News in Review

“We’ve seen possibly this week, the first glimmer that (inflation) is not only beginning to come down, but it was a little bit below where we thought it would be”

At the Monetary Policy Committees’ (MPCs’) December meeting, members voted by a majority of six to three to increase Bank Rate from 3% to 3.5%. The ninth consecutive hike, rates are now at their highest level for 14 years. With inflationary pressures persisting, the MPC said they ‘will respond forcefully as necessary.’

Last week, the Office for National Statistics (ONS) latest data shows the Consumer Prices Index (CPI) rose by 10.7% in the 12 months to November 2022, down from 11.1% in October. The easing in the annual inflation rate in November reflected price changes in motor fuels and second-hand cars. There were also downward effects from tobacco, accommodation services, clothing and footwear, and games, toys and hobbies.

Bank of England Governor Andrew Bailey said there were signs inflation was now beginning to ease from its 41-year high, but that the Bank still needed to raise rates to offset pressures from a tight labour market, “We’ve seen possibly this week, the first glimmer that (inflation) is not only beginning to come down, but it was a little bit below where we thought it would be. That’s obviously very good news. But there’s a long way to go.”

The next MPC meeting concludes on 2 February 2023.

US and Euro Area follow suit

Also last week, in the US the Federal Reserve rate setting committee members voted unanimously to increase its key benchmark rate by 0.5 percentage points to make the target range 4.25% to 4.5% – the highest it has been in 15 years. Along with the increase came an indication that officials expect to keep rates higher through next year, with no reductions until 2024. The US Consumer Price Index rose just 0.1% in November, a smaller increase than expected as the 12-month rate dropped to 7.1%. Fed Chair Jerome Powell said the recent news was welcome, but he still sees services inflation as too high, adding, “There’s an expectation really that the services inflation will not move down so quickly, so we’ll have to stay at it… We may have to raise rates higher to get where we want to go.”

The European Central Bank (ECB) opted for a smaller rate rise in December, taking its key rate from 1.5% to 2%. The ECB said it would need to raise rates ‘significantly’ further in order to temper inflation. From March 2023 the ECB expect to begin reducing its balance sheet by €15bn per month on average until the end of Q2 2023. The central bank said it expects inflation to remain above its 2% target until 2025, with average inflation of 8.4% in 2022, 6.3% in 2023 and 3.4% in 2024. The ECB expects recession in the region to be ‘relatively short-lived and shallow.’

Scottish Budget key points

On 15 December, Deputy First Minister John Swinney outlined the Scottish government’s tax and spending plans for the year ahead, announcing increases in Income Tax for everyone earning more than £43,662. From April 2023 the Top Rate threshold will be reduced from £150,000 to £125,140 and the Higher and Top Rates of tax will rise to 42% and 47% respectively.

Spring Budget 2023
On Monday, Chancellor Jeremy Hunt confirmed he will set out a Spring Budget on 15 March 2023. In a written statement he outlined that he has asked the Office for Budget Responsibility (OBR) to prepare a forecast to accompany the Budget. This forecast, along with the one prepared for the Autumn Statement in November, will fulfil the obligation for the OBR to produce two forecasts every financial year. The Spring Budget will allow the Chancellor to reassess the energy market and the effect of interest rate increases.

Retailers rely on festive rush

Retailers are hoping for a Christmas boost following disappointing November sales figures. On Friday, the Office for National Statistics (ONS) reported that retail sales volumes are estimated to have fallen by 0.4% in November. Helen Dickinson, Chief Executive of the British Retail Consortium, said, “Black Friday provided a small boost to retailers, but there are signs that many consumers are holding off Christmas spending until the last moment.”

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 (21 December 2022)

Looking to retire early? There’s lots to think about

It is the dream of many to retire early. Indeed, 270,000 people in their 50s and 60s left the UK workforce during the COVID-19 pandemic, according to the Institute for Fiscal Studies.

Concerns about retirement poverty

However, two thirds of people aged 50–70 who quit work or lost their job during the pandemic left the workforce earlier than expected1. This means that they might not have the funds they need for a longer- than-anticipated retirement, sparking concerns that they could face poverty later in life. Of particular concern is the financial impact of accessing your pension too early, with research2 showing that doing so before reaching State Pension age could reduce your pot by 59% on average.

Compounding the issue is the fact that those who now want to re-enter the workforce are finding it difficult to get rehired. According to research from the Centre for Ageing Better, unemployed over-50s are twice as likely to be out of work for 12 months or more, than their younger counterparts.

Many factors to consider

Early retirement may be enticing, but it certainly bears thinking about. Before acting, it is always a good idea to take financial advice and think carefully about the following factors:

•             Do you know how much you’ll need to live comfortably in retirement?

•             If so, do you have enough in your pension pot for the lifestyle you want?

•             Do you have savings or any other source of income?

•             Do you still have a mortgage or any other outstanding debt you are still liable for?

•             Could working for just a few more years offer you valuable financial security?

Whatever your goals for retirement, we’re here to help you get into the best possible financial position for later life.

1ONS, 2022

2Canada Life, 2022

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.

On the rise – protection insurance payouts

Claims paid out under protection insurance totalled £6.8bn in 20211, a second consecutive yearly high, with more than £18.6m paid out every day in life insurance, income protection and critical illness claims.

Last year was the third year in a row where the overall average individual payout increased, rising by 9% year-on-year to reach £14,994. For term assurance, the average claim payment was £61,944 and the average critical illness claim payment was £67,500.

Last year, 98% of individual and group claims were paid. However, ‘non-disclosure’ was cited as the main reason for the 2% of rejected claims. This is when a customer fails to provide information about something that might have influenced the insurer’s decision to provide cover or the price of that cover.

More than a number

Protection policies can help give you peace of mind by making sure you can meet financial commitments and knowing that your loved ones will not face hardship. Behind the headline facts are millions of families given support when they needed it most.

1ABI and GRiD, 2022

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

Anyone can fall victim in an ‘epidemic of fraud’

The latest annual fraud report published by UK Finance stresses the need for an urgent response to ‘the epidemic of fraud’ that the UK is currently facing.

The report reveals that £1.3bn was stolen by criminals through authorised and unauthorised fraud in 2021. In total, 56% of UK adults1 have received a suspicious communication or known someone who has in the last year, which equates to an estimated 29.6 million UK adults being affected by scams last year.

Preying on the elderly

Reportedly, scam victims aged over 70 lost about £977m2 in total between April 2019 and 2022. Official figures fail to capture the true extent of such fraud because these crimes remain under-reported, especially among elderly people who live alone.

Cost of living

During the pandemic, criminals exploited victims’ fears over coronavirus. Now, the cost-of-living crisis has become a new line of attack. The UK Finance report showed that authorised push payment (APP) fraud, where victims are tricked into transferring money into scammers’ accounts, leapt by 40% last year. Such techniques are now being used to prey on people’s financial preoccupations.

Tech effect

Everyone, young or old, can be a victim of fraud. Indeed, under-25s are more likely to be defrauded on the phone than older generations. One study3 found the youngest cohort 75% more likely to have been scammed this way than those over fifty-five.

Scammers are also seeing a growing opportunity in cryptocurrencies, which are not regulated by the UK’s Financial Conduct Authority. In the year to May 2022, crypto frauds soared 58% to £226m, new research4 has found.

Don’t suffer in silence

Anyone can be a victim of fraud. We can help you protect your finances.

1Canada Life, 2022,

2Action Fraud, 2022,

3Truecaller, 2022

4NordVPN, 2022

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.

News in Review

“Our reforms deliver smarter regulation of financial services that will unlock growth and opportunity”

Last Friday, as temperatures plummeted, Chancellor Jeremy Hunt announced a package of over thirty UK financial services regulatory reforms, dubbed the ‘Edinburgh Reforms,’ which the government intends will ‘unlock investment and turbocharge growth in towns and cities across the UK.’ A considerable overhaul, the effects will be far-reaching, with the financial services sector contributing £216bn a year to the UK economy.

Speaking at an industry roundtable in Edinburgh, he outlined a series of measures to ‘seize the benefits of Brexit’ establishing the government’s approach to reversing what they regard as ‘burdensome’ elements of EU law. 

Measures include establishing new rules governing how senior finance executives are hired and sanctioned, and a commitment to make legislative progress on replacing the rules governing insurers balance sheets, expected to unlock over £100bn of private investment.

Mr Hunt commented, “We are committed to securing the UK’s status as one of the most open, dynamic and competitive financial services hubs in the world.”

Andrew Griffith, Economic Secretary to the Treasury added, “The UK is a financial services superpower – and we have long benefited from, and are committed to, high quality regulatory standards… Our reforms deliver smarter regulation of financial services that will unlock growth and opportunity in towns and cities across the UK.”

GDP update

As the country ground to a halt, grappling with a combination of heavy snowfall and strike action, news came on Monday that the UK economy contracted by 0.3% in the three months to October as soaring prices took their toll on households and businesses. Over the period, economic activity slowed across all primary sectors including services, construction and production. However, in October, GDP is estimated to have grown by 0.5% following a fall of 0.6% in September. Growth in October was driven by the services sector.

Household confidence on the ropes

The recently released Q3 Household Finance Review from UK Finance has revealed that consumer confidence has continued to fall below current record lows, due to a combination of factors including rising energy prices and inflation, the ongoing conflict in Ukraine, plus the fallout from September’s Growth Plan. Confidence regarding the general economic situation reached an all-time low of -62. Key points from Q3 included:

  • Although inflation masked weaker activity in some sectors, spending remained relatively strong overall, with card spending defying weak consumer sentiment for both the value and number of transactions
  • Personal loan borrowing to fund larger purchases subsided in the quarter, following strong growth during H1 2022
  • House purchase activity aligned with pre-pandemic levels during Q3, but weakness is anticipated as the labour market softens into 2023 and affordability issues come to the fore
  • Refinancing held firm in Q3 due to a strong maturity schedule, but it is strongly anticipated that inflation and interest rate rises will prove challenging for the 1.8 million fixed rate loans set to mature in 2023.

“A new era for UK coinage”

On Thursday, almost five million new 50p coins bearing the image of King Charles III entered circulation via Post Offices across the UK this month. It is expected that a total of 9.6 million of the coins will enter circulation in line with demand. Rebecca Morgan, Director of Collector Services at The Royal Mint, spoke on the launch of the new coin last week, “Today marks a new era for UK coinage, with the effigy of King Charles III appearing on 50ps in circulation… We anticipate a new generation of coin collectors emerging, with people keeping a close eye on their change to try and spot a new 50p that bears the portrait of our new King.”

Markets

At the tail end of last week, UK stocks made some modest gains on the back of the Chancellor’s reforms to overhaul financial services regulations, with UK insurers, banks and asset managers among the companies lifting the FTSE 100 higher. Enter the new week and London’s markets sustained losses on Monday after falls on the back of a sharp rise in natural gas prices, but on Tuesday, the FTSE 100 advanced 0.7% as gains in energy stocks outpaced weakness in consumer staples and news of slowing US inflation filtered through.

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 (14 December 2022)

Equity release increase driven by cost-of-living pressures

In recent years, equity release has become an increasingly popular way for older homeowners to unlock cash tied up in their properties.

Equity release products enable homeowners over the age of 55 to access equity locked up in their homes while still being able to live in their property.

New research suggests that many homeowners are now choosing to do so to help them with the rising cost of living.

According to analysis1, 14% of equity release applications in Q1 2022 were made by customers looking to bolster their everyday living costs. A further 12% were looking to unlock cash in order to consolidate unsecured debts. Meanwhile, over a third (36%) wanted to use equity release to clear their outstanding mortgage.

Equity release use hits record highs

Q2 2022 saw equity release lending figures hit record highs, reaching £1.6bn – a 26% increase year-on-year. This marks the fourth consecutive quarter of near record figures, according to the Equity Release Council (ERC)2 and equates to nearly 12,500 new plans being taken out by over-55s between April and June 2022 alone.

ERC Chair David Burrowes commented, “Raising awareness of how modern equity release products work alongside other financial solutions is essential so people who are asset-rich but cash-poor can benefit from the wealth they have built up over their lifetimes and also support those around them.”

Talk to us

Equity release isn’t right for everyone, it can prove an expensive option, can be inflexible and may impact entitlement to benefits. It is vital to take financial advice to ensure it is a suitable option for your individual circumstances. To find out more about your options, please do get in touch.

1Canada Life, 2022

2Equity Release Council, 2022

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.

Economic Review – November 2022

OBR forecasts long but shallow recession

Updated projections from the Office for Budget Responsibility (OBR) suggest the UK is facing a long but relatively shallow recession which will see households hit by a record drop in living standards.

Chancellor Jeremy Hunt unveiled the independent fiscal watchdog’s latest forecasts during his Autumn Statement delivered to the House of Commons on 17 November. Mr Hunt said the country was facing “unprecedented global headwinds” before announcing the OBR’s new figures which show the UK entered recession during the third quarter of this year.

The updated predictions suggest the UK economy will expand by 4.2% across the whole of 2022, but then shrink by 1.4% next year before returning to growth in 2024. This implies that the downturn will be relatively shallow, if long by historic standards.

Although the recession is forecast to be comparatively shallow for the economy as a whole, the household sector is expected to be hit particularly hard due to a combination of factors including soaring energy and food prices, rising interest rates and higher taxes. As a result, the OBR figures suggest households are facing the largest fall in living standards on record.

Prior to the Chancellor’s Statement, the latest gross domestic product figures from the Office for National Statistics (ONS) had revealed that the UK economy shrank in the three months to September. ONS said the economy contracted by 0.2% across the third quarter of the year driven by a decline in manufacturing which was evident ‘across most industries.’

Survey data also suggests the economy continued to shrink during the first two months of the fourth quarter. The headline reading of S&P Global’s Purchasing Managers’ Index, for instance, sank to a 21-month low of 48.2 in October and November’s preliminary reading rose only marginally to 48.3. Any value under 50 represents economic contraction.

Bank Rate hiked sharply

Last month, the Bank of England (BoE) sanctioned a further increase in its benchmark interest rate and said more rises were likely but not to levels that had been priced in by financial markets.

At a meeting which concluded on 2 November, the BoE’s nine-member Monetary Policy Committee (MPC) voted to raise Bank Rate by 0.75 percentage points to 3.0%. This was the eighth consecutive increase since December and the largest rate hike since 1989. In addition, minutes to the meeting stated that a majority of MPC members believe ‘further increases in Bank Rate may be required for a sustainable return of inflation to target.’

However, the minutes also pointed out that the peak in rates is expected to be lower than markets had been anticipating. Indeed, in an unusually blunt message delivered when announcing the rate decision, Bank Governor Andrew Bailey said, “We can’t make promises about future interest rates but based on where we stand today, we think Bank Rate will have to go up by less than currently priced in financial markets.”

The next interest rate announcement is due on 15 December and economists expect MPC members to sanction another increase in rates – in a recent Reuters poll, more than three-quarters of all economists surveyed predicted rates will rise by 0.5 percentage points, with all of the other respondents predicting a 0.75 percentage point increase.

Comments made during the last few weeks by a number of MPC members have also reaffirmed the need for further rises in order to return inflation to the central bank’s 2% target. Some members, however, including BoE Deputy Governor Dave Ramsden, have begun to mention the possibility of rate cuts at some point in the future, should economic conditions diverge from current expectations and “persistence in inflation stops being a concern.”  

Markets (Data compiled by TOMD)

Global indices largely closed November in positive territory. In the UK the FTSE 100 advanced, ending the month at its highest closing level for five months, supported by commodity and energy stocks. The blue-chip index closed the month up 6.74% to 7,573.05, while the mid-cap FTSE 250 gained 7.12% and the FTSE AIM ended the month up 5.27%.

On Wall Street, markets closed sharply higher following Federal Reserve Chair Jerome Powell’s speech on 30 November, indicating the central bank might scale back the pace of its interest rate hikes as soon as December. The Dow closed the month up 5.67% on 34,589.77, while the Nasdaq closed November on 11,468.00, up 4.37%.

At the end of November, European Central Bank President Christine Lagarde said that a more hawkish line on rising inflation was needed on the continent, suggesting that more rate hikes are likely in the coming months. The Euro Stoxx 50 closed the month up 9.60%. In Japan, the Nikkei 225 closed November up 1.38%.

On the foreign exchanges, the euro closed at €1.15 against sterling. The US dollar closed the month at $1.19 against sterling and at $1.03 against the euro.

Brent Crude closed the month trading at around $86 a barrel, a loss of 5.32%. Signs of an oversupplied market earlier on in the month pushed prices lower but it recovered in recent days as discussions on a Russian price cap continue and government data showed US stockpiles plunging, while traders accelerated buying amid optimism that China will soon loosen restrictions. Gold is currently trading at around $1,753 a troy ounce, a gain of 6.99% on the month.

Record pay growth still lags inflation

While the latest earnings statistics revealed regular pay is now rising at a record level, the data also showed wage growth is still failing to keep up with the rapidly rising cost of living.

ONS figures released last month showed average weekly earnings excluding bonuses rose at an annual rate of 5.7% in the three months to September. This was the strongest recorded growth in regular pay witnessed outside of the pandemic when the data was distorted by workers returning from furlough.

However, although the rate of pay growth is currently high by historic standards, wage increases are still being outpaced by spiralling inflation – in real terms, regular pay actually fell by 2.7% over the year to September. This represents a slightly smaller decline than the record fall recorded three months ago but is still among the largest falls since comparable records began in 2001.

The latest official inflation statistics also revealed a further jump in price growth during October, with soaring energy bills and food prices pushing the annual figure to a 41-year high. The headline rate of Consumer Price Inflation rose to 11.1% in the 12 months to October, a big jump from September’s rate of 10.1%.

Retail sales rise in October

Official data shows that retail sales staged a partial recovery in October although more recent survey evidence suggests retailers remain relatively pessimistic about future trading prospects.

The latest ONS retail sales statistics revealed that total sales volumes rose by 0.6% in October, following a 1.5% decline during the previous month when shops closed for the Queen’s funeral. Despite this partial rebound, ONS said the broader picture was that sales are still on a downward trend that has been evident since summer 2021 and that volumes remain below pre-pandemic levels.

Survey evidence also highlights the current difficulties facing the retail sector, with the latest Distributive Trades Survey from the CBI showing the net balance of retailers reporting year-on-year sales growth falling from +18% in October to -19% in November. A similar proportion also said they expect sales to fall this month suggesting most firms anticipate little festive cheer this December.

Commenting on the findings, CBI Principal Economist Martin Sartorius said, “It’s not surprising that retailers are feeling the chill as the UK continues to be buffeted by economic headwinds. Sales volumes fell at a firm pace in the year to November, and retailers remain notably downbeat about their future business prospects.”

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.

News in Review

“Even before the recent increases in mortgage rates, affordability was becoming more stretched across the UK”

UK house prices fell by 1.4% month-on-month in November, according to the latest Nationwide House Price Index released last Thursday, the biggest monthly drop since June 2020. At £263,788, the non-seasonally adjusted November average price was 4.4% higher on an annual basis, compared to a yearly growth of 7.2% recorded in October.

Commenting on the findings, Nationwide’s Chief Economist Robert Gardner, said, “The fallout from the mini-budget continued to impact the market, with November seeing a sharp slowdown in annual house price growth… While financial market conditions have stabilised, interest rates for new mortgages remain elevated and the market has lost a significant degree of momentum.”

“Even before the recent increases in mortgage rates, affordability was becoming more stretched across the UK” he added.

CBI update

The Confederation of British Industry (CBI) projected on Monday that the country’s economy is on course to shrink by 0.4% in 2023, as persistently high inflation continues to dampen longer-term growth prospects. This new forecast is a sharp downgrade since the CBI’s last update in June, when it predicted growth next year of 1.0%.

Unemployment is expected to peak at 5.0% in late 2023 and early 2024, up from 3.6% currently, while gross domestic product (GDP) is forecast to return to its pre-pandemic level only in mid-2024. CBI Director-General Tony Danker warned of “a lost decade of growth if action isn’t taken.”

US rate rises to slow

Last Wednesday, Chair of the Federal Reserve Jerome Powell said in a speech that interest rate rises might be eased as early as this month, with a 50-basis point rate hike now expected at the Fed’s December meeting. The previous four meetings have all resulted in the Fed increasing its benchmark interest rate by 0.75% to reach the current target range of 3.75% to 4%, which is the highest level since 2007.

In his speech, Mr Powell hinted that rates could be held at a high level for longer to guard against a recession. “It makes sense to moderate the pace of our rate increases as we approach the level of restraint that will be sufficient to bring inflation down”, he said.

Price cap on Russian oil causes price spike

Oil prices rose on Monday in response to the decision by the G7 group of major economies to implement a price cap of $60 a barrel on Russian oil. The price of Brent Crude Oil climbed almost 2% to $87.25 a barrel, as fears grew of global supplies being disrupted in the coming months.

Separately, OPEC+, a group of the top oil-producing countries, said on Sunday that it would stick to its policy of reducing output in an effort to prop up global prices.

November sales boost

Total retail sales in the UK jumped by 4.2% in November compared with the same month a year ago, according to a snapshot from the British Retail Consortium (BRC) released on Tuesday. November’s reading was the highest since January, as retailers enjoyed a boost from Black Friday. Colder weather, meanwhile, caused sales of winter coats, hot water bottles and hooded blankets to soar.

Despite the strong monthly showing, Helen Dickinson, Chief Executive of the BRC, cautioned that “sales growth remained far below current inflation, suggesting volumes continued to be down on last year.”

Further positive sales news had been provided on Monday by the Society of Motor Manufacturers and Traders (SMMT), with its finding that Britain’s new car market grew by 23.5% in November, a fourth consecutive monthly rise. A total of 142,889 units registered last month was the best for November since 2019, though overall registrations are still 8.8% below pre-pandemic levels.

Markets

London stocks ended lower on Tuesday as falls in shares of UK’s big utility companies was offset by rises in bank shares. The FTSE 100 closed down 0.61% at 7,521.39 and the FTSE 250 closed down 1.19% at 19,100.08.

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 (7 December 2022)

Residential Property Review – November 2022

More Stamp Duty changes in Autumn Statement

Chancellor Jeremy Hunt’s Autumn Statement on 17 November left housing out of the limelight, though it did include a commitment to keep the Stamp Duty Land Tax (SDLT) changes announced in the ‘mini-budget’ – for now.

In September, then-Chancellor Kwasi Kwarteng increased the nil-rate threshold of SDLT to £250,000 (previously £125,000) for residential property in England and Northern Ireland. First-time buyers (FTBs), it was announced, could spend £425,000 (previously £300,000) without paying a penny in tax.

Moreover, FTBs also benefited from an increased maximum purchase price of £625,000 for which First Time Buyers’ Relief could be claimed, up from £500,000.

In his Autumn Statement, Mr Hunt confirmed that he will uphold these changes – but only until March 2025. Originally, the changes had been implemented on a permanent basis.

Elsewhere in the Autumn Statement, rent increases in the social housing sector will be capped at 7% in the next financial year. In total, Mr Hunt announced around £55bn in spending cuts and tax rises.

Hesitant FTBs put the brakes on

Higher mortgage costs have caused many prospective buyers to put the brakes on their house purchase, with those buying their first home the worst impacted.

Buyer demand fell by 20% in October compared to a year earlier, according to Rightmove, with soaring borrowing costs and rising economic uncertainty the key drivers. FTBs were the most hesitant, with demand down 26% in the month.

FTBs have lost another motivation to buy since the end of the Help to Buy Equity Loan scheme. The scheme, which was set up to help FTBs purchase a home in England, has now closed to new applications; all homes purchased via the scheme will need to have completed by the end of March 2023.

Help remains for FTBs, however, including the Lifetime ISA, which adds a government bonus of 25% onto savings up to £4,000 each year. The Help to Buy ISA, meanwhile, has closed for new applicants, though anyone with an existing account can still add up to £200 per month until November 2029.

A quarter of landlords plan to sell

More than one in four landlords is thinking about selling properties, according to a new survey that reveals the extent of discontent in the sector.

In recent years, landlords have had to deal with a variety of regulatory and tax changes, as well as stricter Energy Performance Certificate (EPC) requirements.In response, 39% of buy-to-let investors now plan to put rents up.

Donna Hopton, Director at cherry, which carried out the research, noted that, during recent market turbulence, buy-to-let investors have “arguably been hit hardest”. Despite this, she said, “there are also millions of landlords who remain committed to the market, and it’s a market of continued demand from tenants and rising rents, so there will be plenty of opportunity for property investors.”

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.

Commercial Property Market Review – November 2022

Weakening outlook for commercial property

The Q3 2022 RICS UK Commercial Property Survey reveals a picture of weakening market activity, with 81% of respondents now considering the market to be in downturn.

Headline expectations for rents and capital values were in negative territory in Q3. Prime office rents are expected to remain broadly flat in the year ahead, as opposed to a previously expected increase expected. Meanwhile, the outlook for the secondary office sector is more negative, with a net balance of -42% of respondents expecting a decline in rents (down from a reading of -26% in Q2).

Twelve-month rental expectations are still positive for the industrial sector, while the degree to which rents are envisaged rising is the most modest since the early stages of the pandemic.

Looking ahead, the prospect of further interest rate rises continues to weigh heavily on the outlook for the next 12 months. ‘The full extent is not currently known’ commented one respondent.

Prime yields rise in stormy quarter

All-property average prime rents rose by 1.5% in Q3 2022, according to CBRE’s latest quarterly Prime Rent and Yield Monitor.

Yields moved up 41 basis points, following a turbulent quarter that included the market turmoil brought about by September’s ‘mini budget’. The latest Market in Minutes report from Savills also showed yields rising across the board, as commercial markets reprice at speed. The report observes that, ‘price discovery is happening more quickly than we have ever seen before in a falling market’.

Savills remain optimistic about the outlook for the office and logistics occupational markets, noting that these sectors proved their resilience during the turbulent pandemic years, even delivering record prime rent levels in some cases. The same factors that drove this resilience – an undersupply of prime space and a contracting development pipeline – remain in place, it points out.

Less positively, weakening confidence and rising construction prices are leading to fewer-than-expected refurbishment and development starts this year, Savills stated. Indeed, 43% of planned London office completions have not yet started on site.

Strong take-up in big shed market

The industrial sector remains resilient, according to Avison Young’s Big Box Bulletin Q3 2022, with strong market fundamentals holding firm in trying economic conditions.

Take-up in Q3 totalled 14.8m sq. ft – 47.8% above the five-year quarterly average. Analysts expect demand to stay strong, moreover, especially ‘best-in-class’ buildings with strong environmental credentials.

Year-to-date take-up still lags the record-breaking performance of 2021, which, analysts say, is the result of an undersupplied market. Indeed, availability of grade A space is currently 24m sq.ft, equivalent to only two months’ worth of supply based on recent demand.

Key Q3 occupiers included SeAH Wind Ltd (1,130,000 sq. ft), Rhenus Logistics (981,042 sq. ft) and Maersk (601,761 sq. ft). Q3 take-up was dominated by speculative (44%) and design & build (41%), with existing buildings contributing 15%.

Regionally, the East Midlands (30.7%) led the way, ahead of Yorkshire and North East England (23.4%) and North West England (13.4%).

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