4.27am EDT
04:27
Market rally; FTSE 250 at new record
In the City, stocks have begun September with some solid gains.
The FTSE 100 index of blue-chip shares has jumped 0.9%, or 65 points, to 7185 points, a two-week high. Food delivery operator Just Eat Takeaway are the top riser (+2.6%), along with conference organiser Informa (+2.4%) and retailer JD Sports (+2.4%).
The smaller, more UK-focused FTSE 250 index has hit a new all-time high over 24,214, up 0.5% today as it continues its rally.
Travel and hospitality stocks are picking up too, with cinema chain Cineworld (+2.9%), easyJet (+2%) and Wizz Air (+2.1%) gaining.
Hopes of a recovery from the pandemic have been driving the markets steadily higher. But as Ipek Ozkardeskaya, senior analyst at Swissquote points out, we face plenty of problems too:
Corporate results are strong, but the Covid crisis is not over, the world and the US is dealing with the new delta variant, global inflation spikes, there is a worsening chip and other material shortages which will at some point affect companies’ businesses and the high inflation is now driving the Federal Reserve toward the exit of the cheap money era.
Add that to the tragedy in Afghanistan, storms and forest fires: the world is not doing well.
4.14am EDT
04:14
August’s 2.1% jump in house prices follows a 0.6% monthly drop in July*, immediately after the stamp duty tax break was halved in England and Northern Ireland after 30 June, and ended in Wales.
( * Not a 0.6% rise as has been reported [including briefly in our intro]; due to an error in the Nationwide data…)
Joshua Raymond, director at financial brokerage XTB, agrees that the surge is surprising — and may be due to the smaller tax savings still on offer on the first GBP250,000 of a purchase.
This is a bit of a surprise given the wider belief that there was likely to be a short term cooling off period after the expiration of the stamp duty relief in June and it seems July’s price fall was short lived.
Whilst this may look from the outset another vote of confidence in the UK housing market, we should temper the positivity a little given that much of the rise has been driven from demand for properties at the lower end of the market, which still enjoys stamp duty relief below GBP250,000 until the end of September.
Moreover, supply dropped in August after many homeowners brought their sales forward to take advantage of the stamp duty relief, meaning in the aftermath of the expiry those homes normally available now are already off the market, pushing prices up further.”
(@RichardJMurphy)
As a measure of failed housing policy and wasted tax reliefs go this takes some beating: pic.twitter.com/a29upn46k4
3.55am EDT
03:55
A shortage of homes for sale in the UK is likely to keep pushing prices higher, predicts Iain McKenzie, CEO of The Guild of Property Professionals:
“The remorseless rise of house prices continued through August, with the value of the average home now nudging a quarter of a million pounds.
“Even the scaling back of the stamp duty holiday hasn’t put the dampers on the demand we are seeing for property across the country.
“First-time buyers with a deposit in the bank are itching to get their foot on the ladder and incentives such as the extended Help to Buy scheme and the 95% government guarantee mortgages are making it all the more appealing to buy now.
“The main obstacle to intended buyers is the lack of properties on the market, and that lack of supply is likely to keep prices moving upwards in the short term.”
3.54am EDT
03:54
Estate agent: stamp duty relief was ‘misdirection’
August’s house price rally shows that the market didn’t need chancellor Rishi Sunak’s stamp duty holiday, argues Lucy Pendleton of independent estate agents James Pendleton.
She says:
“This is a timely lesson that it’s the fundamentals of the market that are all-powerful still. Sunak’s generous state handout has turned out to be more a demonstration of misdirection than crisis management.
“The market didn’t need his money and, with hundreds of billions tucked away in accidental savings, Britons are continuing to satisfy a deep-seated determination to move after a traumatic 18 months.
“First-time buyers have had their patience sorely tested and are now being pulled back into the frenzy in increasing numbers. Where, once, most of them would have bet on the market cooling and giving them a chance to seek better value, fears that rising inflation will put a protective arm around this bull run are cutting down those numbers.
This readout for August has relegated a strategy of ‘wait-and-see’ to wishful thinking.”
Last month, the Resolution Foundation think tank argued that the stamp duty holiday had been ‘both expensive and unnecessary’, as low interest rates, higher savings rates, the desire for more space and the move into more rural locations would have supported the market anyway.
3.43am EDT
03:43
August’s surge means the average house price rose by over GBP4,600 during the month (to GBP248,857, from GBP244,229 in July).
That’s significantly more than the average worker is paid during a month.
(@BuiltPlace)
Instant Info – Nationwide House Price Index pic.twitter.com/OCwj3jWMsl
(@Independent)
House prices jumped by nearly GBP5,000 month-on-month in August https://t.co/numzctChWa
3.28am EDT
03:28
EY: House prices pick up steam again
Martin Beck, senior economic advisor to the EY ITEM Club, says some homebuyers were keen to take advantage of the smaller stamp duty savings still on offer in England and Northern Ireland:
“Although the temporary stamp duty saving introduced last year was decreased on 30 June, the nil-rate threshold will not return to the original GBP125,000 level until 1 October. So buyers lining up transactions and seeking to benefit from a lower tax bill before the October deadline may have supported demand and prices in August.
But other factors also drove up prices, including demand for properties better suited to a world of home, or hybrid, working.
Consumer confidence has remained high and buyers have continued to benefit from ultra-low mortgage rates. Meanwhile, the pandemic has had what will likely be long-lasting effects on property preferences, including raising demand for larger homes in a world of more home working.
Combined with the fuel for property deposits provided by the substantial savings accumulated by some households during lockdowns, there are plenty of props supporting the housing market.
So are house prices likely to tumble soon? Beck thinks not, even though the forces affecting the housing market are not all positive.
On measures such as the ratio of house prices to household incomes, affordability looks increasingly stretched.
And, despite a recovering economy, higher inflation and the prospect of some increase in unemployment when the furlough scheme ends means the outlook for household income growth is clouded. But the odds of a significant downturn in house prices anytime soon looks small.”
3.11am EDT
03:11
Nationwide also warns that the outlook for the UK housing market is ‘still clouded’.
Despite prices accelerating in August, demand could weaken once the stamp duty holiday ends altogether in England and Northern Ireland this autumn, says chief economist Robert Gardner:
“Underlying demand is likely to remain solid in the near term. Consumer confidence has rebounded in recent months while borrowing costs remain low. This, combined with the lack of supply on the market, suggests continued support for house prices. But, as we look towards the end of the year, the outlook is harder to foresee.
Activity will almost inevitably soften for a period after the stamp duty holiday expires at the end of September, given the incentive for people to bring forward their purchases to avoid the additional tax.
“Moreover, underlying demand is likely to soften around the turn of the year if unemployment rises, as most analysts expect, when government support schemes wind down. But even this is far from assured. The labour market has remained remarkably resilient to date and, even if it does weaken, there is scope for shifts in housing preferences as a result of the pandemic to continue to support activity for some time yet.
3.08am EDT
03:08
August’s rise in prices has made pushed up the UK’s ‘house price to earnings’ ratio, a measure of affordability:
Winchester recently became the least affordable city in the UK to buy a home, with property prices averaging 14 times people’s earnings.
2.48am EDT
02:48
Introduction: UK house prices defy stamp duty holiday winddown
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
UK house prices continued to climb last month, despite the gradual phasing out of the government’s stamp duty holiday, as strong demand, low supply and cheap borrowing costs continues to support the market.
The latest figures from Nationwide, just released, show that UK house prices growth climbed by 11.0% in the last 12 months, up from 10.5% in July.
UK house prices are now around 13% higher than when the pandemic began, as lockdowns have driven demand for larger homes better suited for home-working.
In August alone, prices jumped by 2.1% — the second largest monthly gain in 15 years, defying expectations of a slowdown now that the tax break on house purchases is being phased out.
It lifts the average house price to GBP248,857.
At the start of July, the stamp duty holiday on purchases in England and Northern Ireland halved to only cover the first GBP250,000, before winding up at the end of September. It has already ended in Wales and Scotland.
Robert Gardner, Nationwide’s Chief Economist, said August’s price rise is a surprise — and may be due to homeowners trying to take advantage of the smaller tax saving still on offer. A lack of supply is another factor.
“The bounce back in August is surprising because it seemed more likely that the tapering of stamp duty relief in England at the end of June would take some of the heat out of the market. Moreover, the monthly price increase was substantial – at 2.1%, it was the second largest monthly gain in 15 years (after the 2.3% monthly rise recorded in April this year).
The strength may reflect strong demand from those buying a property priced between GBP125,000 and GBP250,000 who are looking to take advantage of the stamp duty relief in place until the end of September, though the maximum savings are substantially lower (GBP2,500 compared to a maximum saving of GBP15,000 on a property valued at GBP500,000 before the stamp duty relief in England tapered).
Lack of supply is also likely to be a key factor behind August’s price increase, with estate agents reporting low numbers of properties on their books.
Also coming up today
UK shop prices rose last month, according to the latest data from the British Retail Consortium, in a sign that driver shortages and the costs of Brexit-induced red tape are beginning to hit household budgets.
The latest figures from the BRC and research group NielsenIQ reveal a 0.4% month-on-month rise in August. This was driven by a 0.6% rise in non-food prices, including a sharp increase in the cost of electrical goods caused by shortages of micro-chips and shipping problems.
While British shop prices remain below those in 2020, down 0.8% in August compared with the same month a year earlier, that marked a slowdown in deflation from the 1.2% year-on-year fall recorded in July.
Helen Dickinson, the chief executive of the BRC, which represents hundreds of retail businesses, warned:
“There are some modest indications that rising costs are starting to filter through into product prices.”
The OPEC group, and allies including Russia, are meeting virtually today to discuss their oil output plans. They’re expected to ratify their plan to pump an extra 400,000 barrels of crude a day in October, in the face of pressures from the White House to boost production.
(@business)
Oil steadies as traders count down the final hours to OPEC+ meeting https://t.co/5pRkhwapN7 pic.twitter.com/GUCSgNtV1U
Shell has announced its aim to install 50,000 on-street electric vehicle (EV) charging points in the UK over the next four years, in an attempt to provide a third of the network needed to hit national climate change targets.
The latest PMI manufacturing reports will show how factories in the UK, eurozone and the US fared last month. Data released already today shows that Asia’s factory activity lost momentum in August as a resurgence in coronavirus cases disrupted supply chains across the region.
European stock markets are on track to open a little higher on the first day of September, having posted their seventh straight month of gains in August.
(@IGSquawk)
European Opening Calls:#FTSE 7144 +0.35%#DAX 15883 +0.30%#CAC 6707 +0.40%#AEX 791 +0.47%#MIB 26135 +0.48%#IBEX 8897 +0.56%#OMX 2365 +0.57%#STOXX 4213 +0.39%#IGOpeningCall
And the latest reshuffle of the UK’s stock market indices will be announced after the market close. Takeover targets Morrisons and Meggitt are likely to be promoted to the FTSE 100, following the surge in their share prices, while Just Eat Takeaway.com is being ejected after FTSE Russell ruled that the food-on-wheels firm is Dutch, not British.
The agenda
9am BST: Eurozone manufacturing PMI for August
9.30am BST: UK manufacturing PMI for August
10am BST: Eurozone unemployment report for July
1pm BST: Brazil’s Q2 GDP report
1.15pm BST: ADP report on US private sector payrolls
3pm BST: US manufacturing PMI for August
Updated
at 3.01am EDT
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