By Jamie Johnson, CEO, FJP Investment
The common consensus is that the December 2019 election result will be good news for the UK property market. Namely due to the fact that it means Brexit is more likely to go ahead on the 31st of January, dispelling some of the uncertainty that has blighted the sector over recent years.
On announcing its expectations to achieve healthier-than-forecast profits in the current financial year, FTSE 250 property firm Savills stated that Brexit and political uncertainty had “suppressed market activity” across both the commercial and residential sectors in 2019. But it then added: “The clear outcome of the general election prompted a strong close to the year as confidence to transact returned to the market.”
However, to say that a resolution to Brexit will give the property sector the shot in the arm it requires heading in 2020 would be to greatly oversimplify matters. After all, there are numerous pressing issues that people – renters, buyers, sellers, investors and developers – need to see addressed by the new government over the coming 12 months, and these extend well beyond the UK’s future relationship with the EU.
- Invest in new homes
We start 2020 with the same priority that has dominated the housing agenda for decades: the UK needs more homes.
The Government has, unsurprisingly, been quick to promise just that. The Conservative Party has said it is committed to building 300,000 new homes every year by the mid-2020s. Moreover, it has set a target of adding one million new-builds to the country’s housing stock by the end of the current parliament (2025).
Onlookers will take such promises with a rather hefty pinch of salt, given the frequency with which we have seen targets like these set and missed before.
Nevertheless, when the Spring Budget rolls around on 11 March 2020, it is of vital importance that the Chancellor throws some financial weight behind his party’s promises; spending commitments must be made to reignite house-building across the UK, particularly in the regional hubs that are experiencing the highest levels of demand.
- Support developers
Of course, it is not the Government who will actually be developing the new-builds. As such, they must do more in 2020 to support developers, from large construction firms down to small local housebuilders.
This support can come in many forms. For one, as stated, the Government can contribute capital towards projects, ensuring the funding is there to kickstart developments. But it can also help by reviewing planning permission regulations.
Freeing up hitherto unavailable land or enabling developers to convert derelict sites are examples of potential reforms.
Furthermore, tax cuts for residential property developers or even findings ways to incentivise private sector investment into residential developments – through channels such as development finance – could also prove worthwhile.
- Control the BTL market
Boosting the number of properties available on the market is one thing. The flip side to the same equation is how can the Government keep a firm handle on the levels of demand for housing.
One way is to control the buy-to-let (BTL) market, ensuring that not too large a proportion of the housing stock is consumed by investors. And this is something that Westminster has certainly turned its attention to over the past decade.
Since 2010, landlords have had to pay more tax and abide by more regulation, which has dampened appetite for this type of property investment. In fact, a recent survey of landlords found that 26% are planning to sell at least one property in 2020, while 82% said they are not planning on buying any more properties. The top reasons landlords gave for wanting to sell are tax increases and government reform.
Scaring property investors away from purchasing real estate will not solve the housing crisis, so it is important the Government does not push matters to an unreasonable degree. But in resetting the balance in the BTL market, it will help control the high levels of buyer demand we generally see for residential property.
- Reform stamp duty
Stamp duty represents another area of potential change in 2020. Indeed, the new government is proposing a stamp duty surcharge of 3% for non-UK residents who are buying a UK property.
While this reform may not act as a huge deterrent – UK stamp duty rates would still rank below many other global property investment hotspots – it still underlines the Government’s attempts to curtail demand to ensure more first-time buyers can access available properties. The investors, meanwhile, may turn their attention to other methods of investing in the real estate sector, such development finance and debt investment.
But further stamp duty reforms have been touted. It could, for example, be scrapped all together for first-time buyers. Alternatively, the stamp duty could be shifted for all buyers, impacting the amount that is paid and at what price.
More radical still, there have even been slightly more far-flung rumours that stamp duty could be dramatically changed. It could be made payable by the seller rather than the buyer, or it could be replaced by the US model of an annual tax based on the market value of the property.
Though these changes are unlikely, stamp duty reform in some sense does not seem too far away. With that said, all eyes turn to March’s Budget.
- Be creative
Ultimately, one of the themes that has hopefully become apparent throughout the four other points listed above is the need for the Government to be creative.
Small incremental changes in the ways previous governments have done will likely leave us in a largely similar position at the end of 2020 as we start it. Boris Johnson and his party cannot only look to minor reforms, tax revisions or loose spending commitments if we are to see more houses built, more people get on and move up the property ladders, and a more level playing field in the world of bricks and mortar.
Once the Brexit deadline passes, one must hope that the Government can turn its attention to pressing domestic issues, with the property sector one such example. It remains a bedrock of the UK economy as well as a hugely attractive market for both domestic and international buyers – neither of these things can be taken for granted but must instead be nurtured over the coming years.
Shares rise as cyclical stocks provide support; yields climb
By Saqib Iqbal Ahmed
NEW YORK (Reuters) – A gauge of global equity markets snapped a 3-day losing streak to edge higher on Friday, as the recent selling pressure on high-flying big technology-related stocks eased even as investors showed a preference for economically sensitive cyclical sectors.
Oil prices fell from recent highs as Texas energy companies began preparations to restart oil and gas fields shuttered by freezing weather, while the U.S. Treasury yields extended their recent rise.
The MSCI’s global stock index was up 0.47% at 681.88, after losing ground for three consecutive sessions.
On Wall Street, stocks steadied as cyclical sectors edged higher while tech names made modest advances after concerns about elevated valuations led to some selling in recent sessions.
“What we saw (this week) represents a market that is tired and may not do very much. So we are headed for some sort of a pullback, but I don’t think we’re there just yet,” said Peter Cardillo, chief market economist at Spartan Capital Securities in New York.
“Investors are not really pulling out of the market, but they are becoming more cautious. It already has factored in another good positive earnings season.”
The Dow Jones Industrial Average rose 119.97 points, or 0.38%, to 31,613.31, the S&P 500 gained 12.93 points, or 0.33%, to 3,926.9 and the Nasdaq Composite added 92.58 points, or 0.67%, to 13,957.93.
The S&P 500 technology and communication services sectors, housing high-value growth stocks, were among the smallest gainers in early trading, while financials, industrials, energy and materials rose more than 1%.
European shares edged higher on Friday as an upbeat earnings report from Hermes boosted confidence in a broader economic recovery. The pan-European STOXX 600 index was 0.64% higher.
U.S. Treasury yields on the longer end of the curve rose to new one-year highs on Friday as improved risk appetite boosted Wall Street, while the yield on 30-year inflation-protected securities (TIPS) turned positive for the first time since June.
Core bond yields have pushed higher globally, led by the so-called reflation trade, where investors wager on a pick-up in growth and inflation. Growing momentum for coronavirus vaccine programs and hopes of massive fiscal spending under U.S. President Joe Biden have spurred reflation trades.
The benchmark 10-year yield was last up 5.1 basis points at 1.338%, its highest level since Feb. 26, 2020.
Oil prices retreated from recent highs for a second day on Friday as Texas energy companies began preparations to restart oil and gas fields shuttered by freezing weather.
Unusually cold weather in Texas and the Plains states curtailed up to 4 million barrels per day (bpd) of crude oil production and 21 billion cubic feet of natural gas, analysts estimated.
Brent crude futures were down 28 cents, or 0.44%, at $63.65 a barrel, while U.S. West Texas Intermediate (WTI) crude futures fell 66 cents, or 1.09%, to $59.86.
Copper jumped to its highest in more than nine years on Friday and towards a third straight weekly gain as tight supplies and bullish sentiment towards base metals continued after the Chinese New Year.
Spot gold XAU= was down 0.58% at $1,785.71 an ounce.
The dollar lost ground on Friday, extending Thursday’s decline as improved risk appetite sapped demand for the safe-haven currency and drew buyers to riskier, higher-yielding currencies. The dollar index was off 0.295%.
Bitcoin hit yet another record high on Friday, hitting a market capitalization of $1 trillion, blithely shrugging off analyst warnings that it is an “economic side show” and a poor hedge against a fall in stock prices.
(Reporting by Saqib Iqbal Ahmed; Editing by Nick Zieminski)
Oil falls after surging past $65 on Texas freeze
By Stephanie Kelly
NEW YORK (Reuters) – Oil prices fell on Thursday despite a sharp drop in U.S. crude inventories, as market participants took profits following days of buying spurred by a cold snap in the largest U.S. energy-producing state.
Brent crude fell 41 cents, or 0.6%, to settle at $63.93 a barrel. During the session it rose as high as $65.52, its highest since January 2020.
U.S. West Texas Intermediate (WTI) crude futures fell 62 cents, or 1%, to settle at $60.52 a barrel, after earlier reaching $62.26, the highest since January 2020.
Brent had gained for four straight sessions before Thursday, while WTI had risen for three.
“The market probably got a little bit ahead of itself,” said Phil Flynn, a senior analyst at Price Futures Group in Chicago. “But make no mistake, this selloff in oil doesn’t solve the problems. The problems are going to persist.”
Though some Texas households had power restored on Thursday, the state entered its sixth day of a cold freeze. It has grappled with refining outages and oil and gas shut-ins that rippled beyond its border into Mexico.
The weather has shut in about one-fifth of the nation’s refining capacity and closed oil and natural gas production across the state.
“The temporary outage will help to accelerate U.S. oil inventories down towards the five-year average quicker than expected,” SEB chief commodities analyst Bjarne Schieldrop said.
Prices dropped despite a decrease in U.S. oil inventories. Crude stockpiles fell by 7.3 million barrels in the week to Feb. 12, the Energy Information Administration said on Thursday, compared with analysts’ expectations for an decrease of 2.4 million barrels.
Crude exports rose to 3.9 million barrels per day, the highest since March, EIA said.
“The big nugget was the big jump in exports of crude oil,” said John Kilduff, partner at Again Capital in New York. “We’ll have to see what happens with that next week weather in Texas, but I have been looking for a pickup there for a while.”
Oil’s rally in recent months has also been supported by a tightening of global supplies, due largely to production cuts from the Organization of the Petroleum Exporting Countries (OPEC) and allied producers in the OPEC+ grouping, which includes Russia.
OPEC+ sources told Reuters the group’s producers are likely to ease curbs on supply after April given the recovery in prices.
(Additional reporting by Yuka Obayashi in Tokyo; editing by Emelia Sithole-Matarise, Steve Orlofsky, David Gregorio and Jonathan Oatis)
GameStop frenzy sparks fresh investment in stock-trading apps
By Jane Lanhee Lee
OAKLAND, Calif. (Reuters) – The recent trading frenzy centered on GameStop Corp and other “meme” stocks is sparking a wave of investor interest in start-ups aiming to mimic the success of Robinhood Markets Inc, whose no-fee brokerage app has helped drive a trading boom.
Public.com, a direct competitor to Robinhood that boasts a host of blue-chip backers, said on Wednesday it had raised $220 million, valuing it at $1.2 billion on the private market. Another well-heeled rival, Stash, said earlier this month it had raised $125 million, while Webull Financial LLC, backed by Chinese investors, is also raising fresh funds after enjoying an influx of new users.
Robinhood, meanwhile, raised some $3.4 billion in the midst of the GameStop furor to assure its stability amid rapid growth and demands by its trading partners that it post more collateral.
The fresh investments are coming even as government regulators ramp up scrutiny of Robinhood and others involved in the GameStop trading. A U.S. congressional committee on Thursday grilled the chief executive of Robinhood and a YouTube streamer known as “Roaring Kitty,” among others, as it probes possible improprieties, including market manipulation.
Robinhood came under stiff criticism from some quarters for restricting trading in GameStop and other shares at the height of the frenzy, a move the company says it was forced to make due to requirements of partners that settle trades. It has also drawn scrutiny for a business model that relies on payments for sending trading business to partner brokerages, a practice Public.com and some other rivals are pledging to avoid.
Investors see rich opportunity in bringing easy stock trading to smartphone users globally, though the companies say they are also cognizant of the risks.
Stash, which doubled its active accounts to over 5 million by the end of last year, operates with only four trading windows a day to discourage rapid speculative trading, it said.
U.K.-based Freetrade.io told Reuters by email that its user numbers last year grew six-fold to 300,000 and by mid-February had reached 560,000. It said it had raised a total $35 million, including from crowd-funding rounds from over 10,000 customers.
But it does not offer margin trading or riskier offerings. “These products encourage investors to behave as if they are gambling or speculating rather than investing,” a Freetrade.io spokesman said.
Interest in trading apps is soaring globally. In Mexico, trading app Flink launched seven months ago and already has a million users, according to co-founder and chief executive Sergio Jimenez. He said Mexicans can buy fractions of U.S. stock through the platform, but not Mexican stocks – yet.
“Ninety percent of them are investing for the first time,” said Jimenez.
Flink raised $12 million in a funding round in February led by Accel, an early investor in Facebook. Accel is also an investor in Public.com and Berlin-based Trade Republic Bank Gmbh, which allows European retail investors to buy fractions of U.S. stocks, according to Accel partner Andrew Braccia.
“The bigger story here is there’s just this global trend of… accessibility,” he said.
Start-up investors also see opportunity in the infrastructure behind the trading apps. DriveWealth, which serves Mexico’s Flink and 70-plus other online trading apps around the world, has hundreds more partnerships in the pipeline, according to founder and chief executive Bob Cortright. DriveWealth provides the technology to power digital wallets and trading apps, and also provides clearing and brokerage service to its business partners.
“This is this is only beginning,” said Cortright. “The fact that you could have a smartphone in your hand in India, for instance, and buy $10 worth of Coca-Cola stock at an instant, that’s pretty game-changing.”
Venture capital investments in U.S. fintech companies hit a record last year with $20.6 billion invested, according to data firm PitchBook. Globally, around $41.4 billion was invested in fintech companies in 2020.
(Reporting By Jane Lanhee Lee in Oakland; Editing by Jonathan Weber and Dan Grebler)
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