Acadata: Wales House Price Index News Release

Welsh house prices rise for first time in seven months

  • Prices increased £1,563 in September
  • Average price now £1,219 higher than start of 2013

House Price

Index

Monthly Change %

Annual Change %

£152,779

237.0

1.0

0.5

Richard Sexton, director of e.surv chartered surveyors, part of LSL Property Services, comments: “The economy is racing along and the rise in confidence, underpinned by better access to mortgages, is fuelling the property market in Wales. A shift in gear towards growth has become much more obvious: prices have moved into positive territory for the first time in seven months, with a rise of £1,563 in September compared to August.

“Hordes of first-time buyers are coming out of the wood work, providing renewed strength which will help the Welsh market gather momentum. Record low interest rates have meant mortgage payments for new borrowers are their most affordable for over a decade. As a result the mortgage market is bustling with potential buyers. Since the summer the increase in first-time buyers has helped unlock property chains higher up, allowing sales to soar. The slight drop in September is a reaction to the record high peak in August, reflecting a return to a more sustainable level on the barometer.

“The Government’s Help to Buy Cymru scheme has provided much needed support to people in search of affordable new build housing. It’s incredible to see that demand has leapt up and activity in Wales has become more even across all tiers of the property market. Prices have risen now that the distribution of sales is no longer primarily from the lower end of the market. However, there are concerns that interest rates may rise and a slowdown in wage growth could put pressure on aspiring buyers, eager to step on the ladder.

“On a smaller scale, the north and south divide is fading as the average price changes in north, south and central regions are almost identical in September reflecting the uniform recovery across the country. Cardiff is a hotspot having the largest total number of sales, and represents a substantial proportion of the Welsh property market. Often prosperous areas benefit from the upswing in buyer interest, as stronger local economies attract new buyers looking to settle down and find employment. Cardiff, boasts more green space per person than any other UK city, which is a key factor enticing more and more buyers into the region.

“With an influx of people into Wales, the market will hit a roadblock if the lack of housing supply in Wales is not addressed. The spotlight will be shone on the new Housing Bill to boost the supply of affordable homes. While the possibility of the Government’s New Buy mortgage guarantee scheme with builders and lenders will also provide a further foundation for growth.  These schemes will be crucial for the Welsh economy to stay on track and for the recovery to reach the finish line.”

Daily Paper Summary: 11th November

Property

Over 2,000 people have put in offers on homes during the first month of the Help to Buy scheme, under which the taxpayer guarantees up to 15% of mortgages. David Cameron will welcome today the early interest in the scheme. On average applicants have requested to borrow £155,000 but only three quarters are first-time buyers. In the Times, it has been reported that almost a quarter of those using the scheme are trading up rather than buying their first home. Though the rules do not enable homeowners to purchase a second home, the mortgage can be used to buy a more expensive home with loans that require a deposit of between 5% and 20%. And the maximum value of a property bought with a help-to-buy mortgage is £600,000. The majority are couples applying with a joint salary of under £50,000 to borrow about £159,000. What is surprising is that 31% of people in Britain spend more than a third of their income on mortgage or rent, according to a poll commissioned from Ipsos Mori for BBC One’s Panorama. If people spend 35% or more of their disposal income on rent or mortgages that means they may not be able to afford other basic needs such as food.

Personal Finance

The coalition is  searching for new ways to find £1.6 billion a year by means of tax rises or spending cuts to fund measures to reduce household energy bills. George Osborne is thinking about shifting the cost of government-backed insulation schemes away from bills in a step that would reduce household energy prices by up to £75 a year. However any decision to instigate the switch with the Energy Companies Obligation (Eco) and the smaller Warm Home Discount off bills will require £1.6billion a year to fund it. The issue is said to be brought into the limelight in the Mr Osborne’s Autumn statement in early December which will discuss his announcements in more detail. It’s clear the coalition is under pressure to identify measures to cut household bills after Ed Milliband’s pledge to freeze energy prices if Labour wins the forthcoming election.

Economy

A handful of official data, positive surveys and reports are due out today, offering further evidence that the business community is increasing its sights and pushing Britain on track to run the US close to achieving the fastest rate of growth in the world’s developed economies next year.  There are fresh new signs of recovery: rising business confidence, a boost in economic growth, a further fall in unemployment and an expected slowdown in the inflation rate. These factors are expected to offer further light and optimism for the Chancellor and the Bank of England to be more upbeat about the outlook for the economy. Lloyds Bank is reporting a record rise in business activity in the English regions among its customers and a new peak in job creation in both England and Wales. Official figures tomorrow are thought to show the consumer price inflation rate down to a six month low of 2.5% followed by an appreciable fall in employment on Wednesday.  Lloyds bank showed that in a recent survey that job creation remained robust in England and Wales last month to reach a 13-year peak and five regions reported record growth in new business.

Recruitment

The UK’s short-term jobs outlook is at its strongest for five years a survey of 1,000 employers has found as the Bank of England gets ready to show a faster fall in unemployment this week. Optimism for employment prospects is highest in manufacturing and retail, among small and medium sized companies and in southeast England according to the Chartered Institute of Personnel and Developments quarterly labour market outlook.

LSL / Acadata House Price Index: Friday 8th November

Transactions and prices continue to climb across the country

  • Prices rise in all regions in England & Wales for first time in three years
  • Most transactions recorded in an October since 2007
  • House prices up 4.3% from a year ago, setting new record high

House Price

Index

Monthly Change %

Annual Change %

£237,161

241.5

0.6

4.3

David Newnes, director of LSL Property Services plc, owner of Your Move and Reeds Rains estate agents, comments:

“We’re only at a fraction of the heights seen before the credit crunch struck, but still the housing market is a hive of activity. There’s been a tremendous jump in transactions over the past three months – with the most sales recorded in an October since the onset of the crisis. Key to such a surge in activity is the renewed level of confidence seeping back into the market and a plethora of attractive mortgage deals enticing more and more aspiring buyers back into the housing arena. 

“For the first time in nearly three years, all ten regions in England and Wales have seen an increase in prices – an astonishing recovery, one that we can now say is truly national.  Even earlier this year, many regions were still struggling to escape from the resilient grasp of the financial crisis. But in little over six months we’ve seen a drastic improvement in the availability of mortgages and increased lending by the banks to those at the lower end of the spectrum. The increase in demand, in part fuelled by the second phase of Help to Buy having being brought forward, has driven up average house prices across the country by £1,376 over the past month and £9,776 from a year ago. But despite significant rises, the increased availability and competitiveness of mortgages has also opened the door to a new wave aspiring buyers who had previously been persistently locked out. The stark rise in first-time buyer activity in particular has given the speed of recovery an even greater uplift.

“Up and down the country regions are benefiting from the resurgence and experiencing new levels of activity. Up by 26% East Anglia has seen the greatest boost in sales, but even the region with the lowest rise in transactions, the West Midlands, falls only shortly behind rising by 22%. In the face of rises sweeping across the nation, we must ensure that the market doesn’t soar out of reach for those at the bottom of the ladder.

“Over the next year it’s crucial that the Government supports the growth of new house building to meet the growing demand, and prevent properties across the country becoming unaffordable for large portions of the population. But lenders too must share some of the load, as they play a pivotal role in reaching the lower end of the housing market and this can help support a continued and more sustainable rate of recovery into 2014 and beyond.”