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Wednesday, April 2, 2014

Housing boom pushes UK construction optimism to seven-year high

Construction sector stays strong

Gap between house prices in London and the rest of the UK hits record high

Graph: North-South divide widens

Time to dilute Help To Buy?

10.14am BST

Britain's construction industry has now been growing for almost a year, as World First's Jeremy Cook points out:

A growth next month will see twelve consecutive months of growth for the first time since the global financial crisis. Once again it was the housing market that drove demand onwards; something that is not at all surprising given this mornings Nationwide house price index showing the average rising by 9.5% year-on-year.

The one caveat to all of this is the impact of the rate of growth on supply chains; sub-contractors are stretched to breaking point and may provide a break, but not a stop, on further improvements

10.11am BST

Rob Wood of Berenberg bank says the construction boom (see 9.52am onwards) means the UK economy will probably grow faster than expected this year:

Having been hit hard by the recession and government cut backs, low interest rates, rising confidence and surging house prices are combining in a sweet spot for the sector.

That is yet another reason to think the UK will easily outperform consensus growth expectations this year.

10.08am BST

David Noble, chief executive officer at the Chartered Institute of Purchasing & Supply, says confidence in the UK construction sector is "soaring":

As the rain gave way to sun, the housing market reclaimed its spot as the star performer. Commercial activity continued to rise strongly, benefitting from the positive business conditions. By contrast, civil engineering activity slowed somewhat, perhaps not that surprising following last months stellar figures.

10.02am BST

Encouragingly, employment among construction companies continued to rise in March:

Markit reports:

Increased work on new projects contributed to a sharp rise in employment numbers across the construction sector. The rate of job creation picked up over the month and was the second-fastest since August 2007.

9.52am BST

Confidence among UK construction firms has hit the highest level in over seven years, as housebuilders continue to drive strong growth in the sector.

Markit: "Confidence about the 12-month outlook hits highest level since January 2007" What could go wrong? #HelpToBuy

House building reclaimed its place as the main driving force behind the resurgent UK construction sector in March, following some weather-related disruptions during the previous month.

The rise in residential construction was one of the sharpest experienced over the past ten years, helped by strong demand for new development projects and supportive funding conditions.

9.37am BST

In the bond markets, Greece's borrowing costs have fallen to their lowest level since the eurozone debt crisis began.

The yield, or interest rate, on its 10-year bonds has fallen to just 6.4% -- further away from the dangerous levels that forced it to take a bailout. That's the lowest level since 2010, according to Tradeweb.

9.22am BST

In the stock markets, shares have hit their highest level since the early days of the financial crisis.

Most European stock markets have risen in early trading, adding to yesterday's rally on Wall Street - where the S&P 500 hit a record closing high.

The FTSE Eurofirst 300 is up 0.2 per cent after its Asia-Pacific peer added 0.4 per cent. Together, they are helping the FTSE All-World equity index rise 0.2 per cent to 272.6, a seventh consecutive day of gains that takes the worldwide benchmark to its highest since December 2007. Another 2.6 per cent rise and the All-World will be in record territory.

9.12am BST

London's housing market is running hottest in two of its less trendy areas -- Brent (up 31% annually) and Lambeth (+30%). (click on the image below for the full breakdown).

Interesting that London house price growth no longer just posh areas. Brent & Lambeth now fastest growing in capital

9.06am BST

Here's Hilary Osborne's news story on today's Nationwide survey:

House prices in London have increased by almost a fifth over the past 12 months, and are now 20% above their pre-crisis peak, according to the latest data from the country's biggest building society.

In news that will fuel concerns of a price bubble in the capital,Nationwide building society said the average price of a London home had increased by 18% over the year and by 5.3% in the past three months alone, and at £362,699 was now more than twice the figure for the rest of the UK.

8.49am BST

Over in the eurozone, Spain's unemployment total fell by 16,000 in March. That's the second monthly fall in a row, after dropping by 1,900 in February.

Here's Reuters' early take:

The number of people registered as jobless in Spain fell by 0.35 percent in March from a month earlier, or by 16,620 people, leaving 4.8 million people out of work, data from the Labour Ministry showed on Wednesday.

The figure marks the second straight month of declines and is the sharpest monthly fall for March since 2006, the Ministry said.


8.44am BST

Housing expert Henry Pryor is worried that some housing developers may actually be paying deposits to their new properties sold:

Developer in Oxfordshire reported to be paying buyers 5% deposit with #Help2Buy paying 15% means buyer pays nothing now. Eeek!

So far #Help2Buy has supported less than 2% of buyers. It may have helped sentiment but it is NOT yet responsible for a housing bubble.

8.36am BST

Alex Gosling, managing director at online estate agents, says today's figures must be depressing reading for anyone trying to get onto the housing ladder.

Nationwide say house price growth shows "tentative signs of moderation" - tell that to the thousands of Londoners priced out of the market.

The influx of wealthy overseas buyers continues to drive up house prices. And whereas they helped prop up the market after the financial crash, they're now a hindrance to hard working Londoners on average salaries.

"London homeowners can pretty much name their price at the moment. The asking price being marketed is more often than not no reflection of the price a property is sold for.

We are seeing a significant number of properties going for above asking price, and in some cases tens of thousands of pounds above.The worry is that buyers, in their desperation to secure a property, are over-stretching themselves."

8.26am BST

Rising house prices put more pressure on the Bank of England to act before economic stability is threatened.

IHS Global Insight's Howard Archer, who reckons the average price will rise by at least 8% this year, says policymakers need to keep "a very close watch" on the market:

Once strong upward momentum has developed in the housing market, it can be hard to stop especially if interest rates are unlikely to rise markedly. In the budget, the Chancellor asked the Bank of Englands Financial Policy Committee to be particularly vigilant against the emergence of potential risks in the housing market.

While the Bank of England currently does not currently see excessive house price rises outside London, [governor] Mark Carney has expressed concern about the UKs past record of house booms and busts, and we believe the bank will take further action later this year to try and dampen the housing market having already ended Funding for Lending Support for mortgage lending.

This could very well include the Bank of England recommending to the government that it dilutes the Help to Buy mortgage guarantee scheme. In particular, the £600,000 price limit for a house under the scheme could be cut, perhaps to £300,000.

8.14am BST

Readers in Sunderland have not benefitted from the housing recovery -- prices there have risen just 1% annually, less than inflation or average wage increases.

8.04am BST

The North-South divide is alive and well too. House price growth in Northern England has slowed over the last year, but accelerated 'down South:

7.57am BST

Today's data in a nutshell:

7.55am BST

Good morning, and welcome to our rolling coverage of events across the financial markets, the economy, the eurozone and business.

"The gap between house prices in London and the rest of the UK is the widest it's ever been, both in cash and percentage terms.

"Overall, the southern regions have been outperforming for some time, with the result that house prices in London, the Outer Metropolitan and Outer South East have now surpassed their pre-crisis peaks. "

Although all regions saw annual house price growth in Q1, ten of the thirteen regions have yet to surpass their pre-crisis peaks. London, the Outer Metropolitan and the Outer South East are the exception.