UK property market cools in heat as Chinese property market grows increasingly fragile

A slew of Chinese data has been released showing that the Asian giant’s economy is lagging behind forecasters’ expectations.

Industrial production, retail sales, capital investment were all below estimates, while youth unemployment hit a record high of 20%.

China’s central bank has cut interest rates on a range of key money market instruments, making it likely that major Chinese banks will cut rates when they set monthly rates next week.

The Chinese economy is suffering from the ongoing Covid shutdowns and a fragile real estate market.

Developers reported lower investment rates in new construction projects, while sales of new homes fell 31% in the year to the end of July.

In the UK, property website Rightmove said August asking prices fell the most for two and a half years.

August is a month that often sees a setback with shoppers in vacation mode, but August’s 1.3% drop this year is the biggest monthly decline in some time.

Rightmove’s Tim Bannister said the decline was most pronounced in London and high-end properties and said indicators pointed to a continued cooling in the market.

Rightmove said that over the past twenty years the average property price has risen by 134% to £365,000, outpacing a 76% gain in average wages and a 93% increase in RPI.

In a sign of how the rising cost of living is hitting home, including through higher interest rates, Rightmove reported that the average monthly mortgage payments for first-time buyers with a 10% deposit had exceeded 1 £000 for the first time.

Bloomberg polled economists on their views on the growth outlook for eurozone economies and found that contributors now see a 60% chance of a recession in the next 12 months, down from 45% in their survey. previous and only 20% in a survey taken before Russia’s invasion of Ukraine.

Inflationary pressures mean economists still expect the European Central Bank to continue raising rates, with a half-point hike looking likely in September.

Phoenix Group plc said half-year cash generation increased 9% to £950m and the group now expects to top previous estimates for the full year of 1.3 to 1.4 billion pounds.

The group, which specializes in acquiring portfolios of old life insurance policies and reducing their operational costs to free up capital and profits, says it was performing very well, with a Solvency II surplus of 186% , above the top of its target range.

New business written during the period will generate additional long-term cash generation of £430 million, more than double the fill rate of the previous year.

The group announced a 3% increase in the dividend and signaled that a further increase of 2.5% for the full year was likely.

Steve Clayton

Steve Clayton, fund manager at HL Select.