Tag Archives: unemployment
UK property prices up in August despite Brexit worries
House prices in the UK increased by 0.6% in August and are now 5.6% above a year ago, according to the latest index figures to be published. This continued growth takes the average price of a home to £206,145, the data from the Nationwide shows, indicating that an expected fall due to Brexit has not yet materialised. The pick up in price growth is somewhat at odds with signs that housing market activity has slowed in recent months, according to Robert Gardner, Nationwide's chief economist, saying that this includes a softening of new buyer enquiries to the introduction of additional stamp duty on second homes in April and the uncertainty surrounding the EU referendum. Meanwhile, the number of mortgages approved for house purchase fell to an 18 month low in July. ‘However, the decline in demand appears to have been matched by weakness on the supply side of the market. Surveyors report that instructions to sell have also declined and the stock of properties on the market remains close to 30 year lows,’ Gardner explained. ‘This helps to explain why the pace of house price growth has remained broadly stable. What happens next on the demand side will be determined, to a large extent, by the outlook for the labour market and confidence amongst prospective buyers,’ he pointed out. He believes that it is encouraging that the unemployment rate remained at a 10 year low in the three months to June, though labour market trends tend to lag developments in the wider economy and it is also positive that retail sales increased at a healthy rate in July, up almost 6% compared to the previous year, even though consumer confidence fell sharply during the month. ‘However, business surveys suggest that the manufacturing, services and construction sectors all slowed sharply in July, and, if sustained, this is likely to have a negative impact on the labour market and household confidence,’ he said. ‘Most forecasters, including the Bank of England, expect the economy to show little growth over the remainder of the year. Indeed, these concerns prompted the Bank’s Monetary Policy Committee (MPC) to implement a range of stimulus measures at the start of August, which will provide support to economic activity and the housing market. Monetary policy measures will provide some support for households and the housing market,’ Gardner commented. ‘The MPC’s decision to lower UK interest rates from 0.5% to a new low of 0.25% will provide an immediate benefit to many mortgage borrowers, though for most the boost will be fairly modest. The MPC’s stimulus measures will also provide indirect support to the housing market, and not just by boosting wider economic activity,’ he added. According to Nicholas Finn, executive director of Garrington Property Finders, the data reveals a property market that is still unsettled rather than upbeat. ‘On the front line we’re seeing some strong intent but a lack of clarity among buyers. The cut in interest rates and resilient… Continue reading
Residential rents in England and Wales reach new record
Rents across England and Wales have reached a new record of £770 per month, up 1.5% over the last 12 months, according to the latest buy to let index. Tenants have paid down rent arrears despite the new record for monthly rents in October, the index from the UK’s largest lettings agent networks, Your Move and Reeds Rains, also shows. On a monthly basis, rents in October 2014 rose 0.3% but the October rise follows faster average rent rises of 1.9% in the previous 12 months ending October 2013, and rental growth of as much as 3.4% over the preceding year. ‘Rents have edged to a new record and the rental market is pulsing with new demand. Yet at the same time, tenants are getting on top of their finances helped by a cooling pace of such rent rises,’ said David Newnes, director of estate agents Reeds Rains and Your Move. ‘Better affordability is good for tenants in the longer run too and for landlords who can rely on steady revenue to pay the bills. That helps to support a virtuous cycle of only gradual rent rises. Alongside slower overall inflation, a material boost to the supply of properties available to let has helped keep rents from rising as quickly as in previous years,’ he added. Overall tenant finances improved in October, with just 6.9% of all rent in arrears, down from 7.2% in September and 7.1% in October last year. Rent arrears are also just 0.3% above the record low 6.6% set in November 2013. In absolute terms this represents £244 million in late rent in October, down from £256 million in the previous month or a drop of £12 million since September. Levels of the most severe tenant arrears have also improved. Households facing rental arrears of more than two months now represent just 1.4% of all tenancies, compared to 1.6% in the third quarter of 2013, according to the latest quarterly Tenant Arrears Tracker from Your Move and Reeds Rains. ‘Tenants have battled a broadly stagnant jobs market for years. Recent progress on the unemployment rate has helped bring down the most serious cases of rent arrears. But for others consistently falling just a little behind on the rent, the trouble is more with incomes that just haven’t kept pace with the cost of living,’ said Newnes. ‘Instead of wage growth, a growing supply of homes to let and much slower rent rises have been far more useful in tackling the proportion of households falling behind. Looking ahead, if more homes to rent can coincide with a true renewal of real wages, this could prove a powerful combination and would take rent arrears even lower,’ he explained. A breakdown of the figures shows that rents in nine out of 10 regions of England and Wales are higher than a year ago. Leading all other… Continue reading
"US Housing Market Recovery Still In Early Stages"
Prof. Stephen Oliner, a former senior official at the US Federal Reserve, tells “Globes” about the latest trends in US real estate. 1 July 13 17:43, Gil Shlomo “A fire sale” of US bonds, such as the funds of large universities are carrying out, is liable to cause bond prices to crash and send long-term interest rates soaring. A new crisis in the recovering housing market is then only a matter of time. Mortgage interest rates in the US have been creeping upwards in recent weeks, although the interest rate on 30-year fixed-rate mortgages is still just 3.91%. The concern is that a jump in the interest rate on long-term loans, such as mortgages, will deliver a serious blow to the fragile US economic recovery. Prof. Stephen D. Oliner, who held a series of senior positions in the US Federal Reserve over 30 years, is an expert on the subject. “Globes”: US home prices are still rising, almost 11% in the 12 months through March. On what basis is the market recovering? Oliner: “Prices began to rise, especially in areas which were severely affected by the bursting of the bubble, such as California. But the recovery is still in the early stages, and comes after a very sharp drop in market activity as a result of the 2008 crisis. In fact, new construction has not yet returned to a normal level, or even close to it.” There are claims that the recovery is driven by investors, rather than by the general public. “Investors are now taking a larger share of the housing market, far beyond the normal proportion. They are buying cheaply, renovating, renting, and expect to sell at a higher price later. In my opinion, this is a helpful development, because we have a shortage of rental properties, and this offers a solution for people who cannot really buy a home now in their current financial situation.” Land lottery Oliner’s name appears in the bibliography of a Bank of Israel research report published two weeks ago, in which there appears, for the first time, an index of the change in residential land prices. Surprisingly, the US does not yet have such an official national index of changes in land prices, even though the value of land was $17 trillion in 2006. “This is a noteworthy lack, which is why I would like to see the index I developed with my former colleagues at the Fed made accessible to the public. To the best of my knowledge, the Fed is seriously considering publishing the index on its website regularly.” Oliner’s last position at the Fed was senior adviser at the Division of Research and Statistics. He and his colleagues examined 180,000 land deals, which were defined as the sale of an empty lot or a lot with buildings slated for demolition, in 23 areas in the US in 1995-2009. If you thought that home prices in the US were volatile, you haven’t seen the graph of land prices, which rose fairly modestly in 1995-2002, but then jumped by an average of 135% in 2006, and by even more in East Coast cities. The bursting of bubble in that year sent prices down by more than 50% by mid-2011. The home prices index includes the price of land and the cost of construction. The fact that land prices rose and fell much faster than home prices (according to the Case-Shiller Index) in the current business cycle indicates that land prices are more volatile. Oliner attributes this to “supply rigidities”. “When demand for homes or commercial real estate grows, the supply of zoned land does not increase at the same rate as the number of workers or the amount of building materials. As a result, land prices tend to rise much more than the prices of other new construction inputs.” Should zoned land be a rationed product that drives up the price? “That’s a tough question. I think that regulatory review is required when land is rezoned. In the US, the changes mostly include the release of farmland at city margins for residences and commerce. This is a sensitive issue because the value of farmland is derived from its use to produce food, as well as for protecting open spaces. Uncontrolled changes are liable to result in urban sprawl, and we’ve seen ever-worsening traffic problems in constantly growing cities. “On the other hand, landowners want to protect property values, so they aren’t interested in increasing the supply, even if there is a social advantage. There are places where the land shortage is clearly dictated by the interests of landowners and homeowners. But there is no need to go to the opposite extremes and not examine land rezoning at all.” It is odd to talk about land shortages in the US. “The issue is not a shortage of land, but of deciding the best use for it. Opinion in the US about the direction of development is changing. There is a switch to the redevelopment of urban centers, partly because baby boomers whose children have grown are not interested in continuing to live in a big house in the suburbs. In addition, for municipalities, population density reduces necessary investment in highways and railways. It also creates a vibrant urban environment, which is something that we in the US are beginning to appreciate. In this sense, we are now catching up with the rest of the world.” Oliner currently serves as a resident scholar at the American Enterprise Institute. He advises lenders and borrowers to take into account the huge volatility in land prices when using land as collateral and on setting financing rates. In addition, in areas where land value is a large part of a home’s price, he emphasizes that loans should be granted especially conservatively. “The Fed is definitely worried about the day a reduction in quantitative easing is announced, even if is a drop in purchases to $60 billion a month from the current $85 billion,” says Oliner. “This will be a serious challenge, because the market has a tendency to over-react to any major change by the Fed. The market will conclude, mistakenly, in my opinion that a halt in purchases also means a halt in expansionist policy in general, including interest rate policy, more quickly than the Fed believes.” Oliner visited Israel to attend the 2013 American Real Estate and Urban Economics Association International Conference held on June 23-26 at the Hebrew University in Jerusalem. He participated in a panel on monetary policy after the global crisis together with governors and several officials of central banks from around the world. Negligible US interest rate until 2015 “The central bank really tries to manage market expectations, but it is not easy to communicate with the public, especially when working on two monetary fronts. Ending expansionist policy in the coming years will be a pothole-filled road,” says Oliner. The second front that Oliner talks about is the US interest rate, which most members of the Board of Governors of the Federal Reserve System believe will remain near zero until 2015. “The Fed has set thresholds, the crossing of which will set off a debate on raising the interest rate. An unemployment rate of 6.5% is one of them. The second, in general, is that inflation should remain under control. Since the unemployment rate is currently 7.5%, we are far from the unemployment threshold, and therefore from an interest rate hike,” he says. “It should be remembered that these thresholds are relevant only for interest rate decisions, and not for bond purchases, for which no quantitative threshold has been set,” says Oliner. “The Fed will begin to reduce its purchases at the same time as a sustainable improvement in the labor market. We’re not there yet, but if there will be several good monthly job figures later on, I see this happening in the fall, possibly in September.” “I believe that the purchases will stop altogether in the first half of 2014 and that the interest rate will remain negligible into 2015.” Published by Globes [online], Israel business news – www.globes-online.com – on July 1, 2013 Continue reading
