Inflation ticks up, but in a good way
Making sense of the latest trends in property and economics from around the globe
3 minutes to read
The UK's annual inflation rate rose to 2.2% in July after staying at the 2% target for two months.
This was a good print. The Bank of England had expected the rate to accelerate to 2.4%, given the fact that a large drop in energy prices last July has now fallen out of the annual comparison. Markets anticipated a rise to 2.3%.
Core CPI, which excludes volatile elements like food and fuel, eased to 3.3% from 3.5%. Crucially, the annual rate of services inflation fell to 5.2% from 5.7%. That's well below the 5.6% rate in the BoE forecasts.
A battle for market share
On balance, the outlook has changed little since the beginning of the week. Yesterday's jobs figures showed a surprise drop in unemployment rather than the cooling policymakers are looking for, though wage growth and vacancies are easing.
No change is still good news for the housing market. The uptick in inflation was baked into swap rates. The large lenders were expecting it and have continued cutting rates anyway, including both Natwest and Santander this week. Santander was market-leading for higher-value purchases before this round of cuts, so the battle for market share is showing few signs of easing.
Lower mortgage rates are beginning to fuel healthier levels of buyer enquiries, which will feed into higher sales rates in the months ahead. The metric for buyer enquiries in the latest RICS survey rose to a net balance of +2% in July, the first positive reading for four months.
Buyers are back
Momentum takes time to build. The total number of offers made on new build homes in the capital fell around 50% in both June and July this year compared to a year earlier, while viewings eased by just over 10%,, according to a new homes update from Anna Ward.
However, last week viewings started picking up again, climbing 11% in the seven days ended 5th August compared to year earlier. Weekly offers made have now recovered back to 2023 levels.
Current top-selling schemes in the London market include One and 10 Park Drive in Canary Wharf which have just 56 one or two bed apartments remaining out of a combined 830 private units. These schemes completed in 2022 and 2020 respectively. Notting Hill’s The Auria has only 20 remaining private apartments out of a total 111, which are due for completion in late 2024. Other schemes which have proven popular include Capella, the final residential building on the King's Cross estate, which has just six flats remaining of a total 120 private units.
Contracting supply
Stock availability could become problematic when the recovery really picks up. New supply has plateaued in London around the 30-35,000 mark for the past three years.
That's well below projected demand. The new government has asked London Mayor Sadiq Khan to more than double the number of new homes being built in the capital each year to around 80,000 homes, which compares to just 35,000 built in the 12 months to March 2023.
In other news...
Blackstone sells 3,000 homes in biggest shared ownership deal (Times), Bellway scraps bid for Crest Nicholson (Reuters), Eurozone rate cut questioned as German wages soar (FT), US inflation to show modest increase, cementing Fed cut (Bloomberg), and finally, why almost nobody is buying green hydrogen (Bloomberg).