Finimize - 🇬🇧 UK house prices rise

What’s going on here?

Data out on Monday showed that UK house prices rose in September for the third month in a row, which will have homeowners dancing to the beat.

What does this mean?

According to data from British bank Halifax, the average house price in the UK rose 0.3% in September versus August – to just shy of £294,000, or $385,000. That’s almost 5% higher than the same time last year. Analysts think that’s partly down to the rolling stone of August’s Bank of England interest rate cuts. They’ve made it cheaper to borrow money, so those looking to buy have been encouraged to get into the market, helping push up house prices. Case in point: the number of mortgages agreed is up by more than 40% in the last year, and is now at its highest level since July 2022.

Why should I care?

For markets: Economics in action.

Economists are predicting further interest rate cuts in the UK, and that’ll make mortgages even more affordable. In turn, that should mean more folk looking to splash out on homes. But, of course, building more houses takes time and there’s a shortage of them in the UK. So in the meantime, real estate experts are predicting that property prices will keep rising for the rest of this year and into early next.

The bigger picture: Home is where the heart (of the economy) is.

Rising house prices in the UK should make waves in the economy. See, when folks’ homes rise in value, they feel better off. And that’s good for two reasons. One is that people will fork out for things they want but don’t necessarily need, giving a helping hand to consumer-facing goods and services businesses. Another is that people tend to invest more in their homes through things like DIY or renovations, hoping to increase their property values further – and that stands to benefit home improvement firms, like B&Q-owner Kingfisher.

What’s going on here?

Tokyo Metro, a Japanese subway operator, is on track for the country’s biggest initial public offering (IPO) since 2018.

What does this mean?

Tokyo Metro was set up in 2004 and operates nine subway lines in the city, ferrying an estimated six and a half million passengers a day. Japan’s government owns a little over half the company and the Tokyo local government owns the rest. Both will half their holdings following the IPO, which is set to value the company at as much as $4.6 billion. Tokyo is expected to be the only Japanese city that won’t be affected by shrinking populations, which is good news for the metro company. And investors are encouraged that there’ll be a new stock on the market given the recent trend of buyouts in the last year, reducing the number of Japanese companies available to invest in.

Why should I care?

For markets: Infrastructure investors like dividend yields.

Companies like Tokyo Metro are infrastructure companies: they’ve laid down their tracks, quite literally, and make money from those who want to use them. These companies, then, aren’t necessarily going to grow particularly quickly. But they’re cash cows, and investors like them for the money that they generate and that can be paid out – i.e. their yields. In Tokyo Metro’s case, at the mooted valuation and with an estimated annual dividend of 40 yen per share, its dividend yield (annual dividend per share divided by share price) is set to be between 3.3% and 3.6%. That’s higher than other Japanese railway companies at around 2%, which could make Tokyo Metro more attractive than the others to investors when it hits the stock market on October 23rd.