UK house prices rose 1.1% in February; Greggs warns of cost inflation squeeze – business live

Greggs has reported that its move to open some bakeries later into the evening is paying off.

Greggs extended the opening hours of 500 shops until 8pm or beyond last year, as it competed for “food-on-the-go” sales in the evening.

Products such as chicken goujons and pizza slices have proved popular in the evenings, Greggs reports, including sharing boxes via its delivery service.

The bakery is also excited to have gone viral on TikTok, telling shareholders:

We also introduced warm versions of some of our core products, with Hot Yum Yums and salted caramel dipping sauce going viral on TikTok!

Greggs also expanded its range of vegan products, saying:

Whether our customers follow a vegan diet or not, we know many more people are choosing to eat less meat for ethical, environmental or health reasons, and we are meeting that need.

This morning’s Halifax house price report suggets the housing market is resilient, the EY ITEM Club of economic forecasters say.

The “strong gain” of 1.1% in prices last month could be a reflection of mortgage rates falling back from their post-mini-Budget peaks and a healthy labour market, argues Martin Beck, chief economic advisor to the EY ITEM Club.

It could also be another sign that the economy is demonstrating unexpected resilience, despite the headwinds it is facing, Beck adds.

But… February’s rise left annual growth in prices at a modest 2.1%, and Beck says it is hard to see “momentum in prices being maintained”.

He adds:

Mortgage rates have come down in the last few months but are still much higher than a year ago. Meanwhile, households’ ability to take on and service debt is being squeezed by falling real incomes, and widespread predictions of a decline in property values will likely encourage some potential buyers to delay purchasing, weighing on demand.

On the other hand, changes in the structure of the housing and mortgage markets, and a resilient labour market, will likely reduce the risk of forced selling. An improving economic outlook as this year progresses may also limit how far house prices fall.

UK power plans told to generate more electricity as cold snap looms

Alex Lawson

National Grid has asked power plants in Great Britain to generate extra electricity tonight ahead of the coldest night of the year, my colleague Alex Lawson reports.

The Grid’s electricity system operator (ESO) has issued an “electricity margin notice”, telling the owners of power plants to bring on extra power supplies between 4.30pm and 8.30pm on Tuesday. National Grid stressed this did not mean supplies were “at risk”.

The Met Office has issued weather warnings for rain and snow across the UK with temperatures of -4C expected in London and -6C in Birmingham.

The freezing temperatures across the country are expected to trigger a surge in demand for power and heating.

On Monday, National Grid asked EDF to warm up its West Burton A coal unit for potential use today. The unit is covered by one of the “winter contingency” contracts negotiated by government to keep coal fired power plants on standby for emergency use.

Strikes at EDF’s nuclear power plants in France, which supplies Britain with electricity via subsea cables, have also raised concerns in recent days.

The Grid has been on heightened alert over risks of potential power cuts this winter, due to concerns Russia would cut gas supplies into Europe, with a knock on effect on Britain. However, a relatively mild winter and high levels of gas storage in Europe have eased these fears, and caused gas prices to fall sharply.

Late on Monday night, a spokesperson for the ESO said:

“An electricity margin notice (EMN) has been issued to the market. This is a routine tool that we use most winters, and means we are asking generators to make available any additional generation capacity they may have.

The EMN does not mean electricity supply is at risk.”

In December, National Grid paid record amounts to encourage gas-fired power plants to crank up supply at short notice.

The coal-fired plants, which also include units at Drax in Yorkshire and Uniper’s Ratcliffe-on-Soar in Nottinghamshire, have been warmed for potential use several times this winter but stood down each time.

Estate agents Foxtons has predicted that the property market will turn around later this year, as the recent fall in mortgage rates lifts the market.

Foxtons told the City this morning that:

Mortgage rates have started to reduce in recent weeks and buyer activity is picking up, which may result in a more favourable sales market in the latter part of the year.

The average rate on fixed-rate mortgages surged over 6.5% last October, following the turmoil in the government bond market after the mini-budget. But rates have fallen since, with HSBC launching a fiveve-year fixed-rate mortgage priced at below 4% last month.

Foxtons reported an 11% rise in revenues last year, while pre-tax profits more than doubled to £11.9m.

Guy Gittins, who was appointed Foxtons chief executive last year, says “core operational failings have throttled historical performance” at the company.

Those failings includes:

• Poor data accessibility and utilisation impeded business decision making and the ability to unlock revenue growth opportunities.

• Outdated estate agency processes and diluted culture restricted organic growth.

• Insufficient headcount capacity and experience constrained productivity.

• No clear customer proposition and brand invisible in core markets limited ability to successfully compete.

Estate agents are reporting that activity has picked up this year.

Tom Bill, head of UK residential research at Knight Frank, says it appears the market is stronger than expected:

“The UK housing market appears near the end of a long hangover from the mini-Budget rather than on the verge of a price plunge.

Activity stopped well before Christmas due to the mortgage market turmoil but has picked up this year as people come to terms with where rates are settling.

That said, asking prices are likely to come under more pressure as we enter the traditionally busier spring market due to tighter affordability. We expect around half of the 20% increase seen during the pandemic to unwind but most evidence that is not backwards-looking points to a stronger market than expected.”

Matthew Thompson, head of sales at London-based agency Chestertons, reports a rise in properties coming onto the market.

“As the UK economy has shown signs of recovery, we are beginning to see more sellers wanting to capitalise on the positive market sentiment.

In February, our branches registered a 2% increase in the number of properties being put up for sale compared to the same month last year.”

“Still, the capital continues to experience a chronic undersupply of suitable housing; particularly as demand has remained strong since the start of 2023 with more buyers booking in viewings.

Simultaneously, the number of offers being withdrawn has decreased by 11% which indicates that there are fewer window shoppers and more serious buyers entering the market.”

North London estate agent Jeremy Leaf says Halifax’s data confirms the picture at the ‘sharp end’ of the market:

‘The reduction in housing market activity has been quite modest considering recent rises in mortgage rates and the cost-of-living shock, while a fresh crop of properties has buoyed viewings considerably and is outstripping sales agreed.

‘As a result buyers are waiting to see if prices may soften further and mortgage repayments stabilise before committing.’

But Jonathan Hopper, CEO of Garrington Property Finders, reports that uncertainty is slowing the market:

“For both rattled sellers and anxious buyers, this is a tentative step in the right direction.

“Prices are now settling rather than sliding, and the market remains firmly in a period of transition. The trouble is no-one yet knows what it’s transitioning to.

“The Halifax’s data shows the average price of a home has now risen on a monthy basis for two months in a row, but it’s far too soon to call the end of the price correction that’s underway nearly everywhere.

“The fact remains that while many buyers have both the financial ability and the opportunity to buy, they lack the confidence to do so – and as a consequence the market is still slowing.

UK bakery chain Greggs has warned this morning that it is being pressured by rising costs.

Greggs told the City that “cost inflation will continue to be a challenge in the year ahead”, driven particularly by pay awards and energy costs.

Greggs has also reported a “strong performance” for 2022.

Like-for-like sales at its shops jumped by 17.8% last year, while pre-tax profit rose by 1.9% to £148.3m. Earnings were held back by the rising costs of ingredients, energy, and labour.

Greggs opener 186 new stores last year – a record – and closed 39, leading to net openings of 147 shops.

That grew Greggs’ estate to 2,328 shops on 31 December 2022.

The company is aiming for 150 net openings in 2023, and says there is a “clear opportunity for significantly more than 3,000 UK shops in time”.

Good morning.

UK house prices picked up last month, data just released shows, as calm returned to the property market after the turmoil of last autumn.

Halifax has reported that the average house price rose by 1.1% in February, following a 0.2% increase in January and a 1.3% drop in December.

This left the annual rate of house price growth unchanged, at +2.1% for third month running.

But on a quarter-on-quarter basis, prices were down 2.5%.

Kim Kinnaird, director at Halifax Mortgages, points out that the average house price has been stable over the last three months.

The fall in mortgage costs, following the surge after the disastrous mini-budget last September, has also helped prices to stabilise, Kinnaird says:

Recent reductions in mortgage rates, improving consumer confidence, and a continuing resilience in the labour market are arguably helping to stabilise prices following the falls seen in November and December.

Still, with the cost of a home down on a quarterly basis, the underlying activity continues to indicate a general downward trend.

In cash terms, house prices are down around £8,500 (or 2.9%) on the August 2022 peak but remain almost £9,000 above the average prices seen at the start of 2022.

As the average prices are still above pre Covid-19 levels, most sellers will retain at least some of the price gains made during the pandemic.

Kinnaird points out that house price affordability remains a problem for new buyers:

With average house prices remaining high housing affordability will continue to feel challenging for many buyers.

Halifax’s data shows a stronger market than rival lender Nationwide. They reported last week that annual house price growth in the UK turned negative in February for the first time in almost three years.

Also coming up today

The cost of living squeeze hit consumer spending last month, as shoppers cut back.

Total retail sales rose by 5.2% in February compared with a year earlier, up slightly from January’s annual growth rate of 4.2%. But that masks a sharp fall in volumes, as high inflation means goods prices had risen by more.

But there was strong sales of jewellery and fragrances for Valentine’s Day, according to the British Retail Consortium.

The leader of Britain’s manufacturing bosses is expected to criticise the UK government “mismanagement” of the economy, and the post-Brexit relationship with the European Union, at the annual conference of Make UK today.

Stephen Phipson, the chief executive of Make UK, will criticise the government’s failure to embrace a coherent industrial strategy, The Times reports.

Phipson is expected to call for an end to “the rancour and political chaos of the last few years”, and express hopes that the new Windsor framework will lead to a new era of pragmatism and collaboration with the EU “rather than thumping the table or issuing threats”.

Shadow Chancellor Rachel Reeves will also address the conference, and announce a review on the UK’s business tax regime.

Reeves is expected to say that a lack of business investment, fuelled by uncertainty and political instability under the Conservatives, has weighed on economic growth.

European stock markets are expected to open a little higher, as investors wait to hear from America’s top central banker, Federal Reserve chairman Jerome Powell, who is set to appear before Congress.

Powell will be quizzed about the Fed’s interest rate rises over the last year, and the apparent strength of the US economy.

Ipek Ozkardeskaya, senior analyst at Swissquote Bank, explains:

The fact that the US jobs market, or economic activity don’t react to higher Fed rates is a problem for Fed, because it makes the Fed’s arms less efficient for fighting against inflation.

Many would argue that changes in rates take time to filter into the economy but the Fed’s tightening campaign began in November 2021 – 17 months ago, the rate hikes began roughly a year ago. It’s about time we start seeing the impact of higher rates through data.

The agenda

• 7am GMT: Halifax index of UK house prices

• All day: Make UK’s National Manufacturing Conference 2023

• 9.30am GMT: Data on mergers and acquisitions involving UK companies: October to December 2022

• 10am GMT: Treasury committee hearing on the work of the Prudential Regulation Authority.

• 3pm GMT: Federal Reserve chair Jerome Powell testifies to the Senate Banking Committee