Posts Tagged ‘housing’

The government and its conservative policies

Thursday, July 23rd, 2015

Two months on from the election and it is very clear that this government is Conservative only in its composition.

The Chancellor has announced a number of policy initiatives, but perhaps the most headline-grabbing is that of non-protected government departments being expected to come up with spending savings of up to 40 per cent of their budgets.

If I think back to the coalition, I think the prospect of this happening with the Liberal Democrats having seats in the cabinet would have been unlikely at best, and these types of proposals would likely have resulted in a very messy divorce much earlier in the last parliament.

What the Chancellor does now have of course, is a working majority in parliament, albeit a small one, and he seems very focused on transforming what he sees as the role of central government.

In short, that includes smaller central government and greater autonomy, decision-making and control of funds at regional and local level.

The budget held few surprises for the housing market , but there was one specific curb on the Buy-to-Let market of limiting landlord mortgage tax relief to basic rates of income tax, although this is not due to commence until 2017 and will be in introduced in a phased approach over a four-year period.

Those landlords who are affected should therefore have plenty of time to adjust to this and, as a result of the change, we may see more properties being owned within the structures of Limited Companies for Buy-to-Let rather than by individuals due to the differing taxation approaches, particularly as the Chancellor also announced proposals to reduce corporation tax rates.

The housing and mortgage markets have been steady through the first half of 2015 and, as we have commented previously that we did not witness any significant slowdown in activity in the lead up to the general election, neither have we seen any significant change in momentum following it.

Gross mortgage lending in the first half of 2015 is estimated by the Council of Mortgage Lenders to be circa £96bn, which is almost identical to the same period in 2014.

Activity in the second half year is historically generally higher than the first, although remortgaging activity could be stimulated further following comments from the Bank of England Governor, Mark Carney, who in addressing the Treasury Select Committee commented that the “point at which interest rates may begin to rise is moving closer, given the performance of the economy”.

Although he has previously offered similar commentary before and no change has subsequently occurred, expectations are now potentially for a Bank Rate rise in early 2016.

Borrowers already appear to be more aware of the improving overall economic picture and the potential impact on monetary policy, and we anticipate that remortgaging will continue to increase as borrowers will look to lock into attractive rates ahead of any Bank Rate rise.

On the wider economic front, inflation has once again dipped back down to zero, but there was an unexpected rise in the unemployment rate, although most commentators feel this is something of a one-off.

What this may point to is further evidence of the skills gap that has been much talked about, as there are literally thousands of job vacancies across the UK economy but it would appear many of those who are unemployed, particularly long-term, do not possess the skills to enter employment.

The Chancellor’s further cap on benefit payments is clearly designed to push more people, many of whom are longer-term unemployed, into work, even if that is relatively unskilled lower paid work and is very much part of a Conservative policy.

 

Economy continues to impress…

Tuesday, February 24th, 2015

The economic news continues to impress, inflation has today fallen to 0.3% the lowest level since the introduction of the measure of Consumer Price Inflation (CPI), the economic growth forecast for 2015 has been raised by the Bank of England to 2.9% from 2.5% only three months ago, unemployment continues to fall and wages are finally starting to increase in real terms.

We should of course recognise that with inflation falling primarily due to the halving of the oil price this is giving a stimulus to the widening of the gap between CPI and the rise in average earnings and as is usual the politicians on the government side have been keen to seize on this and point to their “long term plan” paying off.

I am not sure that George Osborne or David Cameron or any other government minister can legitimately claim any credit for the fall in the price of crude oil, welcome thought that is!

I think it is important to mention that part of the fall in the price of oil has been the reluctance of the biggest producers, primarily Saudi Arabia to limit production, combined with a slowdown in the economies of many of the emerging states and in China in particular, the consequence of which has seen prices fall from circa $110 as recently as last July / August to as little as $45 in under six months, although it has risen in recent weeks back to nearer $60.

I think our politicians should be mindful that if some of the newer oil producers, in particular the Shale Gas operations that have grown exponentially in the US, are forced out of business, and many potentially will be with the oil price at under $70, once this capacity is taken off line or eradicated the laws of supply and demand will dictate that the price rises, and potentially very quickly much in the same way as it fell.

With the fall in the price of oil and other energy costs (although many of these can be indirectly attributed to the fall in the oil price also) and food costs, the net effect of this is that the Bank of England is forecasting a rise in real post take home household incomes of 3.5% which should make everyone feel that little bit better off.

Is the improving economics not only of the country as a whole but of individuals likely to have a material impact on the outcome of the General Election? We are now only eighty days or so away from polling day and the opinion polls look in general to be neck and neck.

Some point to a small Labour lead and others a Conservative one, but nearly all seem to show UKIP support ahead of the Lib Dems and several show support for the Green party at or around the same as that for the Lib Dems which looks ominous for Mr Clegg and Co?

We need to be mindful that polls have been wrong in the past and perhaps the best and most recent example of this was last year’s Scottish referendum which seemed to suggest a very close race right up until polling day, but ultimately the gap was 10 points in favour of remaining as part of the Union, and therefore making something of a mockery of the polls in the lead up to the vote.

Not surprisingly Labour has so far focused their campaign around the NHS and the Tories on the relative health of the economy under their stewardship. The Liberal Democrats appear to be positioning themselves as a party once again ready to work in coalition but potentially with either side and in doing so being the voice of reason and reigning in the political excesses of both the main parties for the benefit of the National good.

I am sure the next few weeks will have more twists and turns as politics is never straightforward and that potentially other external events not envisaged may play a part in shaping voter opinion and behaviour.

 

The on-going recovery and the introduction of MMR

Thursday, April 24th, 2014

Britain’s economy is now expected to be the fastest growing of any of the G7’s group of major economies, according to the International Monetary Fund (IMF), who now forecast that the UK economy will grow by 2.9% in 2014 – a further increase on the 2.5% forecast only three months ago -and will grow by a further 2.5% next year.

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