What does the end of the stamp duty holiday mean for the property market in 2021?

Liam Roche
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What does the end of the stamp duty holiday mean for the property market in 2021?

Average UK house prices now stand at £265,000

The stamp duty holiday at the current threshold of £500,000 will come to an end on 30 June, and will stagger back to normal levels before the final deadline in September.

The question on everyone’s minds now is what the end of the stamp duty holiday will mean for the housing market.

The stamp duty holiday has buoyed the property market during the pandemic, with greater demand for property and surging housing prices.

According to figures released by the ONS, average house prices in the UK have jumped by 8.9% for the year to May 2021, now standing at £265,000.

GoodMove, the property buyer, carried out research which found that 39% of Brits took advantage of the stamp duty holiday when buying their home during the past year. It is estimated that they made savings of up to £15,000.

“The stamp duty holiday, as well as demand for more spacious properties fuelled by lockdown, has helped the property market succeed through what has been an immensely difficult year in other industries,” said Ross Counsell, chartered surveyor and director at GoodMove.

But what does the stamp duty holiday exemption mean for the housing market for the rest of 2021?

“As we have seen from HPI statistics across the year, the housing market has become extremely saturated, following people rushing to buy properties to meet the deadline. Mortgage approvals and new buyer enquiries for properties have risen by 44%⁴ with the rise in demand reflecting the inflation of house prices,” said Ross Counsell.

“In a sense, the government’s exclusion of contract exchange with Stamp Duty may be of benefit in the long run. We can expect to see a decline in demand from October once the deadline officially ends, and expect this to be a better time to buy a property this year before rushing to try and meet the deadline.”

Counsell is of the view that buyers should wait to purchase property until the end of the new deadline.

“For anyone looking to purchase a property, the advice is simple – hang fire. If the statistics are reflective of anything over the past year, the Stamp Duty is of benefit to only one side of the coin – the sellers. If buyers can wait it out until the end of the deadline, they should expect to save a significant amount of money on a property,” Counsell said.

“A home is the heart of you and your family, and with only three months to go until the end of the Stamp Duty deadline, it’s worth buyers taking their time to find their dream property. Such a significant stage of life should not be rushed, as this can cause dissatisfaction in the long term.”

Eurozone inflation slows compared to UK and US

Liam Roche
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Eurozone inflation slows compared to UK and US

Inflation across the EU is down by 0.1% from May to 1.9% in June

Eurozone inflation fell in June amid a fall in the price of oil, according to data published on Wednesday.

Inflation across the EU is down by 0.1% from May to 1.9% in June.

The figure matched the European Central Bank’s inflation target of below but close to 2%.

“Additionally, the Core CPI also slowed down to 0.9%, in marked contrast to the recent surprise prints in both the US and UK,” said Jesús Cabra Guisasola, Associate at Validus Risk Management.

Slowing Eurozone inflation is in marked contrast to the US and UK.

“Unlike the US and UK CPI data which helped initiate a move towards a more hawkish tone, these numbers will continue to support the ECB’s ultra-loose monetary policy in the coming months, as Chief Economist Lane already signalled that the September meeting would be too soon for a tapering debate.”

For individual countries, Germany‘s yearly rate of inflation came in at 2.1%, down by 0.3% from May. While Spain held the same at 2.4%, France and Italy saw a 0.1% increase, up to 1.9% and 1.3% respectively.

“So far the market reaction has been muted. However, the euro has come under some downside pressures in recent weeks, with the currency depreciating against the dollar from $1.22 to below the $1.19 level,” said Jesús Cabra Guisasola.

The Bank of England predicted last week that inflation would exceed 3%, above its target for a “temporary period”.

“The economy will experience a temporary period of strong GDP growth and above-target CPI inflation, after which growth and inflation will fall back,” the monetary policy committee said.

“A decline in eurozone CPI should provide some relief for markets given the impact it could have upon ECB thinking. Nonetheless, markets are on the back foot, with travel stocks once again feeling the heat in the UK,” said Joshua Mahony, Senior Market Analyst at IG.

“European stocks are on the back foot in early trade today, with another bout of sterling weakness providing little upside momentum for the FTSE 100. On a day dominated by economic data, eurozone inflation has provided a welcome sign of easing pressure on the central banks.”

Vietnam Holding: ‘exposure to a high-growth frontier market with conviction stock ideas’

Liam Roche
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Vietnam Holding: ‘exposure to a high-growth frontier market with conviction stock ideas’

Vietnam Holding

Vietnam Holding (LON:VNH) is a closed-ended fund that invests in high-growth companies in Vietnam, focusing on domestic consumption, industrialisation and urbanisation.

The London-listed investment trust, launched in 2006, offers nimble stock selection with integrated ESG. It has also been signed up to the United Nations Principles for Responsible Investment (PRI) for over ten years.

“We have a team of 12 people on the ground in Vietnam actively managing the fairly concentrated portfolio”, said Craig Martin, chairman of Dynam Capital, the manager of Vietnam Holding.

In June, Edison Group, the investment research and advisory company, released a research note on the fund, making the case that it offers investors exposure to a high-growth frontier market.

Edison Analyst View

Edison is of the view that Vietnam Holding gives investors exposure to a high-growth frontier market with “conviction stock ideas across the market cap spectrum”.

Vietnam’s transformation began some 30 years ago and the analyst now feels that the country is booming. 60% of the fund is geared towards consumption, industrialisation and urbanisation, and Edison feels that it is well placed to offer exposure to these mega trends.

“VNH’s performance relative to the index can be volatile”, said Edison’s research note. This is because it is a very concentrated fund. “Over the past month (to end-May), the top four holdings (39% of NAV) drove strong outperformance vs the index (19% NAV TR vs 8% for the index), resulting in the fund’s NAV outperforming over one and three months,” the note added.

Performance

Vietnam Holding does not have a benchmark, however, Edison used two Vietnamese equity indices to measure the fund’s performance.

The London-based fund has outperformed the VN Index (385 members, the broader market index of the two) and VN All-Share Index (259 members) over the past six months and one year period by 9.2% and 6.3%, and 12.1% and 9.2% respectively. This is on a net asset value (NAV) total return basis.

The portfolio is set to perform well in 2021, according to Edison. That is because of its allocation to economically sensitive industries including banks and retail, providing the economy continues to perform well supported by the “global cyclical recovery and ongoing domestic growth”.

UK Investor Magazine Conference

Vietnam Holding (LON:VNH) presented at the UK Investor Magazine Virtual Conference in March.

Craig Martin, Chairman of Dynam Capital, the manager of Vietnam Holding, presents the case of investing in Vietnam and provides detailed insight into the Southeast Asian economy.

Sunak’s Green Bonds could provide a litmus test for green savings

Liam Roche
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Sunak’s Green Bonds could provide a litmus test for green savings

The success of the new green bond will likely depend on the interest rate on offer

Rishi Sunak is expected to confirm plans for £15bn worth of green savings bonds in the coming days, which will allow Brits to invest in renewable energy schemes.

The bonds, expected to be among the biggest in the world, will be accessible via NS&I, a savings organisation backed by the treasury.

The announcement by the chancellor comes as the UK government steps up its efforts to go green ahead of the upcoming Cop26 climate conference in Scotland.

Sunak has previously said that Britain will market its first green bond in 2021 to meet growing investor demand for such assets designed to fund an environmentally friendly allocation of resources.

The success of the new green bond will likely depend on the interest rate on offer.

“Savers showed they’re willing to vote with their feet when NS&I cut interest rates across a swathe of accounts last November, and if the green savings bond offers a paltry rate of interest, it might fail to ignite demand from the public. On the flip side, if the interest rate is too high, it will raise questions about the cost to the taxpayer, because the green savings bond is ultimately just government borrowing by another name,” said Laith Khalaf, financial analyst at AJ Bell.

Thanks to the Bank of England’s quantitative easing programme and ultra-low interest rates, the government is able to borrow money cheaply, currently around 0.4% per year for 5 years.

“Any premium offered by the green savings bond above prevailing gilt yields is effectively an extra burden for the taxpayer, and costs incurred in this way will naturally be weighed up against other fiscal decisions taken by the Chancellor to repair the nation’s finances in the wake of the pandemic,” Khalaf added.

The longer-term nature of funding green projects means that the Treasury will need to decided how long they keep savers’ money stored away.

“Presumably the government won’t want money flowing in and out regularly, so an instant access account doesn’t look feasible, and a product that locks up savings for say five years looks more appropriate. The longer the government asks savers to keep their money in the bond, the less take-up they are likely to get without offering a seriously big slice of interest.”

There has been a substantial rise in demand for ESG investment funds recently, with inflows into the industry reaching £10bn in 202, up from £3bn the year before.

“The new NS&I bond will be a litmus test to see if there is appetite in the savings market for sustainable products on a big scale. In theory a green NS&I bond is a great idea which will give consumers the option of an environmentally friendly savings account from a trusted provider. But the Treasury faces challenges in the design of the bond to ensure it hits the mark with savers, and at the same time doesn’t cost the taxpayer too much money,” said Khalaf.

FTSE 100 and DAX hungover from historic night at Wembley

Liam Roche
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FTSE 100 and DAX hungover from historic night at Wembley

The FTSE 100 fell 0.94% to 7,021 while the DAX slipped 1.35%, following slow starts to the day on the back of England’s historic victory over Germany at Wembley.

“Investors in each of these markets clearly did not want to get out of bed, either because of hangovers or disappointment respectively”, said Russ Mould, investment director at AJ Bell.

“Healthcare and technology stocks did their best to continue the party in the UK, but it wasn’t enough to revive the FTSE, with financials, energy, real estate and miners in the red,” Mould added.

IAG, owner of British Airways, continued its poor run of form as investors appear to be concerned over the aviation industry in general. The IAG share price is now down by 18.8% over the past month.

“In Germany, the Dax was pulled down by similar sectors to the FTSE 100, with automotive-related stocks also stuck in reverse. Having shot up earlier this year as investors hoped it would be a major success in the electric vehicle space, Volkswagen was the Dax’s biggest faller on Wednesday, followed by chassis and powertrain specialist Continental,” said Mould.

FTSE 100 Top Risers

The top three risers on the FTSE 100 on Wednesday, and the only three in the green at the time of writing, are Croda (0.46%), Sainsbury (0.21%) and Smith and Nephew (0.19%).

Rolls-Royce (-3.51%), IAG (-3.35%) and Taylor Wimpey (-2.43%) are trailing the pack of the UK index during the morning session.

Serco looks beyond pandemic following strong first half of the year

Liam Roche
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Serco looks beyond pandemic following strong first half of the year

Serco revealed growth in its underlying profit of more than 50%

Serco (LON:SRP) reported a 19% increase in revenue on Wednesday, as the company provided an update for H1 2021 and its guidance for the whole year.

The FTSE 250 company revealed growth in its underlying trading profit of more than 50%, while its order intake is at record levels of nearly £4bn.

This includes major contracts with the UK Ministry of Defence, the Department of Work & Pensions and the Royal Canadian Airforce.

Serco is in a ‘robust financial position’ with adjusted net debt expected to be around £275m, while leverage is towards the bottom end of its target range of 1-2 times net debt.

“For the year as a whole, we expect to deliver Underlying Trading Profit of around £200m, or nearly 30% growth in constant currency,” said Rupert Soames, Serco chief executive.

“Profits will be weighted to the first half, and will include contributions from the WBB and FFA acquisitions, which will enable us to absorb the impact of the end of the AWE contract, the mobilisation costs of the recently-signed DWP contract and an expected reduction in Covid-19 related activities.”

Serco also intends to capitalise on the current strong trading to temporarily increase its rate of investment in its systems platform, cyber resilience, and business development spend to “respond to a strong pipeline of opportunities”.

Neil Shah, Director of Research at Edison Group, commented on Serco’s trading update:

“What’s interesting is that the company has reported Covid-19 contracts to have surged, representing £340m of first half revenues expected to be related to the pandemic, up from a comparatively low £80m in the prior year – a figure complemented by the recent £322m deal signed for the firm to run test and trace centres for the next 12 months,” said Shah.

“Serco will expect their new acquisitions FFA and WBB, both focused on long term activities, to continue their positive impact (having already contributed about 5% to revenues), as the firm seeks to ensure growth outside a pandemic context.”

Earlier this week, Serco secured a new £322m contract to continue operating Covid-19 testing locations.

Stagecoach arrives at a fork in the road

Liam Roche
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Stagecoach arrives at a fork in the road

Stagecoach sees its pre-tax profit fall by 40% to £24.7m

Stagecoach (LON:SGC), the Scottish transport group, confirmed its profit and revenue declined during the pandemic as lockdowns negatively impacted the industry.

The group also revealed that it is getting rid of its full year dividend.

Stagecoach saw its profit before tax fall by 40% to £24.7m, while revenue for the year ending in May fell by £0.472bn to £928m.

“During the worst of the lockdowns, bus operators like Stagecoach saw just 25% of regular passenger numbers, this was back up to 50% by May and is still climbing. Stagecoach is now beholden to a new set of circumstances beyond their control such as public confidence, hybrid working patterns and the vaccine rollout,” said Ben Nuttall, Senior Analyst at Third Bridge.

“Rail journeys are more driven by people heading to work, whereas bus journeys are driven by leisure activities. This implies hybrid working patterns are more likely to have a long-term impact on trains rather than buses.”

Stagecoach is looking to the future now which could involve a shift in how transport is used.

“We expect a reconfiguration of demand within local transport networks,” the company said.

23% of its bus journeys outside of London were made by residents for commuting and business, meaning the company is less reliant on these travellers than other modes of transport.

“We see an overall net positive opportunity as government policy, changing consumer attitudes, health drivers and climate change targets necessitate less use of cars and more use of sustainable public transport and active travel,” the company said.

Stagecoach added: “It remains difficult to reliably predict the speed and extent of the recovery in the short-term, including the level of profit for the new financial year ending 30 April 2022.”

“The Government’s bus strategy marks a fork in the road for the UK bus sector,” say Nuttall.

“Our experts predict that where Stagecoach don’t achieve the partnership model they are pushing for, foreign operators, like RATPDev and Abellio, are likely to swoop in – given that Stagecoach is unlikely to accept the low margin of a franchise.”

Stagecoach faces some difficult structural issues around congestion, the decline of the high street, and the UK’s changing demographic.

“The pandemic has pushed bus operators like stagecoach to think a lot harder about the presentation and cleanliness of their vehicles as they fight to get passengers back on board.”

Dixons Carphone posts £4.9bn revenue on growing demand for tech during pandemic

Liam Roche
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Dixons Carphone posts £4.9bn revenue on growing demand for tech during pandemic

Dixons Carphone will resume dividend payments

Dixons Carphone (LON:DC) confirmed on Wednesday that it made £4.9bn in revenue across the UK and Ireland as demand for technology products soared during the pandemic.

The company also posted a 34% increase in yearly profit and committed to resuming its dividend payments.

The group, better known s Currys PC World and Carphone Warehouse in the UK, announced an adjusted profit before tax of £156m for the year ended at the beginning of May.

“Technology has become even more central to people’s lives,” said Alex Baldock, CEO of Dixons Carphone.

James Andrews, Personal Finance Expert at money.co.uk, commented on how Dixons Carphone outperformed other retailers throughout the pandemic.

“The secret to its success has been its ability to successfully market products online to rival that of in-store shopping. The online push – which includes the ShopLive service connecting potential customers with real-life store staff for demonstrations and more – started before the virus hit, seeing the high street chain already one step ahead of many rivals,” Andrews said.

“Thanks to Dixons Carphone’s strong online offering, the retailer has managed to keep profitable despite the closure of its stores around the UK. Over the past year, digital sales have grown by triple digit figures, backing up the sentiment that a smooth online buying process is imperative to its 2021 success.”

“The retailer had a quick decision to shutter stores that had become unsustainable and move stand-alone Carphone branches into Dixons or Currys PC World stores, also helped the retailer drastically limit its losses.”

“This week Dixons Carphone also secured an exclusive deal with Vodafone to its mobile phone plans across its 300 stores. This is a strong signal to customers and investors, following EE and O2’s decision to sever its contracts after being hit by financial penalties for not reaching sales targets.”

Seraphim Space IT set for lift off

Andrew Hore
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Seraphim Space IT set for lift off

Seraphim Space Investment Trust is providing investors with an opportunity to invest in advanced space technology and the growing companies that are developing that technology. There is an intermediaries offer so small investors have a chance to take part in the £150m fundraising.
As well as the fundraising at 100p a share, Seraphim Space is issuing up to 30 million shares to acquire an existing portfolio of space-related investments. The current valuation of the portfolio is £26.1m, but four of the investee companies are in the middle of funding rounds and the final price depends on the valua...

Media Tech SPAC launches PrimaryBid offer

Andrew Hore
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Media Tech SPAC launches PrimaryBid offer

Media Tech SPAC is raising cash via Primary Bid ahead of a standard listing later this summer. The investment company is seeking to acquire media and technology companies. The company wants to raise up to £6m at 10p a share.
Riverfort Global Capital, which is likely to seek to launch other SPACs, and Barry Downes of Sure Valley Ventures are behind the venture. The focus is technology businesses in Europe that have a strong management team and innovative, scalable technology.
Areas of interest include digital technology, cyber security, social media, content distribution, virtual reality, gamin...

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