The equity release market – “green shoots”

According to a lifetime mortgage lender, one in five of their new equity release plans in Q1 were taken out by homeowners with properties worth over £550,0001. 

When asked why they were releasing equity, 22% of customers said they planned to spend the unlocked cash on improving their home. Less than 20% of borrowers wanted to repay mortgages and debts, meanwhile 15% were putting the money towards holidays. 

Are consumers regaining confidence?  

The equity release market is showing some signs of improvement after a slow 2023. In the first three months of this year, there was a 4% quarterly increase in the number of new and returning customers using equity release products2. Existing customers seem to be more confident than those who are new to the market, as returners drove a 6% increase in drawdown activity in Q1. 

What’s in store? 

David Burrowes, Chair of the Equity Release Council, predicted, “As we look to the rest of 2024, we are confident that the green shoots that we are starting to see will germinate and the market will return to growth.” 

Talk to us 

If you’re considering releasing equity on your home, get in touch. Equity release isn’t the right solution for everyone and there could be other options which may be more suitable for you. Professional advice is essential. 

1Pure Retirement, 2024, 2ERC, 2024 

As a mortgage is secured against your home or property, it could be repossessed if you do not keep up mortgage repayments. Think carefully before securing other debts against your home. Equity released from your home will be secured against it. 

ISAs: a quarter century strong

Since being launched on 6 April 1999 as successor to PEPs and TESSAs, the Individual Savings Account (ISA) has become an integral part of the UK savings and investment landscape. 

Worth celebrating 

By any measure, the humble ISA has been a huge success. The latest HMRC figures show that more than 22 million UK adults have one, with the combined market value of these accounts standing at over £740bn. Their principal benefit is that holders do not have to pay tax on dividends, interest or capital growth; indeed, in total, ISAs will collectively save investors around £7bn in tax this year. 

Maxed out 

Estimates1 suggest that anyone who invested the maximum stocks and shares annual ISA allowance each year over the last quarter of a century could, depending on the performance of their chosen investments, have accumulated an investment pot worth around £900,000.  

The evidence also suggests that people who invested early in a tax year were likely to have amassed a larger amount than those who waited until the end – in other words, it’s time in the market that counts rather than timing the market. 

Make the most of your allowance 

For some people though, little and often is the preferred way to invest in ISAs and this approach can certainly amount to significant sums being saved as well. Indeed, whether investing a lump sum or saving on a regular basis, the real key is making sure you utilise as much as possible (having regard for other aspects of your current and future finances) of your ISA allowance each year. 

1Vanguard, 2024 

The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated. 

Limiting ‘home bias’

Does your investment portfolio suffer from too much ‘home bias’? It’s natural for investors to stay close to home when thinking about investing, contemplating well-known UK companies or UK-focused funds rather than looking further afield. But if your portfolio becomes too heavily concentrated in the UK, you risk missing out on valuable diversification benefits and better potential returns elsewhere.  

The drawbacks of home bias  

One of the biggest reasons to avoid home bias is that it limits your portfolio’s growth potential. Investing with a global perspective opens up your portfolio to a world of different countries, industries and companies to invest in, potentially leading to higher returns over time. Importantly, investing globally means you’re more likely to gain exposure to high-growth sectors or companies that are not always present in your domestic market, whereas sticking with the UK means narrowing your opportunities, even if you own some outstanding local companies.  

The benefits of diversification  

At the same time, home bias in a portfolio breaks one of the biggest investment rules: diversification. Spreading your portfolio across different asset classes, countries and companies is one of the simplest – yet most effective – ways to mitigate risk within your portfolio and helps you achieve more consistent returns over time. Studies and historical data show that including international investments in a portfolio can lead to better risk-adjusted returns due to diversification benefits, though geopolitical risks must be considered. Global markets offer a wider range of asset classes and reduce your vulnerability to economic downturns specific to your home country.  

However, over-diversification is a risk to be wary of too! It occurs when additional investments diminish returns without lowering risk significantly. Regular reviews and rebalancing help maintain a well-diversified portfolio and manage any potential concentration risk that may occur over time. Ready to invest? Recent research suggests that some Britons are starting to save more despite the cost-of-living crisis1. Now might be the right time to start thinking about investing if you have some money on the sidelines.  

1Aldermore, 2024  

The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated. As a mortgage is secured against your home or property, it could be repossessed if you do not keep up mortgage repayments. 

News in Review

“I am determined to create wealth for people up and down the country” 

The government’s legislative agenda was set out in the King’s Speech last Wednesday. Delivered at the State Opening of Parliament, the government set out a package of bills it intends to introduce to Parliament in the coming sessions and months, in addition to outlining various policy priorities which don’t require legislation. 

As anticipated, the government continued its theme of growth, with Prime Minister Keir Starmer saying the focus of the Speech was on national renewal and growing the economy, reiterating his intention to “take the brakes off Britain,” before adding, “I am determined to create wealth for people up and down the country – it is the only way our country can progress, and my government is focused on supporting that aspiration.” 

In addition to widely expected bills including those on employment rights, planning and infrastructure, immigration and border security, devolution, renters’ rights, nationalising rail and bus services, climate change, reforming the House of Lords and the National Wealth Fund (NWF), a new Pension Schemes Bill was announced and confirmation of the manifesto pledge to add 20% VAT on private school fees to fund 6,500 new teachers.  

The Pension Schemes Bill is intended to improve outcomes for people in retirement, aiming to support over 15 million people save more in their private sector pension schemes, ensuring the average earner has over £11,000 more in their pension pot by the time they retire. Measures include addressing poorly performing default funds and consolidating multiple small pension pots. 

Former Pensions Minister, Steve Webb, commented on the bill, saying it “very much represents ‘business as usual’ when it comes to pensions policy. There appears to be nothing in the legislation that so far represents a distinctively ‘Labour Party approach’ to pensions, and a Conservative minister could happily have brought forward this legislation.” He continued, “It will take time before we see how the new government’s agenda differs from that of its predecessor, but this does mean that any distinctive policies will have to await legislation later in this Parliament and may take time to have effect.” 

Over the weekend, Chancellor Rachel Reeves announced a landmark pensions review which will include unlocking the investment potential of the £360bn Local Government Pensions Scheme and a review of the £2bn spent on associated fees. The Chancellor commented “The review we are announcing is the latest in a big bang of reforms to unlock growth, boost investment and deliver savings for pensioners. There is no time to waste.” 

New law – OBR power 

To avoid a repeat of the September 2022 mini-Budget, when previous Chancellor Kwasi Kwarteng announced £45bn of unfunded tax cuts, a new bill was announced to prevent any future government from sidelining the UK’s independent forecaster, the Office for Budget Responsibility (OBR), from assessing its economic plans. Powers will be given to the OBR to make judgements on any major taxation or spending announcements, with the intention of improving investor confidence and boosting economic growth.  

Inflation news 

New data from the Office for National Statistics (ONS) has shown that Consumer Prices Index (CPI) inflation held steady at 2.0% in June, replicating the 2.0% recorded in May. The latest figures show the largest downward contribution came from clothing and footwear.  

Director of Insight at the British Retail Consortium, Kris Hamer, commented, “While we should celebrate the end of high inflation, which has dogged the UK for two years, many of the factors that caused it lurk in the background. Energy prices have fallen from peak, but the UK’s reliance on imported energy remains a vulnerability. Similarly, the impact of climate change on harvests at home and abroad, as well as rising geopolitical tensions, could increase commodity prices and translate into higher inflation in the future.” 

Biden ends re-election campaign 

On Sunday Joe Biden announced that he will not run for re-election in November, saying, ‘It has been the greatest honor of my life to serve as your President. And while it has been my intention to seek  

re-election, I believe it is in the best interests of my party and the country for me to stand down and to focus solely on fulfilling my duties as president for the remainder of my term.’ Joe Biden has endorsed Kamala Harris for President.  

Here to help 

Financial advice is key, so please do not hesitate to get in contact with any questions or concerns you may have. 

The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated. 

All details are correct at time of writing (24 July 2024) 

Commercial Property Market Review – July 2024

A report from Carter Jonas indicates some growth in commercial markets recently 

According to MSCI, annual retail rental growth was 0.9% in May – the highest annual growth rate since 2016. While rental values have grown modestly since 2022, values are still 17% lower than the peak seen in 2018.  

In the retail warehouse subsector, rental values increased by 1.3% in the year to May 2024. Meanwhile, shopping centre rental values continue to drop with an annual decrease of 1.5% reported in the year to May.  

With regards to the office sector, average rental growth was recorded at 2.5%, with the central London market moving ahead of the south east and regional markets. Despite their cost, high-quality office spaces are in high demand as they are perceived to help to improve employee wellbeing and attract new recruits.  

There is limited supply of new units in many key markets, including the industrial sector. However, occupiers are expected to sublease if they have surplus space, which should boost supply.   

How is the market faring in Scotland? 

Scottish investors seem to be treading carefully as the commercial property market has seen a dip in sales this year.  

According to Knight Frank data, almost £750m was invested in Scottish commercial property in H1 2024 – down 19% when compared with the same period last year. Retail property made up 51% of the total investment volume, followed by hotels (19%) and offices (16%).  

The most active buyers were real estate investment trusts (REITs) and listed property companies, who accounted for 32% of investment volumes, while international investors made up 30%. 

Despite the fall, there has been a spread of different investors this year, which is promising. Head of Scotland Commercial Property at Knight Frank, Alasdair Steele, commented, “Over the last decade international buyers have come to account for the majority of investment in Scotland, but in the year to date there has been a much more even share, with institutional investors buying as well as selling, alongside increased interest from private equity and property companies.” 

Large offices difficult to sell in the capital  

Large London office buildings have become very difficult to sell, as investors are deterred by high interest rates and the move to hybrid working, according to research. 

Data from JLL has found that central London office sales total £2.5bn so far this year – 28% lower than in 2023. The City of London used to see deals topping £1bn, but in H1, only a handful of office buildings over £100m have been sold, according to CoStar.  

An MSCI index indicates that 64% of investors would make a loss if they sold their London offices now. Office landlords struggling to sell include GPE and Derwent, who have reportedly not had high enough offers on their priciest buildings.  

New Bond Street drives West End investment market  

According to Savills, sales in the West End investment market were muted in May with only six transactions, worth a total of £166m. 

So far this year, there have been 51 deals totalling £1.83bn – 40% of these assets were worth less than £20m. There is £2.3bn of available supply, with only seven options above £100m.   

Four trades have taken place at New Bond Street in 2024, accounting for 22% of this year’s cumulative investment volumes. Savills notes, ‘The street’s defensive investment characteristics, including high letability prospects and robust rental growth forecasts, is a key driver for investors seeking long-term wealth preservation.’ 

In the most recent transaction, the virtual freehold interest in 126-127 New Bond Street was acquired by Weybourne, having previously been owned by a private investor in Hong Kong. It is understood to be priced at £71m.  

It is important to take professional advice before making any decision relating to your personal finances. Information within this document is based on our current understanding and can be subject to change without notice and the accuracy and completeness of the information cannot be guaranteed. It does not provide individual tailored investment advice and is for guidance only. Some rules may vary in different parts of the UK. We cannot assume legal liability for any errors or omissions it might contain. Levels and bases of, and reliefs from, taxation are those currently applying or proposed and are subject to change; their value depends on the individual circumstances of the investor. No part of this document may be reproduced in any manner without prior permission. 

All details are correct at the time of writing (18 July 2024) 

Residential Property Review – July 2024

A new Labour government – what next for housing?  

Following the Labour Party’s landslide election win, what changes might be in store for the UK housing market?  

In the Prime Minister’s introduction to the King’s Speech on 17 July, Sir Keir Starmer stated “Too many people currently live with the threat of insecurity and injustice, and so we will make sure everyone can grow up in the secure housing they deserve. We will introduce tough new protections for renters, end no-fault evictions and raise standards to make sure homes are safe for people to live in.”  

Several key Bills relevant to the housing market were announced:  

  • Renters’ Rights Bill – rent caps and longer-term tenancy agreements to stabilise the rental market  
  • Planning and Infrastructure Bill – simplified planning procedures and infrastructure funding  
  • Draft Leasehold and Commonhold Reform Bill – abolishment of ground rent and simplification of leasehold extensions and freehold purchases. 

Housing market update 

Completions and house prices rose in June, but buyer activity fell as the nation awaits a cut in Bank Rate.  

The start of 2024 saw a boost in sales agreed, resulting in positive effects being seen in June, with the highest number of completed transactions since March 2023, according to HMRC.  

However, a slight decline in mortgage approvals and sales agreed indicate that buyer activity has waned halfway through 2024. Savills report that supply of homes has continued to increase, thus widening the gap between supply and demand. Buyer confidence should be restored once mortgage affordability improves and is dependent on Bank Rate reducing, which Oxford Economics predict will happen in August.  

UK annual rental growth fell to 5.8% in May according to Zoopla – down on the 6.6% recorded in April. Commuter belt regions continue to show the strongest growth, particularly in the north of England. 

BTL landlords intend to raise rents 

Many buy-to-let (BTL) landlords plan to raise their rents within the next year, according to a survey by Landbay.  

Nearly 85% of respondents intend to increase rents over the next 12 months, with 37% of this group planning to put rents up by between 6% and 10%. Meanwhile, 36% said they would raise rents by up to 5% and a further 8% of BTL landlords will put them up by between 11% and 19%. The reasons cited for the increases included higher interest rates and increased operating costs.  

According to the survey, half of the landlords raising rents self-manage their properties, 27% use an estate agent and a fifth rely on a professional management company. The survey also found that 42% of landlords have between four and ten properties, while 28% own at least 20 rental properties.  

It is important to take professional advice before making any decision relating to your personal finances. Information within this document is based on our current understanding and can be subject to change without notice and the accuracy and completeness of the information cannot be guaranteed. It does not provide individual tailored investment advice and is for guidance only. Some rules may vary in different parts of the UK. We cannot assume legal liability for any errors or omissions it might contain. Levels and bases of, and reliefs from, taxation are those currently applying or proposed and are subject to change; their value depends on the individual circumstances of the investor. No part of this document may be reproduced in any manner without prior permission. 

All details are correct at the time of writing (18 July 2024) 

News in Review

“We need to go further and faster if we are to fix the foundations of our economy” 

Last week, Chancellor Rachel Reeves announced the launch of a National Wealth Fund (NWF), which has been created to increase investment in the UK. A key Labour manifesto promise, the Chancellor pledged £7.3bn of state funding to “unlock investment” in UK growth industries. 

The funding will be allocated through the UK Infrastructure Bank, alongside existing monies, while the British Business Bank will be reformed to help initiate institutional capital in the UK. British Business Bank Chief Executive, Louis Taylor, said, “We expect the fund to create a single coherent governmental offer for businesses and a compelling proposition for investors that will help mobilise billions.”  

A NWF task force has been assembled, the inaugural meeting of which was attended last week by Ms Reeves, Energy Secretary Ed Miliband and former Bank of England Governor Mark Carney. Further details on the fund will be outlined ahead of a global investment summit later in the year. The new government intends to legislate to make the fund a permanent institution. 

At the meeting, the Chancellor commented, “This new government is getting on with the job of delivering economic growth. I have been clear that there is no time to waste… We need to go further and faster if we are to fix the foundations of our economy to rebuild Britain and make every part of our country better off… Britain is open for business – and the work of change has begun.” 

GDP uptick 

Recently released growth figures have shown the UK economy grew by 0.4% in May, following a flat reading the previous month. The data from the Office for National Statistics (ONS) highlights a rebound in the service sector as a key contributor, growing by 1.1% in the three months to May, the strongest three-monthly growth rate since December 2021. Growth in the sector was widespread, with output increasing in 10 of the 14 sub-sectors. 

Exceeding expectations from a poll of economists of 0.2% growth for the month, sterling rose on the news last Thursday, to reach its highest level against the US dollar since early March. 

Housing activity 

The new UK Residential Survey from the Royal Institution of Chartered Surveyors (RICS) has shown optimism in the housing market has reached ‘the highest level since January 2022,’ on the back of the General Election. Over the next quarter, the RICS survey highlighted 20% of respondents are expecting a recovery in residential sales, the highest figure since January 2022. The survey states, ‘The outlook does appear to be brightening somewhat, with near-term sales expectations improving noticeably.’ This can be partly attributed to confidence in the newly elected government, which has committed to deliver 1.5 million homes over the next five years. 

A net balance of +54 survey respondents anticipate house prices will continue their ascent over the next year. New buyer enquiries show a net balance reading of -7% in June, signaling a ‘modest weakening’ in demand, the third consecutive month in which enquiries have slowed. 

Senior Economist at RICS, Tarrant Parsons spoke of potential improvements in the sector, “There are some factors emerging now that could support a recovery in the months ahead. If the Bank of England does decide that the current inflation backdrop is benign enough to start loosening monetary policy next month, this may prompt a further softening in lending rates. In addition, the recent election delivered a clear outcome, with housing pushed up the political agenda.” 

Euros boost the economy 

Although the result didn’t go in England’s favour on Sunday, there is some good news for the economy, with expectations of a £3.1bn economic boost over the last month as Euros excitement gripped the nation. Before the final, those preparing to watch the match spent an estimated £405m, with an estimated £280.1m spent in supermarkets alone, as viewers stocked up on last-minute food and drink. Over the weekend, Tesco predicted selling over one million pizzas, 180,000 packs of burgers and four million packs of beer. Pubs and bars estimate a £120m revenue boost with fans turning out to cheer on the Three Lions. 

Here to help 

Financial advice is key, so please do not hesitate to get in contact with any questions or concerns you may have. 

The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated. 

All details are correct at time of writing (17 July 2024) 

Off on holiday? Leave your home fully insured

Are you looking forward to a long holiday this summer? Don’t spoil the fun and relaxation; make sure you leave your home fully insured. 

Inform your insurance provider 

You may think that it doesn’t make a difference whether you go on holiday for two weeks, a month, or more. However, most insurers require you to notify them if your primary home will be vacant for at least 30 days. In this instance, it is likely you will need to take out an extra layer of cover called unoccupied property insurance. Failing to do so may invalidate your policy, leaving you and your home unprotected. 

Proceed (and post) with caution 

We understand the desire to share snaps of your holiday on social media. Before you do so, be mindful that insurers expect you to take reasonable care to ensure the safety and security of your home. Since live holiday updates show people that your home is probably unoccupied, you could be putting your home and its insurance at risk. 

Safety tips 

With burglaries more common during the summer months, here are a few ideas for keeping your home secure: 

  • Lock all windows, doors and gates 
  • Save the holiday posts until you return home 
  • Ask a neighbour to put your bins away after they are collected 
  • Cancel any deliveries so they don’t pile up 
  • Leave keys with someone you trust; to make the house seem occupied, they could turn lights on/ off, close the curtains, remove post from the letterbox, or use your driveway. 

As a mortgage is secured against your home or property, it could be repossessed if you do not keep up mortgage repayments 

Wealth in the news

Are you a magpie investor? 

Almost one in ten (9%) adults are. These so-called magpie investors buy luxury items hoping for an increase in value and an attractive return, according to new research1. The assets invested in include jewellery, watches, collectibles, classic cars, art, wine, whisky, and accessories such as clothes and handbags. Magpie investors favour jewellery most, with almost half (46%) saying they’ve invested in jewellery in the hope it will increase in value. Wise investors insure their valuable items. 

Record inflows to equities 

There was a record surge of interest in equity funds in the weeks leading up to the end of the tax year. According to a recent fund flow index, 2024’s ISA season was the best in the 10 years the index has produced its data. The index2 recorded inflows from the middle of February to the end of the tax year, revealing that equity funds absorbed £5.17bn, representing more than five times as much as during the same period in 2023 (£981m). 

1Investec, 2024, 2Calastone, 2024 

The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated. The Financial Conduct Authority (FCA) does not regulate Will writing, tax and trust advice and certain forms of estate planning. 

News in Review

“We need to move forward together” 

After a historic landslide victory for the Labour Party, Sir Keir Starmer became the seventh Labour Prime Minister on Friday. Securing a massive 412 seats, the incoming Prime Minister spoke outside 10 Downing Street for the first time, declaring “Our country has voted decisively for change, for national renewal and the return of politics to public service.” 

Acknowledging the challenges ahead and the fractured vote that delivered Labour its biggest parliamentary majority in decades, Mr Starmer said, “We need to move forward together.” He cautioned that changing a country is “not like flicking a switch… This will take a while but have no doubt that the work of change begins immediately.” 

The Conservative Party sustained huge losses, securing a total of 121 seats, a loss of 251. While Rishi Sunak retained his seat in Richmond and Northallerton in Yorkshire; a number of senior Conservative MPs lost their seats including former Prime Minister Liz Truss, Defence Secretary Grant Shapps, Leader of the House Penny Mordaunt and Jacob Rees-Mogg. The party lost all of their seats in Wales. On departing Downing Street, the outgoing Prime Minister apologised after leading the Conservatives to their worst ever election result. Mr Sunak said he would quit as party leader once arrangements are made to choose his successor. 

Liberal Democrat leader Sir Ed Davey said the results were “exceptional” as the party won the highest number of seats ever. Despite the exit poll suggesting the party would secure 61 seats, they ended up with 71, an increase of 64 seats. Reform UK leader Nigel Farage was voted an MP for the first time after eight attempts, his party secured five seats. The Green Party had a good result, winning four seats. Carla Denyer, Green Party Co-leader said that Bristol had “made history” by electing her as the city’s first Green MP. 

Scottish National Party (SNP) leader John Swinney described the General Election result as “very, very difficult and damaging” for the party, who secured just nine seats, greatly diminishing the chances of an independence referendum. 

The first July General Election since 1945, low voter turnout appeared to reflect disillusionment among the electorate, coming in below 60% – the lowest in over 20 years. 

Straight to work 

Keir Starmer got straight to work appointing 22 Labour MPs and peers to key cabinet positions. As expected, Angela Rayner was appointed Deputy Prime Minister, while Rachel Reeves will be moving into 11 Downing Street as Chancellor. The incoming Chancellor previously confirmed Labour would not hold a Budget without an independent forecast by the Office for Budget Responsibility (OBR) which require ten weeks’ notice to prepare. 

Other key appointments include David Lammy (Foreign Secretary), Yvette Cooper (Home Secretary), John Healey (Defence Secretary), Bridget Phillipson (Education Secretary) and Wes Streeting (Health Secretary). 

As the new cabinet began activating its vision for change, the 58th Prime Minister spoke with world leaders, who congratulated him on his appointment. In his first few days in power, Mr. Starmer said “work has already begun” to improve relationships with the EU and he met John Swinney, the First Minister of Scotland, in Edinburgh in a bid to “reset” the relationship between the Scottish and UK government. 

A busy start to the week  

On Monday morning, Chancellor Rachel Reeves laid out Labour’s economic agenda, including: 

  • Bringing back compulsory housebuilding targets to achieve its goal of 1.5 million new homes in England over the next five years 
  • Scrapping the “absurd” ban on new onshore wind in England 
  • Decisions on large projects will be taken nationally, rather than locally 
  • Setting a date for the Autumn Budget before the summer recess 
  • Deputy Prime Minister Angela Rayner will write to local councils and planning authorities to review green belt boundaries. 

In other news 

Released on Friday, the latest Halifax House Price Index shows that average house prices were largely flat in June, down by -0.2% on a monthly basis, while the annual rate of house price growth was unchanged from last month at +1.6%.  Amanda Bryden, Head of Mortgages at Halifax said, “For now, it’s the shortage of available properties, rather than demand from buyers, that continues to underpin higher prices.” 

Here to help 

Financial advice is key, so please do not hesitate to get in contact with any questions or concerns you may have. 

The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated. 

All details are correct at time of writing (10 July 2024)