Minutes of the MPC?s meetings and the Bank?s Inflation Report continued to emphasise the incipient risk posed by inflation. It is widely expected that the MPC will make its first quarter point increase in the second half of 2011.
• The sovereign debt crisis in the Eurozone spread from Ireland to Portugal. On 16th May 2011 Eurozone finance ministers had to agree a £78 billion bail-out for Portugal and there were fears that Greece would require further support. More seriously for London, there were fears that two of europe?s big economies would require similar intervention: Spain and Italy.
• The “Arab Spring” and military intervention in Libya created uncertainty close to europe and although there was little direct evidence of investment from those countries in the London housing market, London?s status as a “safe haven” for capital was bolstered.
• The conflicts in North Africa and the Middle East inevitably had an impact on the oil price which rose from $70 a barrel to $114 a
barrel in May 2011, stoking inflationary fires in the UK. Although the price fell to $101 in June, analysts forecast the price in June 2012 at $116 a barrel.
• The Budget in March included provisions which could lead to the promotion of housing supply by allowing the change of use of The overall effect of higher prices in the first half of 2011 was to commercial buildings to residential without planning permission. increase the levels of stock available for sale as vendors realised that In our view, this proposal is unlikely to be implemented in this form they would be able to sell at historically high prices. All sectors of the
and even if planning rules are eased, there are plenty of other market experienced price growth. Some buyers, whom in our view, regulatory hoops for developers to jump through.
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