(Alliance News) - The UK housing sector kicked off 2022 with the strongest start to a year since 2005, as price growth accelerated in January, figures on Tuesday showed.
According to Nationwide, UK house prices surged 11% from a year before in January, following a 10% rise in December. The annual growth came largely in line with the FXstreet-cited market consensus.
House prices rose 0.8% in January from December, slowing from a 1.1% monthly hike in December. The average UK house price now stands at GBP255,556.
Nationwide Chief Economist Robert Gardner noted January's annual growth was the strongest for the UK since June and represented the best start to a year since 2005.
"Housing demand has remained robust. Mortgage approvals for house purchase have continued to run slightly above pre-pandemic levels, despite the surge in activity in 2021 as a result of the stamp duty holiday, which encouraged buyers to bring forward their transactions to avoid additional tax," Gardner added.
"Indeed, the total number of property transactions in 2021 was the highest since 2007 and around 25% higher than in 2019, before the pandemic struck. At the same time, the stock of homes on estate agents’ books has remained extremely low, which is contributing to the continued robust pace of house price growth."
UK house prices have been on the upturn since the sector re-emerged from 2020's spring Covid-19 lockdown. The sector benefited from stamp duty relief that was only recently removed.
In March 2021, UK Chancellor of the Exchequer Rishi Sunak extended the stamp duty cut granted in 2020 to the end of June 2021 at a GBP500,000 nil rate band, which was then tapered to a GBP250,000 threshold until the end of this past September.
Nationwide's Gardner said it is "likely" that the UK housing market will finally slow in 2022.
"House price growth has outstripped earnings growth by a wide margin since the pandemic struck and, as a result, housing affordability has become less favourable," the analyst commented.
"Consumer price inflation reached 5.4% in December, its fastest pace since 1992. This is more than double the Bank of England's 2% target, and inflation is set to rise further in the coming months as the energy price cap is increased. This rapid rise in inflation has been an important factor denting consumer confidence in recent months, especially how people see their own personal financial situation evolving, although as yet, this has done little to dent housing market activity."
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: up 0.8% at 7,525.78
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Hang Seng: Hong Kong market closed for Chinese New Year holiday.
Nikkei 225: closed up 0.3% at 27,078.48
S&P/ASX 200: closed up 0.5% at 7,006.00
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DJIA: closed up 406.39 points, or 1.2%, at 35,131.86
S&P 500: closed up 83.70 points, or 1.9%, at 4,515.55
Nasdaq Composite: closed up 469.31 points, or 3.4%, at 14,239.88
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EUR: up at USD1.1264 (USD1.1211)
GBP: up at USD1.3477 (USD1.3425)
USD: down at JPY114.93 (JPY115.25)
Gold: up at USD1,804.14 per ounce (USD1,797.05)
Oil (Brent): down at USD89.05 a barrel (USD91.12)
(changes since previous London equities close)
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ECONOMICS AND GENERAL
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Tuesday's key economic events still to come
China Chinese New Year. Financial markets closed in Hong Kong and Shanghai.
0955 CET Germany manufacturing purchasing managers' index
1000 CET EU eurozone manufacturing PMI
1100 CET EU unemployment
0930 GMT UK manufacturing PMI
0945 EST US manufacturing PMI
1000 EST US ISM manufacturing PMI
1630 EST US API weekly statistical bulletin
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Ireland's manufacturing sector started 2022 on strong footing due to a faster increase in new orders, according to survey data. The AIB Ireland manufacturing purchasing managers' index rose to 59.4 points in January from December's nine-month low of 58.3. The latest reading, further above the no-change mark of 50.0, indicated stronger growth in January. The reading was only a fraction below the 2021 average of 59.7, AIB noted.
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Japan's manufacturing sector improved in January as new orders rose, but so did costs, according to survey data from IHS Markit. The manufacturing PMI rose to 55.4 points in January from 54.3 in December. The increase marked the strongest improvement in manufacturing performance since February 2014. "Latest data pointed to a sharp expansion in output. Growth was recorded for the fourth consecutive month and was the quickest since February 2014. Higher production levels were often associated with rising new orders," said IHS Markit. But at the same time, the rate of input price inflation was "substantial" and led to output prices rising at the fastest pace since July 2008 and the second-fastest in survey history.
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German retail sales took a hit at the end of 2021 as the Omicron wave damped activity, data from Destatis showed. But retail sales for the year as a whole still managed to notch growth on 2020. Retail sales in December fell 5.5% on the month before, after growth of 0.8% in November. On an annual basis, they were flat in December after November's 0.5% rise.
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BROKER RATING CHANGES
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BERENBERG RAISES SHELL PRICE TARGET TO 2350 (2100) PENCE - 'BUY'
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MORGAN STANLEY RAISES IMPERIAL BRANDS TO 'EQUAL-WEIGHT' (UNDERWEIGHT) - PRICE TARGET 1,955 (1,680) PENCE
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HSBC RAISES FEVERTREE DRINKS TO 'BUY' (HOLD) - PRICE TARGET 2,500 (2,700) PENCE
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COMPANIES - FTSE 100
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Schroders confirmed it has completed the GBP230 million acquisition of the Solutions business of River & Mercantile, after receiving all needed regulatory and shareholder approvals. The Solutions business consists of the UK Advisory, Fiduciary Management and Derivatives business of River & Mercantile, the remainder of which is subject to a GBP99 million agreed takeover by AssetCo.
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COMPANIES - FTSE 250
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Johnson Matthey completed the sale of its Advanced Glass Technologies business. The London-based chemical and technology company sold the business to Fenzi Holdings for GBP178 million on a cash-free, debt-free basis. The completion follows the satisfaction of conditions, including the fulfilment of a works council consultation in the Netherlands. The AGT business provides specialist glass enamels and precious metal pastes mainly to the automotive sector. Fenzi is a manufacturer and supplier of materials for flat glass processing. JM previously said in November a profit on sale in excess of GBP100 million was expected, and it will return GBP200 million of proceeds to shareholders via a buyback program.
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Retail and small business bank Virgin Money UK said its trading in three months to December 31, its financial first quarter, was "in line with the board's expectations". Customer lending fell 0.5% to GBP71.65 billion from GBP72.00 billion in the fourth quarter. It was down 1.9% annually. Mortgage lending fell 0.5% quarterly and 2.2% annually. Business lending declined 2.2% quarter-on-quarter and 9.0% year-on-year. On mortgages, Virgin Money said it "maintained market share while continuing to prioritise margin in a competitive environment". On business lending, the bank noted a "subdued" environment amid weaker demand and lower government-backed lending. Reflecting the focus on margin, Virgin Money's net interest margin improved to 1.77% in the first quarter, from 1.70% in the fourth quarter. It now expects a net interest margin of 1.75% for all of financial 2022, with growth in higher-yielding lending offset by competitive rates in mortgage lending.
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Movie house operator Cineworld said it has begun talks with former dissenting shareholders of its Regal Entertainment unit. The company wants to delay its payments under a unsecured facilities agreement related to a judgement in favour of Regal Entertainment Group shareholders. Cineworld back in September said it will pay USD170 million as part of the judgement in favour of former shareholders of Regal. Cineworld acquired Regal back in February 2018. The company said on Tuesday: "In order to facilitate these discussions, Cineworld has obtained waivers of, or undertakings to waive, any events of default arising from non-payment under the unsecured facility agreement from various other creditors. These creditors include certain holders of Cineworld's guaranteed convertible bond due 2025 as well as the lenders under certain of its existing debt facilities. "Cineworld has initiated discussions with the Regal litigation parties with the aim of maximising its available liquidity and is hopeful that a satisfactory agreement can be reached within the period afforded by the waivers." Cineworld also is battling in the courts with Cineplex over the cancelled acquisition by Cineworld of its Canadian peer.
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Beverage maker AG Barr said it expects to report revenue of GBP267 million for the year that ended January 30. This would represent an 18% annual hike from GBP227.0 million in financial 2021 and a 4.4% rise from the GBP255.7 million achieved in financial 2020, before the onset of the pandemic. AG Barr expects an operating margin before exceptional items of 15.6%, beating the prior year's 14.8%. Pretax profit before exceptional items is expected to be ahead of guidance. "This strong trading performance was achieved despite the unexpected and increased UK government restrictions related to the Omicron Covid variant, and further emphasises the quality and resilience of our brands, business model and people," AG Barr explained.
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COMPANIES - MAIN MARKET AND AIM
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British lifestyle retailer Joules warned that revenue over the Christmas holiday and into January was lower than it had expected, though still up 31% from a year before and 19% from two years ago. Joules said the Omicron variant of Covid-19 reduced retail footfall in January. What's more the retailer suffered from delays to new stock due to supply chain blockages. This resulted in fewer full-price sales, hurting both revenue and margin. Wholesale revenue also was lower than expected, due to delayed stock and customer cancellations. A third-party operated distribution centre suffered lower productivity and higher-than-expected costs. Joules said it expects footfall to recover and its stock position to improve. It said it expects at least GBP5.0 million in adjusted pretax profit for financial 2022, down from GBP6.1 million the year before. The stock was down 40% early Tuesday.
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COMPANIES - GLOBAL
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Swiss bank UBS said it plans to buy back USD5 billion worth of shares in the year ahead after seeing profit surge in 2021. Net interest income jumped 15% to USD6.71 billion from USD5.86 billion in 2020, and net fee & commission income rose 17% to USD22.39 billion from USD19.19 billion. Total operating income increased 9.7% to USD35.54 billion from USD32.39 billion. UBS posted a pretax profit of USD9.48 billion for 2021, up 16% from USD8.16 billion the year before, and a net profit attributable to shareholders of USD7.46 billion, up 15% from USD6.56 billion. The lender said it plans to propose a dividend of USD0.50 per share for the year and intends to buyback up to USD5 billion of shares in 2022, after repurchasing USD2.6 billion in 2021.
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Tuesday's shareholder meetings
Polar Capital Global Financials Trust PLC - GM re authority to allot shares
Schroder AsiaPacific Fund PLC - AGM
Scottish Investment Trust PLC - AGM
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By Tom Waite; thomaslwaite@alliancenews.com
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