What we read today and what can it mean for Jersey?
UK House price growth stalls
The price inflation appears to have stopped as forecast, with a gloomy outlook for the upcoming periods due to a further jump in mortgage rates. The share of the mortgage payments in take-home salaries is well above the long-run average. A 10% deposit on a typical first-time buyer property is now equivalent to almost 60% of annual gross earnings – an all-time high according to Nationwide.
Shoppers borrow on credit cards at the fastest annual rate in 17 years
The shoppers’ credit card debt increased by £500m in August, up 12.9% since the same month last year. The latest figures suggest that households are turning to borrowing to make ends meet.
UK remains the only G7 economy to languish below pre-pandemic levels
According to Office of National Statistics figures (ONS), the UK GDP remains 0.2% lower than it reached in the final quarter of 2019.
According to ONS, the economy grew by 0.2% in Q1 and Q2 2022 primarily driven by the financial sector and professional services.
Market turmoil makes investors wary of UK private equity
The institutional investors are cautious about investing the UK focused private equity. Further to the ongoing sale of substantial amounts of UK gilts the pension funds and other large institutional investors expect further rebalancing of the portfolios and bringing down the private assets. The high-interest rate environment is a further headwind for fundraising in the industry which flourished during the more than a decade-long interest rate environment.
What can this mean for Jersey?
The slowdown and monthly decline of the property prices in the UK is an indicator of the house price sensitivity to the interest rates, which are expected to increase significantly over the coming months. We expect similar headwinds to the housing prices in Jersey due to the increased rates and unaffordability of the housing, the declining prices in alternative locations and the general cost of living crisis.
Considering the increasing interest rates and the fact that the private equity and real estate fund industries flourish during the low-interest rate environment, we expect headwinds in the Jersey finance industry.
The combination of these factors is already affecting the Jersey housing market and we expect these effects to increase as we head into Q4 2022.
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