Weekly Market Update- Week Ending 15/04/2022

Investment markets were broadly higher this week. Talks continued in Ukraine and the oil price fell on news the US will release a record amount of its reserves. This measure will help to alleviate some major supply issues as countries continue to search for alternatives to Russian oil.

Against the uncertain backdrop in recent months, house prices in the UK have continued to rise. On Thursday, the Nationwide announced that the pace of growth was at an 18-year high in March at an annual rate of 14.3%. The average house price across the UK now stands at £265,312, some £33,000 higher than a year ago.

A shortage in supply and a strong jobs market has been highlighted as the main drivers behind the sharp rise. On a regional basis, Wales and South-West England saw the biggest gains, whilst London was the lowest at 7%.

For many, the largest asset they own is their home. As prices rise, this can increase consumer confidence through what is known in behavioural economies as the ‘wealth effect’. Although the increase in asset price is just on paper, this perception of being better off can give individuals the confidence to increase spending in other areas of their life.

The direction of prices going forward looks uncertain with affordability likely to be tested. Household budgets are already tightening due to the large increases in the cost of living; simultaneously, the cost of borrowing is also rising.

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John Naylor, Chartered FCSI – Head of Investment Committee