UK house prices see ‘surprise’ pick-up, says Nationwide

House price growth rebounded last month with the average value hitting a record high of £231,068, according to the Nationwide.

Prices were up 6.9% from a year before, compared with 6.4% in January, it said.

“This increase is a surprise,” said the Nationwide’s Robert Gardner, as price growth had been expected to slow ahead of the end of the stamp duty holiday.

The holiday is due to end on 31 March although there have been reports it could be extended.

The stamp duty holiday means the tax has been suspended on the first £500,000 of all property sales in England and Northern Ireland since July. 

There has also been some relief from the equivalent taxes for property buyers in Scotland and Wales – which is also set to end on 31 March.

An announcement on any changes in stamp duty could come in this week’s Budget. 

A mortgage guarantee scheme to help people with small deposits buy a property ladder is set to be announced in the Budget.

The government will offer incentives to lenders, bringing back 95% mortgages which have “virtually disappeared” during the pandemic, the Treasury says.

House price chart Feb

The Nationwide said house prices rose by 0.7% month-on-month, after taking account of seasonal effects, reversing the 0.2% monthly decline recorded in January.

However, it added that the outlook for the housing market was particularly uncertain right now, and the market could slow because of the employment situation. Many workers remain on furlough, and some of those jobs may not return.

Rival lender the Halifax said last month that the economic realities of 2021 meant activity would slow as the year progressed.

Mr Gardner, Nationwide’s chief economist, said: “It may be that the stamp duty holiday is still providing some forward momentum, especially given the paucity of properties on the market at present.

“Shifts in housing preferences may also be providing a more significant boost to demand, despite the uncertain economic outlook.

“Many peoples’ housing needs have changed as a direct result of the pandemic, with many opting to move to less densely populated locations or property types, despite the sharp economic slowdown and the uncertain outlook.”

‘Flight to safety’

Samuel Tombs, economist at Pantheon Macroeconomics consultancy, said he had been forecasting a fall in house prices this year, but the Nationwide numbers have prompted a rethink.

“Our forecast for house prices to drop by about 2% this year now looks too downbeat, though we’ll wait for details of the guarantee scheme to be released before providing new numbers.”

However, Anna Clare Harper, chief executive of asset manager SPI Capital, said: “Reduced stamp duty is not the only driver of house price growth since the strictest lockdown conditions were removed in 2020. 

“We also have cheap debt as a result of very low interest rates, which gives buyers a ‘discount’; the release of pent-up supply and demand and desire to improve surroundings amongst existing homeowners. 

“There is also the ‘flight to safety’, since in times of uncertainty, people want to put their money in a stable asset with low volatility. These trends are likely to hold up throughout 2021.”

PPE price rises cost taxpayers £10bn, report says

Personal protective equipment (PPE) stockpiles in England were inadequate for the Covid pandemic and price rises earlier this year cost taxpayers about £10bn, the UK spending watchdog has said.

The National Audit Office said there had been a particular shortage of gloves and aprons.

The government said the NAO’s report recognised that NHS providers had been able to get what they needed in time.

Almost £12.5bn was spent on 32 billion items of PPE between February and July 2020. During the same period in 2019, 1.3 billion items were bought at a cost of £28.9m.

Source: BBC

UK: Clothes and food price rises push inflation higher

Rises in the cost of clothing and food helped to push UK inflation higher-than-expected last month.

The UK’s inflation rate, which tracks the prices of goods and services, jumped to 0.7% in October from 0.5% in September, official figures show.

Second-hand cars and computer games also saw price rises, but these were partially offset by falls in the cost of energy and holidays.

Analysts had expected the rate to remain flat at 0.5%.

“The rate of inflation increased slightly as clothing prices grew, returning to their normal seasonal pattern after the disruption this year,” said Office for National Statistics deputy statistician Jonathan Athow.

Normally prices for clothes and shoes fall each year between June and July in summer sales before autumn ranges come in, and then rise before sales towards the end of the year, the ONS said.

Throughout 2020 this pattern has been different, with increased discounting in March and April, probably as a response to lockdown, it said. After a small increase in July and August, prices rose by more than a year ago.

What is inflation?

woman shopping

Inflation is the rate at which the prices for goods and services increase.

It affects everything from mortgages to the cost of our shopping and the price of train tickets.

It’s one of the key measures of financial well-being, because it affects what consumers can buy for their money. If there is inflation, money doesn’t go as far.

Food prices rose between September and October, with most of the increase coming in fruit and vegetables, the ONS said.

Analyst firm Capital Economics said food price inflation could continue to rise in November as supermarket demand continues to increase during the Covid-19 lockdown.

cpi inflation

Second-hand car prices also rose in October as people tried to reduce their reliance on public transport.

However, car prices may stabilise and fall back in the middle of 2021 should a vaccine become widely available, according to Samuel Tombs, chief UK economist for Pantheon Macroeconomics.

The largest downward pressure on inflation was caused by a fall in household energy prices.

Gas prices dropped by 12.3% and electricity prices fell 3.2% between September and October.

This was mainly due to energy regulator Ofgem’s latest six month energy price cap, which came into effect on 1 October, the ONS said.

Markets rise after lockdowns prompt oil price plunge

BBC – Markets have turned higher as investor optimism rises ahead of the US presidential election on Tuesday.

The three main share indexes in the US all gained in early trade on Monday, reversing course after sharp falls last week.

Oil prices also rebounded in US trading hours, after earlier hitting a five-month low following fresh virus-induced lockdowns. 

Countries including the UK, France and Germany recently tightened rules.

The news hit financial markets, worried that the new lockdown measures would further dent economic growth and cause demand for oil to slump.

In Asia trading hours, the price of Brent crude fell to a low of $35.74 per barrel, a level not seen since late May. 

But it later recovered, turning positive in Londonhours,helped by strong manufacturing data. 

The price of US crude oil was also been hit hard, falling as much as 7% on Monday to a low of $33.64 a barrel before turning positive.

But trading remained volatile and the price of Brent, the main benchmark for oil prices, remains down 45% from the start of the year.

The virus-induced slump has weighed heavily on energy companies, with BP and Shell among those announcing thousands of job cuts this year.

BP plans to cut 10,000 jobs after a slump in demand while Royal Dutch Shell has said it expects to cut 7,000 to 9,000 jobs. Exxon Mobil last week said it planned to cut 14,000 jobs – or about 15% of its global workforce.

Election fears

Share prices rose in a broad US market rally, with the Dow Jones Industrial Average up 1.7%, the S&P 500 advancing 1.3% and the Nasdaq up 0.8% by mid-morning trade in New York.

Concerns that the results of the US presidential election would not be known for weeks have weighed on markets. 

But hope that the US will avoid a messy and contested election outcome has risen among investors, as polls show challenger Joe Biden maintaining his lead over President Donald Trump in key states on the eve of election day. 

Investors are also optimistic that the conclusion of the campaign will return attention to the debate over economic stimulus, ultimately pushing Washington to advance spending plans to help the US economy recover from the pandemic downturn.

“Whichever way you look at it, this coming week will be huge for US and global markets,” said Simon Ballard, chief economist at First Abu Dhabi Bank.

“We see the potential for a sharp rise in volatility around these events and all in the context of a still deteriorating Covid-19 situation across much of the US, Europe and elsewhere.”

Commodities markets are on edge with the US election looming this week.

China hopes

China remains the most upbeat market for economic growth this year.

The world’s top crude oil importer said on Monday it would raise its quota for 2021 by 20% for non-state owned companies.

This came after activity in China’s factory sector accelerated at the fastest pace in nearly a decade in October as domestic demand surged.

This was according to the Caixin/Markit Manufacturing Purchasing Managers’ Index (PMI) – a private survey which focuses on smaller to medium-sized companies.

Last month, China continued its recovery from the pandemic with strong economic growth during the third quarter, according to its official figures.

The world’s second-biggest economy reported growth of 4.9% between July and September, compared to the same quarter last year.