Introduction: UK house prices edge up to hit two-year high
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
UK house prices have risen close to the record high set two years ago, a new survey this morning shows, as confidence in the market picks up.
Lender Halifax has just reported that the average price of a house sold in August rose to £292,505, the highest since August 2022. That’s only £1,000 shy of the record high set in June 2022.
Halifax’s monthly gauge of the housing market also shows that prices rose by +0.3% in August, following a rise of +0.9% in July.
On an annual basis, prices rose by +4.3%, the strongest year-on-year rise since November 2022.
Recent cuts to mortgage rates have helped buyers afford homes; that trend could continue, with the Bank of England expected to cut interest rates at least once more this year (after it started easing policy in August).
Halifax points out that this higher annual growth largely reflects the base impact of weaker prices a year ago.
Amanda Bryden, head of mortgages at Halifax, says:
“Recent price rises build on a largely positive summer for the UK housing market. Prospective homebuyers are feeling more confident thanks to easing interest rates. That optimism is reflected in the latest mortgage approval figures, now at their highest level in almost two years.
Such has been the resilience of house prices that the average property is now just £1,000 shy of the record high set in June 2022 (£293,507). While this is welcome news for existing homeowners, affordability remains a significant challenge for many potential buyers still adjusting to higher mortgage costs.
Reaction to follow….
Also coming up today
Global investors are bracing for the latest US jobs report, which will influence how quickly, and deeply, America’s central bank may cut interest rates.
Economists are hoping for a pick-up in hiring; expectations are for a 160,000 increase in payrolls in August, up from the disappointing 114,000 in July. The US unemployment rate is forecast to drop back to 4.2%, from 4.3%.
Jim Reid, strategist at Deutsche Bank, sets the scene:
After much anticipation, we have finally arrived at the latest US jobs report day, which is of crucial importance as the Fed decides how much to cut rates this month.
It was only five weeks ago that the last jobs report underwhelmed, with payrolls growth down to just +114k alongside negative revision to the previous couple of months. So the big question today is whether that disappointing report was just a blip, or was it the start of a more serious deterioration.
The agenda
-
7am BST: Halifax house price index for August
-
7am BST: German industrial output for July
-
9am BST: UN food price index
-
10am BST: Eurozone final GDP Q2 report
-
1.30pm BST: US non-farm payroll report for August
Key events
Flat prices have underperformed all other property types in the UK over the past five years, new analysis from the Financial Times shows.
This is due to the shift to flexible working, landlords exiting the market and concerns about cladding hit the segment.
The average cost of an apartment has risen at half the pace of any other property type since 2019, before the Covid-19 pandemic, according to a Financial Times analysis of official data.
Figures from Land Registry, the register of property ownership, show the average flat cost £232,400 in June, up 14 per cent on the same month in 2019. In the same period, the average property price rose by about 25 per cent to £288,000, while detached, semi-detached and terraced house prices rose by almost 30 per cent.
FT (£) UK apartment prices underperform rest of market since 2019: Figures from Land Registry show the average flat rose 14% since 2019. In the same period, the average house price rose by about 25%. https://t.co/M7wSzSdA44 via @ft
— Peter Bill (@peterproperty) September 6, 2024
Looking back at UK house prices…. Royal Bank of Canada predicts a “robust autumn selling season”.
Following the news from Halifax that prices hit a two-year high in August, RBC told clients:
House prices leapt by 4.3% in the year to August 2024, the highest rate of annual house price inflation since November 2022, as easing mortgage rates are boosting homebuyer confidence. We expect this positive momentum to continue for the remainder of 2024 and to see a robust autumn selling season as mortgage rates continue to fall.
The eurozone grew more slowly than first estimated this spring, in a blow to Europe’s recovery.
Statistics body Eurostat has revised down its estimate for GDP growth in the euro area, from 0.3% to 0.2%.
Poland (+1.5%) recorded the highest increase of GDP compared to the previous quarter, followed by Greece (+1.1%) and the Netherlands (+1.0%). The highest decreases were observed in Ireland (-1.0%), Latvia (-0.9%) and Austria (‑0.4%).
Eurostat also reports that:
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government final consumption expenditure increased by 0.6% in the euro area and by 0.7% in the EU (after +0.1% in both zones in the previous quarter),
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gross fixed capital formation decreased by 2.2% in the euro area and by 1.8% the EU (after -1.8% and -1.7% respectively),
Google disagrees with the CMA’s view of its advertising technology, and will “respond accordingly”, Reuters reports.
ALPHABET’S GOOGLE SAYS IT DISAGREES WITH THE UK COMPETITION REGULATOR’S VIEW ON ITS AD TECHNOLOGY AND WILL RESPOND ACCORDINGLY
— First Squawk (@FirstSquawk) September 6, 2024
The CMA isn’t the only regulator concerned about Google’s ad-tech business.
Last June, the EU ordered Google to sell part of its advertising business, to address similar worries:
CMA objects to Google’s ad tech practices
Newsflash: Britain’s competition authority believes Google is using anti-competitive practices in the market for adverts on websites and apps, potentially harming thousands of UK publishers and advertisers.
Following an investigation, the Competition and Markets Authority has provisionally found that Google has abused its dominant positions through the operation of both its publisher ad server and buying tools to restrict competition in the UK.
The CMA says Google ‘self-preferences’ its own ad exchange – harming competition and, as a result, advertisers and publishers.
This relates to the rapid series of auctions and transactions which takes place when a user opens a web page or app, to determine which ads will be shown.
The CMA accuses Google of abusing its dominant position to strengthen the market position of its AdX service – an ad exchange that matches bids from publishers and advertisers.
Google also operates ad buying tools for publishers, and for advertisers, and the CMA believes it has conducted various practices that give AdX competitive advantages, and disadvantage Google’s rivals.
They include:
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providing AdX with exclusive or preferential access to advertisers that use Google Ads’ platform;
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manipulating advertiser bids so that they have a higher value when submitted into AdX’s auction than when submitted into rival exchanges’ auctions; and
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allowing AdX to bid first in auctions run by DFP for online advertising space, effectively giving it an ‘right of first refusal’ – with rivals potentially not having any chance to submit bids.
The regulator has laid out its concerns in a statement of objections today.
Juliette Enser, interim executive director of enforcement at the CMA, explains:
We’ve provisionally found that Google is using its market power to hinder competition when it comes to the ads people see on websites.
Many businesses are able to keep their digital content free or cheaper by using online advertising to generate revenue. Adverts on these websites and apps reach millions of people across the UK – assisting the buying and selling of goods and services.
That’s why it’s so important that publishers and advertisers – who enable this free content – can benefit from effective competition and get a fair deal when buying or selling digital advertising space.
Nationwide’s £2.9bn takeover of rival Virgin Money is expected to complete next month after the UK’s financial regulators cleared the deal.
The lenders told the City this morning that the Financial Conduct Authority (FCA) and the Bank of England’s Prudential Regulation Authority (PRA) have both approved the takeover.
The Competition and Markets Authority gave its approval back in July.
World food prices ease slightly in August, UN says
Global food prices fell slightly last month, driven by cheaper sugar, meat and cereal quotations.
The UN’s world food price index, just released, dipped to 120.7 points in August from 121 points in July.
The index gives important detail to the drivers of food commodity prices, which are lower than in their peak in 2022.
Today, it show that global wheat export prices fell month-on-month, due to “sluggish international demand” and strong competition among exporters, especially from “competitively priced Black Sea supplies”. Higher than expected wheat production in Argentina and the US also pushed down prices.
The sugar price index fell by 4.7% compared with July.
The UN’s Food and Agriculture Association says:
The decline in August was mainly driven by the improving production outlook for the 2024/25 season in Thailand and India, following favourable rainfall that benefited sugarcane crops. In addition, lower international crude oil prices exerted further downward pressure on sugar prices.
Meat prices fell by 0.7%, including a drop in poultry prices in Brazil where exports were suspended du to an outbreak of Newcastle Disease. World pig prices also dropped, due to a slowdown in import purchases, especially by China.
But not everything got cheaper. Vegetable oil prices rose by 0.8% month-on-month, due to higher world palm oil prices. Dairy prices rose by 2.2%, driven by whole milk powder, skimmed milk powder and butter.
Rolls-Royce shares fall after EASA orders checks on Airbus A350-1000 engines
Shares in engineering firm Rolls-Royce have fallen over 1%, after Europe’s air safety regulator ordered inspections on the Airbus A350-1000 fleet, powered by its Trent XWB-97.
The European Union Aviation Safety Agency (EASA) acted after a Cathay Pacific A350-1000 suffered an engine fire on Monday.
EASA executive director Florian Guillermet said in a statement.
“This action is a precautionary measure, based on the information received from the initial investigation of the recent Cathay Pacific serious incident and on the airline’s findings in its own subsequent inspections.”
“We will continue to follow closely all information that will be made available through the ongoing safety investigation.”
The EASA explains that the flight from Hong Kong to Zurich “experienced an in-flight engine fire shortly after take-off”.
The regulator adds:
The fire was promptly detected and extinguished, and the aircraft returned safely to Hong Kong.
Rolls-Royce has confirmed that the Cathay Pacific aircraft was powered by its Trent XWB-97 engines.
Markets dip ahead of US jobs report
European stock markets are lower in early trading, as investors anticipate today’s US employment report (at 1.30pm UK time).
The FTSE 100 index is down 41 points, or 0.5%, at 8200 points. That would be its sixth daily loss in a row, its worst run since May.
Germany’s DAX has lost 0.45%, and France’s CAC is 0.3% lower.
UBS reports that the market mood remains cautious ahead of the US jobs data
Mark Haefele, chief investment officer at UBS Global Wealth Management, says:
“Given the importance of the jobs data, investors should brace for volatility in the wake of the release. Our base case remains for a soft economic landing, though recession risks have increased. We recommend focusing on long-term financial plans and ensuring adequate diversification.”
German industrial output falls more than expected
There’s more gloom in the German economy this morning, where factory output has fallen sharply.
German industrial production fell by 2.4% in July, statistics body Destatis reports, much worse than the 0.3% fall predicted by economists.
Production dropped by 8.1% in the automotive industry, following a 7.9% rise in June.
The declines in the manufacture of electrical equipment (-7.0%) and the manufacture of metal products (-3.8%) also had a significantly negative impact, Destatis adds.
Carsten Brzeski, global head of macro at ING, says:
A drop in German industrial production in July not only brings a weak start to the third quarter but is another illustration of how difficult it will be to bring the economy back to strong growth.
Today’s Halifax house price index adds to the evidence that we are in the early stages of a recovery in house prices, argues Peter Arnold, EY UK chief economist.
But, Arnold also predicts that house price growth will remain slow in the next couple of years.
He explains:
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A second successive monthly increase suggests that house prices are in the early stages of a recovery. The EY ITEM Club attributes the upturn to mortgage affordability improving due to lower quoted mortgage rates and strong nominal wage growth.
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The EY ITEM Club expects house price growth to remain in the slow lane over the next couple of years, with transactions staying relatively low. Though mortgage affordability is better than it was last summer, it remains very stretched. Other affordability metrics also remain high, which will continue to limit the pool of potential buyers.
UK homebuilder Berkeley says trading stable
UK house builder Berkeley has reported this morning that trading has been stable between 1 May 2024 to 31 August – the first four months of its current fiscal year.
Berkeley is also confident it will hit its profit targets, and is (predictably) backing the new government’s drive to speed up houebuilding.
It told the City:
Berkeley supports the proposed changes to the planning system and the Government’s aspiration to deliver 1.5 million new homes across this Parliament as part of its mission for growth.
Achieving this ambition requires a change of attitude and a refreshed partnership approach to allow developments, that are currently stalled, to come forward and Berkeley is committed to playing its full part in delivering the new homes the Country needs.
Jonathan Hopper, CEO of Garrington Property Finders, predicts we’ll see an “autumn bounce” in house prices – with buyers benefitting from more affordable mortgages.
After Halifax reported a rise in prices in August this morning, Hopper says:
“With interest rates falling across the board and some lenders now offering rates not seen since the Liz Truss era, thousands of buyers who had been sitting on the fence have sprung into action – with many setting themselves the goal of being ‘in by Christmas’.
“This upswing in demand is starting to push up prices strongly in some areas, but not all. Behind the momentum revealed by the national averages, prices are rising fastest in areas where value is strongest. In fact in the most expensive parts of London and the Southeast, we’re still seeing prices come down.
“That’s why the Halifax’s data shows average prices in Wales are rising nearly four times faster than those in London, while prices in North West England are outpacing those in the capital by nearly three to one.
Darktrace CEO Poppy Gustafsson stepping down
Mark Sweney
Poppy Gustafsson , the co-founder and chief executive of British cybersecurity firm Darktrace, is to leave the company following its $5.3bn (£4.2bn) sale to US private equity business Thoma Bravo.
Gustafsson, one of the most well-known figures in the UK tech industry, founded Darktrace in Cambridge in 2013 with the backing from the late billionaire tycoon Mike Lynch’s Invoke Capital.
In April, Thoma Bravo, which walked away from previous takeover talks in 2022, agreed a deal for the London-listed company which had been considered by analysts to be undervalued by investors.
Gustafsson is to step down with immediate effect and will be replaced by Jill Popelka, Darktrace’s current chief operating officer.
Gustafsson, who was awarded an OBE for services to cyber security in 2019, says:
““Darktrace has been a huge part of my life and my identity for over a decade and I am immensely proud of everything we have achieved in that time.
“Now is the right time to hand over the reins so Jill can lead Darktrace through its transition into private ownership and beyond. I remain Darktrace’s number one fan.”
Lynch and his wife Angela Bacares held a 6.8% stake in Darktrace which was worth £300m at the time of the sale.
Lynch died last month when his superyacht sunk off the coast of Italy in a storm.
Halifax’s house price index shows the UK property market is “continuing on its road to recovery”, says Liz Edwards, money expert at personal finance site finder.com:
“Today’s figures indicate that the UK property market is continuing on its road to recovery. Last week, data from the Bank of England revealed that mortgage approvals have risen to the highest level since the mini-Budget in September 2022. As well as this, many are confident that there will be further cuts to the base rate before the end of the year, which should help stimulate the housing market even further. In fact, when we recently surveyed a panel of experts, 80% predicted that there will be at least one more base rate cut before the end of 2024.
“There’s a chance that the upcoming October Budget could dampen buyer confidence slightly, as we wait to see what the new government has in store for our finances, but I think that any stall in the market is likely to be temporary.”
House prices continued to rise during the summer albeit at a slower pace. Increasing 0.3% on July’s efforts to £292,505.
On an annual basis Northern Ireland led the house price comeback, increasing +9.8%, followed by Wales +5.5%, the North West at +4.0%, then Scotland at +1.7% &… pic.twitter.com/XjQpAw91jw— Emma Fildes (@emmafildes) September 6, 2024
Northern Ireland records the strongest annual house price growth
Northern Ireland continues to record the strongest annual house price growth in the UK, Halifax reports.
Northern Ireland continues to record the strongest property price growth of any nation or region in the UK, rising by +9.8% on an annual basis in August. The average price of a property in Northern Ireland is now £201,043.
The average price of a property in Northern Ireland is now £201,043. House prices in Wales also recorded strong growth, up +5.5%, compared to the previous year, with properties now costing an average of £224,433.
Scotland saw a more modest rise in house prices, where a typical property now costs £205,144, +1.7% more than the year before.
The North West once again recorded the strongest house price growth of any region in England, up by +4.0% over the last year, to sit at £232,917.
London continues to have the most expensive property prices in the UK, now averaging £536,056, up +1.5% compared to last year.
Looking ahead, Halifax’s Amanda Bryden predicts that house prices will continue to rise during 2024:
“With market activity picking up and the possibility of further interest rate reductions to come, we expect house prices to continue their modest growth through the remainder of this year.”
Introduction: UK house prices edge up to hit two-year high
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
UK house prices have risen close to the record high set two years ago, a new survey this morning shows, as confidence in the market picks up.
Lender Halifax has just reported that the average price of a house sold in August rose to £292,505, the highest since August 2022. That’s only £1,000 shy of the record high set in June 2022.
Halifax’s monthly gauge of the housing market also shows that prices rose by +0.3% in August, following a rise of +0.9% in July.
On an annual basis, prices rose by +4.3%, the strongest year-on-year rise since November 2022.
Recent cuts to mortgage rates have helped buyers afford homes; that trend could continue, with the Bank of England expected to cut interest rates at least once more this year (after it started easing policy in August).
Halifax points out that this higher annual growth largely reflects the base impact of weaker prices a year ago.
Amanda Bryden, head of mortgages at Halifax, says:
“Recent price rises build on a largely positive summer for the UK housing market. Prospective homebuyers are feeling more confident thanks to easing interest rates. That optimism is reflected in the latest mortgage approval figures, now at their highest level in almost two years.
Such has been the resilience of house prices that the average property is now just £1,000 shy of the record high set in June 2022 (£293,507). While this is welcome news for existing homeowners, affordability remains a significant challenge for many potential buyers still adjusting to higher mortgage costs.
Reaction to follow….
Also coming up today
Global investors are bracing for the latest US jobs report, which will influence how quickly, and deeply, America’s central bank may cut interest rates.
Economists are hoping for a pick-up in hiring; expectations are for a 160,000 increase in payrolls in August, up from the disappointing 114,000 in July. The US unemployment rate is forecast to drop back to 4.2%, from 4.3%.
Jim Reid, strategist at Deutsche Bank, sets the scene:
After much anticipation, we have finally arrived at the latest US jobs report day, which is of crucial importance as the Fed decides how much to cut rates this month.
It was only five weeks ago that the last jobs report underwhelmed, with payrolls growth down to just +114k alongside negative revision to the previous couple of months. So the big question today is whether that disappointing report was just a blip, or was it the start of a more serious deterioration.
The agenda
-
7am BST: Halifax house price index for August
-
7am BST: German industrial output for July
-
9am BST: UN food price index
-
10am BST: Eurozone final GDP Q2 report
-
1.30pm BST: US non-farm payroll report for August