Bank of England Review - May 2014
The latest Bank of England Summary Report, released in April, shows that the UK economy remains in mild recovery with consumer services and UK inflation remaining largely unchanged.
The report is based on feedback from thousands of businesses across the country, combined with broad economic data collected by the Government and its agencies. It shows that companies want to invest in plant and machinery and recruit additional staff, while wage levels are stable with some slight upward pressure in the service sector.
Also on the positive side, there has been notable growth in turnover for business services, largely due to rising activity among professional and financial services firms. Growth in manufacturing output also picked up further, both for the domestic market and for export.
However, the most notable element of the report is the acceleration in house building and the optimistic outlook for the residential housing market in general.
Sales volumes have continued to rise strongly in the UK property market, with many participants reporting double-digit percentage increases on a year ago, leading to continuing growth in activity for estate agents, residential conveyancers and mortgage brokers.
Estate agents in particular reported that new instructions are rising slightly, but are significantly lagging behind the increase in home sales. The Guild’s own market analysis supports this, showing that residential stock levels in many areas are significantly below those of a year ago with an average of 12 potential applicants for every property available on the market.
Reports of double-digit annual rises in house prices have been restricted to London, where a major driving factor is overseas investment, and to particular towns, such as Brighton, Cambridge and Oxford where property is in exceptionally strong demand. Elsewhere, residential price inflation has remained more modest.
Our own outlook for the next three months expects the situation to remain much the same with potential buyers eager to purchase before prices rise further, and to take advantage of the current highly competitive mortgage rates. We see evidence of lending rates starting to harden slightly, especially for buy-to-let and longer-term fixed deals. Nevertheless, the overall picture is one of a recovering market, a slight upward movement in prices for most areas, a strong market for motivated vendors and strong incentives for able and ready purchasers.