House Price Growth 'Should Be Capped At 5%'

Avoiding A Bubble: Can It Be Done?

Updated: 1:11pm UK, Friday 13 September 2013

Proposals for policymakers in the UK to restrict property market growth are not without international precedent.

In governor of the Bank of England Mark Carney's native Canada and New Zealand, governments have imposed a system of checks to prevent housing bubbles occurring.

In August, alarmed by rapid house price growth that saw property values in Auckland swell by an annual average of 8.6%, New Zealand's Reserve Bank moved to impose a long–threatened raft of measures designed to cool the market.

From October 1 this year, the Reserve Bank said, banks would have to ensure that a maximum of 10% of their loan book was comprised by mortgages exceeding 80% of the property value.

Reserve Bank Governor Graeme Wheeler said this high loans-to-value ratio (LVR) was the most powerful tool at the bank's disposal for bringing the market under control.

He said: "The LVR restrictions are designed to help slow the rate of housing-related credit growth and house price inflation, thereby reducing the risk of a substantial downward correction in house prices that would damage the financial sector and the broader economy."

In Canada, policymakers have made repeated efforts since 2009 to artificially slow the housing market after a prolonged period of low borrowing costs saw prices rise steeply and household debt levels increase correspondingly. 

Measures have included shortening the maximum period over which a mortgage can be repaid from 30 years to 25 years and reducing the lending cap from 85% of the total property value to 80%.

"These government changes have been introduced to ensure that the housing market in Canada continues to be stable, as well as to encourage Canadians to avoid overextending themselves financially," a statement from the Royal Bank of Canada said.

Mortgage lending rules were tightened four times before the Canadian housing market slowed in July, 2012, but prices have since bounced back and appeared to stabilise.

Figures published by Statistics Canada on Thursday said its national house price index had seen an increase of some 1.9% on the previous year and 0.2% on the previous month.

Mazen Issa, economist at TD Securities, said it was unlikely the market would overheat in the coming months as house prices were now markedly less affordable than they had been previously.

"We do not see a strong case for rampant home price appreciation over the medium-term as the backup in mortgage rates will erode affordability," he said.

"Moreover, sales activity is likely to slow as household balance sheets are stretched and the increase in home prices may have priced-out potential home buyers."

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Thames Water Bill Hike Criticised By Regulator

Planned price hikes by Thames Water could be reversed after the industry regulator attacked the company's performance and its demand for extra money.

Thames Water wants permission for a one-off bill increase of up to 8% in 2014/15, arguing that it has to fund the construction of a 'super sewer' under London.

But Ofwat has turned the tables on the company, saying Thames Water has failed to deliver on several fronts and investigating whether it needs the money after benefiting in recent years from the ultra-low cost of lending for corporations. 

It said Thames Water, which has 14 million customers, has made "substantial savings" by doing less than expected to tackle sewer flooding.

A major investment programme in sewage treatment has also dragged on too long, it added, despite customers being charged for the improvements.

And it said some of Thames Water's sewerage network is not hitting performance targets.

Mogden water treatment works in London are operated by Thames Water

Ofwat chief regulation officer Sonia Brown said: "We have been clear that we would challenge Thames' proposed bill increase.

"So we are looking to see if there are areas where we can claim money back for customers."

The average Thames Water household bill is around £354 a year.

Ofwat also launched a separate probe into whether the company, owned by Australia's Macquarie Group, has "benefited from wider economic circumstances beyond its control".

The probe is believed to centre on whether Thames Water has gained from the ultra-low interest rate environment, reducing the cost of servicing its huge debt pile.

It could deduct gains from Thames Water through a process called the "favourable effect mechanism" - although Ofwat said it is too soon to say whether this may result in lower bills for customers.

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Gala Coral Owners In Talks Over Exit Jackpot

By Mark Kleinman, City Editor

The owners of Gala Coral, one of Britain's biggest gaming and leisure groups, are in talks about preparing for an exit that could value the group at more than £2bn.

Sky News has learnt that the company's shareholders have approached a number of investment banks about a strategic review of the business that would kick off in the coming months.

The discussions raise the prospect of a flotation that - depending upon its valuation - could put Gala Coral on the cusp of the FTSE-100. And it could trigger an unlikely return to the stock market for Andy Hornby, the former chief executive of HBOS, who sits on the group's board as chief executive of the Coral chain.

Gala Coral is the UK's third-biggest high street bookmaker behind Ladbrokes and William Hill, and has a roughly 45% share of the bingo sector. It is also one of the biggest betting groups in Italy through its Eurobet brand, and like most of its peers has a fast-growing digital presence as consumers shift their spending online.

The strategic review is not yet underway, and bankers have not yet been formally engaged. However, people close to Gala Coral said the company's shareholders and management were in discussions with prospective advisers and were open-minded about the outcome of their review of the company's options.

That could include a separate sale of some or all of the company's divisions, or a flotation of the whole business, according to one insider. A stock market listing would make sense given the current appetite among investors to back high-quality company flotations.

The betting and gaming group was seized from its private equity shareholders just over three years ago as part of a £2.5bn debt restructuring deal which involved the hedge funds Apollo, Cerberus, Park Square and York Capital Management taking control.

The move represented a rare setback for a number of the buyout firms, including Cinven and Permira, which had previously owned Gala Coral.

Earlier this year, Gala Coral sold its casinos business, comprising 19 sites, to Rank Group in a move which made the acquirer the largest operator in the UK.

The transaction was part of a restructuring which has seen Gala Coral transform its financial performance during the last two years. In the 12 months to September 29, 2012, it recorded revenues of £1.19bn and generated earnings before interest, tax, depreciation and amortisation of £280m.

Gala Coral is chaired by Rob Templeman, the former boss of Debenhams, who also heads the private equity-owned RAC, the roadside recovery service. The company's chief executive is Carl Leaver, a former Marks & Spencer manager.

Mr Hornby has been with the leisure group for just over two years, having stepped down months earlier as the boss of Alliance Boots.

He left HBOS following its rescue by Lloyds Banking Group and may face mild criticism in a forthcoming probe into the bank's takeover by the City regulator. He has been repeatedly backed by Gala Coral colleagues during the HBOS furore and while he may opt not to remain on the company's board if it decided to pursue a public share offering, there is no suggestion that he would leave his post.

A Gala Coral spokesman declined to comment.

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The Sky News Business Round-Up And Look Ahead

Sky's Naomi Kerbel offers a round-up of what's coming up in the week's business news.

:: Monday September 16

The new Current Account Switch Service takes effect on Monday. It will let you change accounts in seven working days. 33 banks and building societies will deliver the new service

:: Tuesday September 17

Monthly inflation figures for August on Tuesday. July's consumer price index was 2.8%, down from 2.9% in June. The government target is 2%

:: Wednesday September 18

U.S. interest rate decision on Wednesday followed by Ben Bernanke press briefing. The briefing will give current economic projections and provide some context for the any policy decisions. The markets will be keen to see if the Fed Chairman starts tapering bond-buying

:: Thursday September 19

Data heavy day in the UK on Thursday. CBI Industrial Trends Survey, mortgage lending figures, retail sales figures and auto production numbers

:: Friday September 20

Balloting for strike action is expected to start on Friday by the Communication Workers Union over the privitisation of Royal Mail. Results of the ballot will be out early October. A possible strike would take place later that month

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New Housing Bubble Fears As Price Gap Widens

By Ed Conway, Economics Editor

Fears of a housing bubble have been underlined by new figures showing some parts of the country now have the most unaffordable property prices in history.

The average home in Kensington and Chelsea is now some 28.9 times the average salary of those living in the borough, according to research by Sky News.

The gulf between local salaries and property prices has doubled since 2009, pushing them further out of reach even of those who live in the area.

The figures will reinforce concerns both within and outside the property market that a bubble is emerging in some parts of Britain.

The average house price across Britain is now around six times the median salary.

This is broadly unchanged from its levels in 2007, before the financial crisis, and is beyond the level defined by property economists as "severely unaffordable".

However, an analysis by Sky News of local-level affordability shows that the gap between prices and incomes is now at unprecedented levels.

In Westminster, the average home is now 19 times the median salary  - up from 13 times in 2009.

In Hammersmith and Fulham the ratio - often used by economists to measure affordability - is at 17.5 times salaries, compared with 11.3 in 2009.

In Blackburn, prices are 3 times the average salary

However, in other parts of the country, prices are well within reach. In Durham, homes cost 3.5 times the local salaries. In Blackburn prices are 3 times the average salary. Across England and Wales the affordability ratio is 6.1 times.

The Sky News research compares the most recent Land Registry house prices figures with official local earnings figures.

It underlines that for those living in the most expensive areas of London, house prices are now well beyond realistic levels.

In general, mortgage lenders are reluctant to provide potential homebuyers with a loan of more than four to five times their salaries.

According to Demographia, the most unaffordable city in the world last year was Hong Kong, with average property prices equivalent to around 13 times the average salary.

The overall figure for London is now 11.8 times, having risen sharply from 8.6 times in 2011.

The figures come on the same day the Royal Institution of Chartered Surveyors suggested that the Bank of England should consider limiting house price inflation to 5% a year, using its tools to clamp down on lending if prices exceed that.

According to HBOS, house prices across Britain rose by 5.4% in the three months to August.

RICS also suggested that the Bank could start targeting house prices by region - something that the South Korean authorities recently did.

Some, including the Business Secretary, Vince Cable, have warned that if there are further signs of a bubble in parts of the property market, the Government should reconsider the wisdom of the mortgage guarantee scheme at the heart of its Help to Buy programme, which part-funds homebuyers' deposits.

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Twitter IPO: Firm In Stock Market Launch Bid

A Bite-Sized History Of Twitter

Updated: 4:46am UK, Friday 13 September 2013

Twitter came to life on March 21, 2006 when co-founder Jack Dorsey's account (@jack) automatically sent out the first tweet, which read: "just setting up my twttr."

Dorsey followed it up with the first "human-generated" tweet: "inviting coworkers."

Since then, more than 170 billion tweets have gone out worldwide, and Twitter has 500 million users, according to Dashburst.com, a website that monitors the social media industry. Officially, Twitter has only said it has "well over 200 million" users.

Here are some more Twitter facts: 

:: Justin Bieber (@justinbieber) has the most followers with 44,418,729, as of 11pm UK time on Thursday, followed by Katy Perry (@katyperry) with 42,603,233 and Lady Gaga (@ladygaga) with 40,094,580.

:: US President Barack Obama (@barackobama) is fourth with 36,493,643 followers; the announcement of his re-election victory in November 2012 was re-tweeted 802,624 times.

:: The average Twitter user has 208 followers and spends 170 minutes on the site every month.

:: There are more than 200 million active Twitter users, with 80% of all users access Twitter on mobile devices.

:: China is the country with the most Twitter users with 35.5 million, according to Dashburst.

:: About 20 million Twitter accounts are believed to be fake.

:: The hashtag (#) feature on Twitter which groups tweets by subject debuted in August 2007, proposed by a user.

:: In October 2009, Google and Microsoft began integrating tweets into their search products.

:: In January 2013, Twitter introduced Vine, which enabled users to make and tweet six-second looping videos. Some 12 million Vine videos are uploaded every day.

:: In July, 2013, Twitter was criticised for not taking stronger and swifter action against women who became the target of rape and death threats, and subsequently admitted to failing the victims.

:: Twitter is based in San Francisco, with additional employees in New York, Chicago, Los Angeles and Washington. Its total payroll exceeds 900.

:: Twitter was incorporated in April 2007; it was co-founded by Biz Stone, Evan Williams and Jack Dorsey -- @biz, @ev and @jack.

:: The initial Twitter logo was created by Stone, a former graphic designer.

:: Twitter chief executive Dick Costolo is a former improvisational comedian.

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Vince Cable Calls For Minimum Wage Increase

Business Secretary Vince Cable is pressing for an increase in the minimum wage amid concerns that many lower-paid workers are still not benefiting from the burgeoning economic recovery.

Speaking before the Liberal Democrat party conference in Glasgow today, Mr Cable said he would ask the Low Pay Commission to restore its value, which he estimates has fallen in real terms by 10% to 12% since the crash of 2008.

"We cannot go on forever in a low pay and low productivity world in which all we can say to workers is, 'You have got to take a wage cut to keep your job'," he told told The Guardian.

Mr Cable said action to boost low pay should be combined with measures to tackle the abuses of zero-hours contracts.

"We have got to enter into a different kind of workplace. For a very long time, five or six years, wages have been suppressed in low wage sectors. I am sending a signal that we are entering a very different environment," he said.

In a further sign that cost of living issues are set to dominate the annual party conference season, his Lib Dem colleague - Treasury Chief Secretary Danny Alexander - urged employers to ensure that staff benefited in their pay packets as profits picked up again.

"It's not for me as a Treasury minister to start telling employers what their pay policies should be, that's a matter for firms," he told The Daily Telegraph.

"But of course, as growth returns to our economy and we see businesses being successful, the workforce will want to and should share in that success."

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Bank Seven-Day Switch Scheme May Fall Flat

By Poppy Trowbridge, Business and Economics Correspondent

The Government wants banks to work harder to win your business and is backing an initiative to allow customers to swap current accounts within seven working days.

But exclusive research conducted for Sky News reveals that the public is largely unaware of the plan and among those in the know the Government's initiative is unwanted.

From September 16 the so-called 7-Day-Switch scheme will come into effect.

Customers wanting to swap banks can provide their preferred lender with personal details, the bank then makes all the arrangements to bring across salary deposits and bill payments - with a hassle free guarantee.

In a move to revitalise competition in high-street banking, Chancellor George Osborne confirmed the plans back in February after the regulator highlighted how little choice existed in the current account market.

But in a poll of more than 2000 bank customers, 44% of those surveyed said they had never heard of the service.

Of those who had, 53% would not even consider switching when the guarantee is in place.

That is perhaps because 82% say they are happy enough with their current account, another indication that the initiative isn't needed by many.

The four biggest banks in Britain - Lloyds Banking Group, Barclays, Royal Bank of Scotland and HSBC - control three quarters of the current account market, according to figures from the Office of Fair Trading.

That means switching accounts may not result in drastically better deals at one bank or another.

Ali Steed, a personal finance expert at mymoneydiva.com, says many of the rates and products don't differ much from bank to bank.

"At the moment, because interest rates are actually very low, the amount of money you can actually get on your savings - from anywhere on the high street - is not really going to put you in a position where you can beat inflation."

If the government initiative is to have any immediate effect it is likely to be in customer service.

Michael Ossei, from uSwitch, says: "Banks will have to work harder to both attract new customers and keep their existing ones, which means that accounts must offer better value for money and customer service."

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Plastic Bags: Shoppers To Be Charged 5p

Supermarkets and other big stores in England are to introduce a 5p charge for plastic bags.

The move is due to be announced this weekend by Deputy Prime Minister Nick Clegg at the Liberal Democrat conference in Glasgow.

It will bring England into line with the rest of the UK - with charges already in place in Wales and Northern Ireland, and Scotland set to follow suit in 2014.

Lib Dem sources said the charge, intended to discourage use of the environmentally damaging bags, would come into effect in England in 2015.

However, it is not yet clear whether it will be before the general election, set for May that year, or after.

Mr Clegg was said to have had to fought hard within the Coalition for the scheme - which is Lib Dem party policy - at a time when ministers are under intense pressure over rising cost of living.

But with a 76% fall in plastic bag use in Wales since the levy was introduced there in 2011, the Lib Dem leader was said to believe that it was the right thing to do.

A Lib Dem source said the charge would be the "centrepiece" at the conference this weekend.

Energy and Climate Change Secretary Ed Davey told Sky News: "Liberal Democrats in the coalition are pushing the green agenda all the time.

"Sometimes it's quite a fight - this one we've won and it's very clear the evidence shows that plastic bags not only create lots of litter and a real eyesore, but they can be really bad for wild animals, particularly marine life." 

The charge will only apply to supermarkets and other large stores, with small corner shops excluded.

The proceeds will go to charities involved in clearing up the environmental damage caused by the bags rather than the Government or the retailers.

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Santander Bank Hacking Plot: Four In Court

Four men have appeared in court over an attempt to take control of computers at a Santander bank branch to steal millions of pounds.

It is alleged one of the gang posed as an engineer to fit a computer at the branch in Surrey Quays shopping centre, southeast London, with a "keyboard video mouse" (KVM).

The device, which can be purchased online for as little as £10, allegedly allowed them to transmit the contents of the computer's desktop and take control of all computers at the branch.

But the attempt failed and the Spanish bank said "no money was ever at risk".

Lanre Mullins-Abudu, 25, from Putney, southwest London; Dean Outram, 34, from northwest London; Akash Vaghela, 27, from Hounslow, west London; and Asad Ali Qureshi, 35, from southwest London, are charged with conspiracy to steal.

They spoke only to confirm their names and details when they appeared at Westminster Magistrates' Court on Saturday.

They are accused of committing a "very significant and audacious cyber-enabled offence" that would have cost Santander millions of pounds.

Vaghela was granted conditional bail and the others remanded in custody until the next hearing at Southwark Crown Court on September 27.

Eight other people who were arrested were bailed until mid-November pending further inquiries.

A Santander spokesman said no member of staff was involved.

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