Wednesday, May 26, 2010

Bank of England Report

Begin forwarded message:

From: "Malcolm G. Lindley " <>
Date: 21 May 2010 17:00:35 GMT+01:00
To: "David Clark" <>
Subject: Bank of England Report

Malcolm G. Lindley
The Guild of Professional Estate Agents

Dear David Clark

The Bank of England Report

I would firstly like to thank all those of you who took the time and trouble to provide me with the information and ammunition for my meeting yesterday with the Bank of England – and, as promised, am pleased to provide a summary of the meeting.

The meeting was a discussion on current business conditions and was with Peter Andrews, Mark Menary and Kate Barker of the Bank of England Monetary Policy Committee.  I was representing Estate Agency interests and it is indeed a real privilege to be able to attend these consultations as they do form a real part of the Bank of England research and intelligence into the immediate sentiment of business at ground level.

I was questioned by the team and my report, in summary, was as follows –

"As Managing Director of GPEA Ltd I represent 800 individual independent estate agency offices. 

Since 2007, UK residential property sales levels fell from 1.2million transactions a year to a low of approximately 450,000 but they have now recovered to a run-rate of 650,000-700,000, however, transaction volumes are still approximately 33% off the peak.

Property prices have, on a national basis, recovered well, although this is patchy – in London, for example, prices have been particularly strong whereas part of the North of England, Wales and the Midlands are still recovering.

Prices have been stronger because of the level of supply versus demand, the introduction of Hips certainly tightened up the market and the lower interest rate (for those able to get mortgages) made property prices more achievable.

There are still enormous difficulties in the mortgage market and the supply of mortgage funds and low interest rates will be key factors in sustaining a recovery in the housing market. 

At present there is considerable concern around the uncertainly of Hips, interest rates, direct and indirect taxation, capital gains tax and spending cuts.  We look forward to clarity to remove this uncertainty and hope for a more consistent base upon which to rebuild a sustainable confidence".

Summary of the Bank of England Inflation Report –

"The United Kingdom continued to emerge from recession. World demand picked up further, although the pattern of recovery was uneven. The level of activity, both at home and in most other advanced economies, remained well below pre-crisis levels and heightened concerns about the fiscal position in some countries led to renewed fragility in financial markets.

A pickup in UK GDP growth is likely, underpinned by the considerable monetary stimulus, a projected global recovery and the past depreciation of sterling. But the pace of expansion is likely to be tempered by the need for fiscal consolidation and for further balance sheet repair by financial institutions.

Both the strength of the recovery and the impact of the financial crisis on the supply potential of the economy remain highly uncertain. Even with relatively robust growth, a degree of spare capacity would be likely to persist over the forecast period.

CPI inflation remained well above the 2% target, raised by the restoration of the standard rate of VAT to 17.5%, higher oil prices and the past depreciation of sterling. As these temporary effects on inflation wane, downward pressure from the persistent margin of spare capacity is likely to cause inflation to fall below the target for much of the forecast period. But the pace and extent of that moderation in inflation are highly uncertain.

Under the assumptions that Bank Rate moves in line with market interest rates and the stock of purchased assets financed by the issuance of central bank reserves remains at £200 billion, inflation is somewhat more likely to be below target than above it for much of the forecast period, although those risks are broadly balanced by the end."

Yours Sincerely,

Malcolm G. Lindley
Managing Director

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