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Monday Market Memo | Rosy UK employment and business outlook drives market demand, while emerging market currencies tumble

September 17, 2018Article by Paul Avery

Welcome back to our Monday Market Memo


With 32.4m people currently in work, the UK labour market is running hot. At 4.0%, the unemployment rate is among the lowest in Europe and has not been lower since Q1 1975.

Ultra-low unemployment is finally beginning to pull up wages, with 2.9% nominal wage growth in the most recent quarter, compared with 2.7% in the previous one. Coupled with the fastest rolling 3-month economic growth rate since July last year, strong employment conditions are feeding into ever more robust demand for rental property.

The latest monthly data from ARLA indicates that tenant demand is at its highest level in 2018 so far, with July’s figure up 13% on the same month last year. The RICS August Residential Market Survey concurs, finding a twenty-third consecutive month of declining supply plus the strongest reading for tenant demand in two years: ‘as a result of the supply-demand imbalance, near term rent expectations point to further rental growth in the coming three months.’


Though business activity picked up across the UK in August, regional variations are widening. While the North East stagnated, Yorkshire & Humber performed a clean sweep in the latest Purchasing Managers Index, with the steepest rise in business activity, demand for goods and services, payroll, and business optimism.

In line with Yorkshire’s bright economic outlook, the region saw the second highest average house price growth in the first half of this year at 3%, according to the latest ONS House Price Index. The West Midlands saw the fastest growth at 4.3%, with the North West close behind Yorkshire at 2.7%, and London bringing up the rear with a 0.6% contraction. Yorkshire & Humber also experienced the second highest level of new buyer enquiries (after Northern Ireland) in the latest RICS survey.


An important pair of emerging market currencies are having a turbulent time,hitting new lows in recent weeks. The Turkish lira has collapsed by 40% this year under the weight of President Erdogan’s eccentric management style – appointing his unqualified son-in-law as finance minister, exerting pressure on the notionally-independent central bank, and espousing the theory that rising inflation is best restrained by low interest rates (a view shared by few economists).

Meanwhile, the Argentine peso has plummeted by around 50% in 2018, despite the implementation of sensible reforms, primarily due to the years of economic mismanagement by the previous populist regime. Argentina’s interest rate was raised to an eye-watering 60% at the end of August, yet the currency is still falling.

Unsurprisingly, such volatile exchange rates have produced incredible bargains for fast-acting and risk-inclined international property buyers. Though be warned that the Argentine peso is thought to be only 25% undervalued compared with its long-term average (as opposed to its artificially raised level of recent years) and the country remains a credit risk, while further inept economic meddling in Turkey could cause foreign buyers to exit en masse, triggering a ‘scramble to the bottom’.


P.S. Is there something that you’d like us to cover? Send us your idea and we’ll cover it in the next Monday Market Memo. 


Paul Avery

Paul joined us in 2016 to lead our in-house research efforts, producing reports and guidance for clients as well as the strategic market analysis behind our new project launches. His background is in sustainability in the construction sector, and he is currently being trained in property valuation to further bulk up his investment creds.
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