Azure Global : 09/12/13

Thursday 12 September 2013

Record number of estate agents raises fears of unsustainable housing bubble

ONS data shows 562,000 people work in real estate sector – the largest number since records began in 1978

Britain now has a record number of estate agents, official figures have revealed, underlining fears that the fledgling economic recovery is based on inflating an unsustainable housing bubble.

The number of people employed in "real estate activities" increased by 9.9% between March and June (the latest month for which data are available), according to the Office for National Statistics.

That was the fastest percentage increase in any sector of the economy; and a rise of 77,000 in the number of estate agents over the past year has taken the total number of people employed in the sector to 562,000, the largest number since records began in 1978.

Growing confidence in the outlook for the housing market has been a key component of the economic upturn that led the chancellor, George Osborne, to claim in a speech on Monday that the UK is "turning a corner".

Prices across the country rose by 3.5% in the year to August, according to the Nationwide, with much sharper increases in London and the south east.

However, with the most potent element of Osborne's Help to Buy scheme due to kick in next January, offering taxpayer-backed guarantees on homes worth up to £600,000, news of a jump in the number of estate agents will underline fears that the UK is on its way to another unsustainable housing boom.

"We're no longer a nation of shopkeepers, we're becoming a nation of estate agents," said Danny Gabay, director of economics consultancy Fathom. "I would certainly agree that the economy has turned a corner; my concern is about how sustainable this recovery will be, given that it is based on using government subsidies to encourage already over-extended households to take on even more debt to finance their consumption".

Simon Rubinsohn, chief economist at the Royal Institution of Chartered Surveyors, said any recent increase in jobs among estate agents is likely to have been concentrated in the south, where the housing market upturn is most evident.

"I think it's early days across much of the country. It may be capturing some of the impact from London and the south east, but when I look at the comments from our members elsewhere in the country, I don't sense they're rushing to take on lots of new employees, or open new offices: it's a bit premature."

Article Source : http://www.guardian.co.uk

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Lloyds must help TSB, Office of Fair Trading says

Lloyds Banking Group now required to bolster TSB's profitability by £50m a year in its first four years while giving it another £40m

Lloyds Banking Group has been ordered to help the 631-strong TSB branch network become more profitable under a series of measures set out by the Office of Fair Trading to make the offshoot a stronger high street competitor.

The move will be seen as clearing the way for government to kickstart the sale of its stake in 39%-taxpayer owned Lloyds Banking Group, which was first signalled by chancellor George Osborne in his Mansion House speech in June.

But the OFT's verdict is a frustration for Lloyds which just two days ago launched TSB as a new brand with much fanfare. It will now be required to bolster TSB's profitability by £50m a year in its first four years while giving it another £40m. But Lloyds will be relieved that is not being forced to include more branches in the spun-off TSB, which is likely to be floated on the stock market next year.

The announcement by the OFT follows an analysis commissioned by Osborne in June of whether the sale of the TSB branches as well as the 315 outlets by Royal Bank of Scotland – ordered by Brussels as a condition of the 2008 taxpayer bailouts – will be enough to increase competition on the high street.

The OFT concludes that the RBS sell-off, codenamed Rainbow, does not need alteration. A separate analysis of splitting RBS into a good and bad bank, also commissioned by Osborne, is ongoing. Business secretary Vince Cable said: "We must not forget the potential implications of a 'good bank/bad bank' split of RBS".

The competition body acknowledges that asking Lloyds to put more branches in to the TSB network could risk "incurring further delay and additional sunk costs" but wants steps to be taken to ensure that the TSB offshoot attains a 4.6% share of the current account market. As currently constructed, the OFT estimates TSB's current account market share is between 4% and 4.5%.

The announcement by the OFT came as a top Bank of England official attempted to justify his claim that bad lending by the Britannia building society was the cause of the £1.5bn capital hole in the Co-operative Bank, which merged with the mutual lender in 2008.

Andrew Bailey, deputy governor of the Bank of England, wrote to the Treasury select committee to set out the cause of nearly £1bn of losses on loans at the Co-op.

Bailey provided the analysis of the Co-op's losses following evidence given to the committee last week by Neville Richardson, the former head of Britannia which merged with Co-op in 2008. Richardson, who ran the combined entity until 2011, told MPs that he had left the organisation with "no issues" and insisted that Britannia's loan book was well managed and in line with other lenders.

In a letter obtained by the BBC, Bailey tells the committee's chairman Andrew Tyrie that some 75% of the £970m of bad loan losses at the Co-op between the beginning of January 2012 and the middle of 2013 were in the bank's non-core book, which in turn is made up of between 85% and 90% of former Britannia loans in 2013 and around 75% in 2012. Of the £970m, £288m were from the core lending book and £682m from the non-core book.

Article Source : http://www.guardian.co.uk

UK unemployment rate falls to 7.7%

Closely watched indicator takes tentative step towards 7% that could trigger rise in interest rates from Bank of England

Britain's unemployment rate has fallen to 7.7%, in the first tentative step towards the 7% target Bank of England governor Mark Carney says may signal an economy strong enough to withstand a rise ininterest rates.

The jobless rate has become a closely watched indicator in the City since the Bank's monetary policy committee introduced its policy of forward guidance, promising to leave borrowing costs on hold at their record low of 0.5% at least until unemployment falls to 7%.

Unemployment on the broad International Labour Organisation measure tracked by the Bank stood at 2.49 million from May to July, down by 24,000 from three months earlier, according to the Office for National Statistics (ONS).

That took the unemployment rate to 7.7%, from 7.8% over the previous three-month period, driven by a larger-than-expected 80,000 increase in employment.

On the more timely claimant count measure, which just includes people receiving out-of-work benefits, unemployment also fell, by 32,600 in August to 1.4m.

Sterling surged to a seven-month high against both the euro and the dollar after the news, as investors continued to bet on a stronger recovery than the MPC expects. "Markets are clearly ignoring Carney's 'low rates for longer' pledge and driving sterling higher in currency markets," said Nawaz Ali, market analyst at Western Union.

Carney used his first set-piece speech as governor to set out the reasons why he doesn't expect unemployment to fall sharply over the next two years; and stress that the 7% threshold was a "staging post", which need not trigger an automatic rate rise.

Chris Williamson, chief economist at data provider Markit, said: "The upturn in the labour market bodes well for the sustainability of the wider recovery, as more people in employment and rising wages should help boost economic growth further. The improvement also increases the possibility that unemployment could fall faster than the Bank of England expects, meaning an earlier hike in interest rates than 2016, as currently envisaged under the Bank's 'forward guidance'."

There were 334,000 new jobs created in the economy between June and a year earlier, the ONS said – the latest period for which figures are available – with the largest increase, of 117,000, coming in health and social work, within the private sector. With the housing market starting to show signs of life, there was a 77,000 rise in the number of people employed in "real estate activities".

Despite the improving picture, there was also evidence in the detail of the figures that conditions in the labour market remain tough for many.

Average pay rose at an annual rate of just 1%, or 1.1% including bonuses – well below the 2.8% rate of inflation – suggesting that living standards are still being squeezed.

The ONS also highlighted the fact that much of the increase in employment – almost all of it, for women – has been in part-time work, in many cases taken up by employees who would prefer a full-time job if they could find one.

Almost a third of men, and 13.5% of women, in part-time work or self-employment would prefer to be in a full-time role, according to the ONS.

Long-term unemployment has also remained stubbornly high: while overall unemployment has fallen by 105,000 over the past 12 months, the number of people unemployed for more than a year is little changed, at just below 900,000.

Young people are also failing to feel the benefit of the upturn, with youth unemployment 9,000 higher in May to July than three months earlier, at 960,000.

Article Source : http://www.guardian.co.uk