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Uncertain Brexit Deal Propels Stressed Housing Market

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Brexit Deal

Last updated on March 21st, 2019

This month is undoubtedly the most crucial for Britain, which is due to leave the European Union anytime soon. In an already messed up decision, several unexpected and terrible circumstances have surfaced in the three years since the public referendum.

While the chaos only escalates, the uncertainties for the UK market are also soaring. Particularly, the housing market is in dismay due to the approaching Brexit deadline and no clarity over the deal.

The conflict between the Tory MPs and Prime Minister Theresa May over the twice-negotiated and defeated withdrawal agreement, is going through a series of votes in the Parliament. Recently, the MPs voted in favour of extending the Article 50 to the end of June, but the final decision depends on the unanimous vote of the EU member states.

As the Parliament has voted down the withdrawal agreement, a no-deal Brexit remains a default position in case no agreement is reached between Britain and the bloc. The vagueness of the outcome and the potential consequences of a no-deal, have left several real estate businesses and financial experts in a dilemma.

Last year in September, Bank of England governor Mark Carney raised a warning that leaving the union without a deal could lead house prices tumbling by a third. In February, he added that the UK’s growth would be ‘guaranteed’ to fall in the event of a no-deal Brexit.

House market experts analysed that since the Brexit vote in June 2016, the property prices did slug. The pattern also reflected seasonal changes, where the prices went up in spring and remain stagnate during summer, during both 2016 and 2017.

Besides, in the post-summer period of 2018 with Brexit deadline approaching, the house prices suffered a bigger dip. Statistics reveal that they went down to £230,630 in November from £232,797 in August. An year-on-year house price analysis also reflected that in the year after the referendum the rate of property prices growth dropped everywhere in the UK, except Scotland.

While the lawmakers are striving to strike the best possible deal before March 29, the prospects are much lower considering the feuds. Industry experts have highlighted that the Brexit is capable of having range of affects on the UK housing market, both before and after the exit.

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Brexit Uncertainty Leaves its Impact on Multiple Market Sectors

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Brexit Uncertainty

Investment and finance organisations in the United Kingdom are suffering due to the Brexit uncertainty and its aftermath. The latest organisation to feel its heat is M&G, an investment management firm, which has now suspended the withdrawals from its property portfolio fund.

The firm has held “Brexit-related political uncertainty” and the issues in the retail sector, responsible for the situation it is in.

This is not the first time businesses are seeing the effect of uncertainty surrounding Brexit. Apart from the investment management sector, the tourism sector has also witnessed a drop in revenue due to the Brexit uncertainty.

Rob Tanner, owner of 19-year-old sightseeing company SEA Oxford, explaining the adverse effects of prolonged Brexit said, “If you were trying to design a way to close businesses like mine, you’d behave exactly as the government has done.”

“At some point, the uncertainty will level out – but we just don’t know when that will be and if it does recover we don’t know if EU visitors will return to the levels that they were at.”

The UK is continuously witnessing extension in the Brexit deadline since March 31, which has now been prolonged till January 31st, 2020. Moreover, the deadline also depends upon the general elections next week that will reveal the next government in power, along with the future of Brexit.

Brexit uncertainty and a declining global trade has resulted in a drop in the pay growth in October, according to analysis conducted in late November. The analysis also revealed that the average wage witnessed a downfall to 3.6 percent from 3.8 percent in September and 4 percent in July.

Speaking on the scenario, M&G said, “In recent months, unusually high and sustained outflows from the M&G Property Portfolio have coincided with a period where continued Brexit-related political uncertainty and ongoing structural shifts in the UK retail sector have made it difficult for us to sell commercial property.”

“Given these circumstances, we have now reached a point where M&G believes it will best protect the interests of the funds’ customers by applying a temporary suspension in dealing,” the company added.

The rising Brexit uncertainty has led to the closure of many businesses, putting the return on investments in the market or retracting the investments at a risk, along with a drop in the pay growth.

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YouGov Poll: Pound Sterling Registers Growth Post Tory Majority News

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YouGov Poll

Following a YouGov poll speculating Conservative Party majority in the parliament from the December general elections, Pound Sterling achieved a six-month high against Euro on Thursday.

The currency experienced growth against all major currencies after YouGov released its MRP polling model. The MRP model based on the multilevel regression and post-stratification gave a detailed breakdown of the seats and majority the Tories will hold.

Tories are subjected to win 359 out of 650 seats, according to the YouGov poll. On the other hand, Labour, Scottish National Party and Lib Democrats are expected to win 211, 43, and 13 seats respectively, if the elections are held now.

While the Pound went 1.1763 against Euro, Pound-Dollar exchange rate, rose to 1.2953 against the US dollar. However, the currency later experienced a 0.2 percent drop to close at $1.2907.

The result from the MRP polling model is considered significant as the poll predicted a hung parliament, back in 2017, under the leadership of Theresa May.

Speculating further growth of Pound Sterling, the currency strategist at BMO Capital Markets, Stephen Gallo said that the currency will soar further, if Tories win the general elections on December 12. With Pound Sterling continuously fluctuating amid brexit uncertainty, Brexit and Pound will have a clear path paved.

Speaking on the result from the YouGov poll on possible Tory majority, Mikael Olai Milhøj, a senior analyst at Danske Bank said, “If it turns out to be right, Prime Minister Boris Johnson will be able to pass his Brexit deal before Christmas without too many problems. Friday 20 December has circulated as a potential voting day.”

He added, “As we do not have much else to rely on, a Conservative majority is now our base case.” Following the poll results, the possibility of Tories registering majority in the parliament has rose to 67.5 percent from 63 percent, leading to a drop in the probability of a hung parliament to 28 percent from 32 percent.

The result from the YouGov poll might still change, as two weeks remain for general elections. However, the news of possible Pound Sterling growth following the Tories win in the elections, point to the possibility of a stronger economy in future and verifies that the Tory policies are grounded to the actual real-world facts.

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Child Poverty will Drop under Labour Party, Claims Resolution Foundation

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Resolution Foundation

As per the reports from the think tank, Resolution Foundation, there is a high probability that child poverty may witness a record-rise if the Tories win the upcoming general elections, since the Conservative Party failed to offer any change in the existing welfare policy in its manifesto.

No change in the current welfare policy means that child poverty is expected to witness a record-increase of 34 percent in 2023-24 from 29.6% in 2017-18.

On the other hand, child poverty will rise around 30.2 percent and 29.7 percent with the introduced plans of the Labour Party and the Liberal Democrats respectively.

The report from the Resolution Foundation has claimed that if the election manifesto of the Labour Party and the Tories is compared, there would be 550,000 fewer children in poverty with the plans of the Labour Party.

Due to such reports, it is not hard to acknowledge that the economy of the country might experience post-Brexit adversities, which in turn would further worsen the scenario of child poverty.

However, the report also admits the fact that child poverty can witness a drop if the political parties introduce reforms like scrapping Universal Credit, two-child Limit and the benefit cap. On the contrary, the Labour Party has promised to boost the economy and reduce child poverty by “guaranteeing a minimum standard of living”.

Laura Gardiner, the research director of Resolution Foundation, in regards to the effect of policies introduced in manifesto on child poverty and economy, said, “Labour and Liberal Democrat pledges to spend £9bn more would mean child poverty being over 500,000 lower than under Conservative plans. However, this would not do enough to see child poverty fall from today’s already high levels.”

On the other hand, an Economic Outlook from PwC suggests that the UK’s GDP might experience growth of four percent if the local areas boost their productivity levels from below average to half of what is required.

The report added that the economic growth in Scotland will be 1.3 percent this year, which is 0.3 percent lower than the expectations that were set in July.

The report from the Resolution Foundation claims that with £9bn of extra social security spending, the Labour Party might reduce the extent of child poverty, which would benefit country’s economy to a greater extent, especially ahead of the economic uncertainty due to Brexit.

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Investors Losing Hope to Recover Money from UK-Based Signature Living

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signature Living

At the outfit it sounds as a good deal to invest in an international luxury hotel chain, but the investors seeking money from Liverpool-based chain are losing hope of recovering their capital.

The investors from countries across Europe and Asia, who said they had to fly to the UK to ask for their money back, were initially promised hundreds of thousands of pounds by Signature Living. The luxury hotel chain owns a number of historic and refurbished UK properties.

The firm’s founder Lawrence Kenwright said, investors would eventually get back their money and “they have to trust me”. Ironically, back in May he said that every investor would receive their share by the end of that month.

Presently, investors are caught in a vicious circle of trying to get their money back, while rigorously pushing to see the hotel’s owner. However, neither their money nor the Signature Living’s owner has showed up.

“It’s just an appalling way to treat investors,” said Susanne Grampe, who travelled to Liverpool last month from Germany in a face-to-face attempt to recoup about £110,000 owed to her. “I’m devastated,” she added.

Grampe exclaimed that she invested in the company’s football-themed George Best Hotel in Belfast and that the money was supposed to help pay for the care of her elderly parents.

As per the documents obtained by the BBC, signed by a senior Signature executive, the full amount in six weekly payments starting on 6 November was to be paid. However, no payment has been recorded yet.

Other than that, Lawrence Kenwright had already promised via email to repay Grampe. “I will ensure that you get another 20k payment this Friday and every Friday thereafter. “Please keep in contact with me and I will ensure that this happens,” he added. But as it turns out, every promise made until this point has been nothing, but a lie told with conviction.

Kenwright, who has his own YouTube Channel and recently presented TedX talk on “entrepreneurial socialism”, once again told the investors that they would be paid once the multiple hotels involved had been completed and sold.

As a fact, more than a dozen investors are still waiting for the money they are owed by Signature Living. One Hong Kong real estate agent said that she had already been to the UK thrice over the past two years, but still couldn’t get any help from Kenwright. “Of course I regret investing in Signature Living,” she said. “It affects the reputation of the UK property market. People are very afraid to invest there now,” she added as a sign of concern.

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Individual Voluntary Arrangements Triggering Insolvencies; Reports Show

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IVA

Individual Voluntary Arrangements or IVAs have become the new trend to survive another day amidst financial crisis, but the technique is failing big time across England and Wales. As reported, the numbers are following an upward trajectory so fast that the financially insolvent people have shot up by nearly a quarter.

According to the Insolvency Service, personal insolvencies across England and Wales rose by 23 per cent to 30,879 in the third quarter. The number includes around 19, 973 individual voluntary arrangements between July and September, with a spike of 43 per cent in it, compared to the last year.

Individual Voluntary Arrangements (IVAs) have gained huge momentum because they are a legally binding accord between payer and payee, which grants a fixed time period over which the payer has return the debts. Such an agreement provides safety and is approved by the court only if both parties agree. Even celebrities such as Katie Price have made use of the service.

However, with legal obligation to return the money, the scenario turns upside down, especially for youth who are more reliant on debts to accomplish their needs. The latest insolvency figures come as Alec Pilmoor, personal insolvency partner at consultancy RSM, raised concerns over the rising number of people becoming insolvent in the age group of 18 to 25 years.

“Continued access to easy money, and the prevalence of a cashless society makes it increasingly difficult for consumers to monitor their spending and maintain a budget effectively,” he said. Adding that those within this age group lack much financial experience and sufficient education from school or finance providers.

Overall, the numbers also state that personal insolvencies are at the highest quarterly level for the past four quarters, since late 2010.

“Today’s figures provide a worrying insight into the state of personal finances; the comparison with the same quarter last year shows an especially steep increase in personal insolvencies,” said R3, the trade association for the UK’s insolvency specialists.

The concern is real and the numbers just prove it. The management of money across England and Wales needs a real time solution because short time dependency on Individual Voluntary Arrangements is only making the matters worse.

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