Record Property Prices Fuel Bubble Debate

An annual surge of almost 10% in London's house prices has cast more fears about a bubble and highlighted a growing divide in the UK market.

The Office for National Statistics recorded a 9.7% increase in the capital over the year to July, helping to push the value of homes across England to a new high of £255,000 on average.

Prices in London and the wider South East were both found to have raced past their 2008 peaks and stood at an average of £438,000 and £303,000 respectively.

Property prices in the East of England and the South West also edged close to their previous highs but while a 3.7% year-on-year increase was measured in England as a whole, prices dropped by 2% in Scotland and 0.7% in Wales.

Prices in Northern Ireland were up by 1.8% year-on-year.

North East and North West England both recorded falls of 1.3% and 0.7% respectively - highlighting a growing north-south divide, though the ONS said the annual pace of house price inflation picked up across the UK in July to its fastest rate recorded in 2013 so far at 3.3%, taking values to £245,000 on average.

The price rises have prompted concerns that Government initiatives to kick-start the housing market such as Funding for Lending and Help to Buy are in danger of creating a property bubble, with borrowers over-stretching themselves as access to low-deposit deals returns.

In an interview with Sky News, the Business Secretary Vince Cable said the second phase of Help To Buy might have to be reconsidered while the Royal Institution of Chartered Surveyors (RICS) suggested that a 5% cap should be placed on annual house price growth to stop any future bubble.

Matthew Pointon, property economist at consultancy Capital Economics, described London today as a "special case", with prime central London in particular seen as a safe haven for overseas buyers to place their cash.

He said some areas were seeing "bold behaviour" from buyers and predicted that in the short term, a shortage of homes on the market in London is likely to spell further price gains in the capital.

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Inflation 'Ruining Power Of Savings Accounts'

A report highlighting deteriorating consumer saving power claims £10,000 invested five years ago in the average savings account would only be worth £8,844 today.

The website moneyfacts.co.uk issued the findings - charting the effects of taxes and inflation on savers - as official figures credited slowing fuel cost rises and summer discounting of autumn clothing for easing inflation.

The Office for National Statistics said the Consumer Price Index (CPI) measure slowed from an annual rate of 2.8% in July to 2.7% in August - also spurred by a lower rise in air fares compared to the same period last year.

The fall in the CPI rate was credited to clothing and footwear inflation coming at 2% compared to 2.8% 12 months previously, at a time of year when retailers were introducing new full-price autumn ranges.

Meanwhile, petrol prices rose 2p per litre compared to a rise of 3.5p per litre in August 2012, mirroring movements in oil prices.

Air fare increases were smaller than those in August 2012

Air fares were up 9.4% compared to 10.2% a year ago, with the main downward effect coming from domestic routes.

The ONS said the most notable upward contribution to inflation came from furniture, household equipment and maintenance where prices rose for a variety of furniture items and household appliances.

After the figures were released, moneyfacts suggested only three of the 840 ISA and non-ISA accounts on the market now negated the effects of tax and inflation on savers.

It calculated that to beat inflation, a basic rate taxpayer at 20% needed to find a savings account paying 3.38% per annum, while a higher-rate taxpayer at 40% needed an account paying at least 4.5%.

Moneyfacts has questioned the concept of savings accounts

The effect of inflation on savings, it said, meant that £10,000 invested five years ago, allowing for average interest and tax at 20%, would have the spending power of just £8,844.00 today.

Moneyfacts editor Sylvia Waycot said: "Inflation may have fallen but it is still high enough to ruin the spending power of any feeble interest paid on today's savings accounts, which leaves the elderly reliant on savings income and the young saving for a house deposit high and dry.

"It is time to start calling savings accounts by a different name as 'savings' suggests growth and the reality is one of stagnation."

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Heathrow Lands Rudd For New Three-Year Term

By Mark Kleinman, City Editor

The owner of Heathrow Airport will announce on Wednesday that its chairman has agreed to stay on for another three years to steer the company through the most crucial period in its history.

Sky News understands that Heathrow Airport Holdings will say that Sir Nigel Rudd is to prolong his tenure until 2016, enabling it to focus on the battle to win Government backing as the location for an expansion of London's airport capacity.

The company will announce Sir Nigel's new term following a scheduled board meeting, an insider said.

One of Britain's best-known businessmen, Sir Nigel has chaired Heathrow and BAA, its predecessor, since 2007, when it owned a much larger number of British airports, including Gatwick and Stansted.

He is understood to have contemplated stepping down but decided to stay in place to argue the case for an expansion of Heathrow, which is bitterly opposed by commercial rivals, politicians and environmental campaigners.

One factor weighing in favour of Sir Nigel's decision was the fact that Invensys, the industrial group he chairs, is poised to be taken over by Schneider Electric of France, a deal that if completed would see him step down.

As the former chairman of Boots and Pilkington, Sir Nigel has frequently been labelled a member of the club of senior boardroom figures who have overseen the sale of chunks of Britain's industrial heritage to overseas predators.

During his time at Heathrow's parent, he has brought in a number of sovereign wealth and pension funds from Canada, China and Qatar to invest alongside Ferrovial, the Spanish infrastructure group which bought BAA in 2006.

Heathrow's investors are understood to have been keen for Sir Nigel to stay on for a further term that would provide continuity during the run-up to a key Government-commissioned report on the airport capacity debate.

The company's announcement will come weeks after it set out a series of options for bolstering aviation capacity in London and the south-east, focused on a new runway at Heathrow.

It has argued to the commission led by Sir Howard Davies that such a move would be the cheapest and quickest way to fix a looming capacity crunch. Building a third runway could cost up to £18bn and would open between 2025 and 2029, Heathrow believes.

The owners of Gatwick have said that they prefer the idea of a "constellation" of London airports that would be cheaper than the proposal of Boris Johnson, the London mayor, for a newly-built airport costing well over £60bn.

A Heathrow spokesman declined to comment on Tuesday.

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Fed Decision On Stimulus Slowdown Looms

The Federal Reserve is expected to confirm later that it will start to wind down its massive stimulus effort that has pumped $2.8trn (£1.76trn) into the US economy.

Quantitative easing, or QE for short, is credited with helping the US economy overcome the deepest slump since the Great Depression but opinions are split on whether the recovery has been secured.

In the US, the flood of cheap money lifted stock prices to record highs and put a floor under what had been a reeling housing market while Fed chairman Ben Bernanke says it has also aided cutting unemployment and averted a damaging cycle of deflation.

But while the scale of the bond-buying since the financial crisis has boosted recovery by driving interest rates to record lows, it has left financial markets addicted to the low-cost credit and investors worried about the effect of turning off the taps.

Investors have piled into shares amid QE following the financial crisis

The Fed's QE programme has been felt worldwide.

Stock market values have swung wildly since May when the idea of tapering, or slowing down the monetary stimulus, was first floated.

The money helped push banks and other investors towards risky investments in emerging markets, where the prospect of tapering has resulted in huge withdrawals from currencies and stocks.

Last month, the Indian rupee fell to its lowest rate against the dollar to become the weakest currency in Asia - dipping 19% since the start of the year.

The threat of tapering has even been felt in the UK, where long-term market rates have risen steadily over the summer.

The cost to the UK of servicing its debts has climbed over tapering fears

It means the effects of the Fed's bond buying has been controversial both at home and abroad because while QE has helped oil the cogs of world recovery, critics say it was artificial and therefore too risky.

Mr Bernanke has signalled he will look to reduce QE this year and end it next year, but keep short-term rates low for many months afterwards in order to continue to encourage investment and hiring.

Analysts suggest the market has already factored in a $5-$15bn monthly reduction in the scheme.

On Tuesday, the Dow Jones closed higher on greater investor confidence that the US economy could withstand the expected reduction of Federal Reserve bond purchases.

In early trading on Wednesday, the FTSE 100 rose cautiously in early trading on the back of that assessment - along with the other major European markets.

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iPhone 5S Sale Queue Starts Four Days Early

Two Apple devotees have pitched camp outside the firm's flagship store to be the first in the queue for the new iPhone 5S.

The device does not go on sale until Friday, but by that point the enterprising teenagers are hoping to sell their spot for as much as £1,000.

One of the students, Gad Harari, 17, said: "There are crazy people who are willing to do that."

Gad, from Hendon, north London, is a familiar face outside the store as he has always been among the first in line to buy the new models of iPhone.

Noah Green says he has 'pretty much everything that Apple makes'

He took up his spot on Monday and said: "We are always among the first to get a new iPhone. I came down last night to be the first - this time we really wanted to be first."

He said he had already been offered £200 for his place, but reckoned people would offer more before they go on sale at 8am on Friday.

Gad and his friend Noah Green, also 17, and from Stanmore, in northwest London, have been sheltering from the wet weather under a green tent kitted out with technology, including one of Apple's MacBook laptops.

The 5S device, said to be twice as fast as its predecessor, sets itself apart from its competitors with its Touch ID feature. This allows users to unlock their phone with the touch of a finger.

The tent has been kitted out with the latest technology

Noah, who runs his own web business, said: "I'm really excited. It's going to be incredible, this launch. It's going to be the biggest yet.

"I collect Apple products. I pretty much have everything that Apple makes."

5S prices start at £549 and the cheaper 5C phone costs from £469.

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Bust-Up Erupts Over Ronson's City Skyscraper

By Mark Kleinman, City Editor

One of the tallest buildings in the City of London is at the centre of a titanic power struggle following a bust-up between its shareholders.

Sky News can reveal that bankers to the 46-storey Heron Tower on Bishopsgate, which briefly became the financial district's biggest skyscraper, are contemplating calling in receivers in the coming days as a consequence of the row.

The move, which would result in the Tower being put up for sale, would come despite last-ditch talks between its three investors, who are led by Heron International, the developer headed by Gerald Ronson, the property entrepreneur.

The other shareholders are the State General Reserve of Oman and undisclosed members of the Saudi Royal Family. The three are said to be in dispute over the management of the building as well as the circumstances in which they can realise value from their investments.

The appointment of receivers would underline a remarkable failure for a skyscraper hailed as a symbol of the City's efforts to shed the legacy of the 2008 financial crisis when it opened three years later.

Although lauded by property critics, the Heron Tower has rented out just 60% of its available space since opening in March 2011. When fully let, it is expected to command total annual rent of in excess of £25m, according to previous reports.

Mr Ronson developed the skyscraper with a £370m loan - of which only £300m was drawn down – led by two German banks, Hypothekenbank and Landesbank Hessen-Thüringen. Under the terms of the loans a deadline was set by which the developer had to secure tenants for an agreed proportion of the building.

Home to companies including Partnership Assurance, the annuities provider that recently floated on the London Stock Exchange, the trio of shareholders have been discussing since January how to replace a £315m loan from a group of banks now led by Wells Fargo, the American lender.

Wells Fargo took on the loan after acquiring the UK commercial real estate portfolio of Hypothekenbank – also known as Eurohypo – in July, while the other members of the syndicate include Nationwide, the UK's biggest mutual.

A source admitted that there had been "some letting covenant issues" to resolve with the lenders but insisted that the building remained financially viable and that it continued to be more valuable than its outstanding debts.

Starwood Capital, a real estate investment firm, has offered to provide nearly £300m of new debt to assist with the refinancing and is understood to still be in discussions about a possible deal.

One source said that a solvent refinancing by Starwood, rather than a sale or receivership, remained the likeliest outcome of the dispute.

However, people close to the situation said that the Heron Tower also required roughly £120m in fresh equity and that talks between the shareholders had broken down "recently" over the terms and structure of that new financial investment.

One insider said that Heron required under the terms of the new agreement to retain the ability to sell its investment in the building in future, a demand which was resisted by the other shareholders. The shareholder discussions are said to have been made more complex by the myriad advisers surrounding the interested parties.

Mr Ronson is one of the British property sector's most prominent figures, having staged a remarkable comeback from the Guinness share-trading affair of the late 1980s.

Heron International counts some of the world's wealthiest business people, including Steve Wynn, the casinos magnate, and Larry Ellison, the software tycoon, among its investors.

In addition to Mr Ronson's real estate interests, he has also become one of the biggest owners of petrol stations in the UK through Snax 24, a separate venture.

The battle over Heron Tower's future underlines one of the perils of the flood of overseas money to have entered London's commercial property market since the banking crisis.

None of the parties involved were available for comment.

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Manchester Utd Revenue Record As Debts Fall

Manchester United made record revenues of £363.2m in the club's last financial year which saw its partial flotation in New York.

In the 12 months to June 30, profits rose 282% to £17.2m as United completed seven global sponsorship partnerships including a world record shirt deal with Chevrolet.

The club's debt pile - racked up under the ownership of the Glazer family and a source of anger among fans - fell 11% over the period to £389.2m.

It believed that its improved financial performance would continue - as it forecast further revenue growth in its current financial year to between £420m and £430m - helped by new television and sponsorship deals.

David Moyes became club manager at the start of the current financial year

But United said the target - the first under new club manager David Moyes following the retirement of Sir Alex Ferguson - was based on the team finishing third in the English Premier League and reaching the quarter-finals of the Champions League and domestic cups.

Ed Woodward, Executive Vice Chairman, said: "We are very proud of our results for fiscal 2013.

"It has been a little over a year since our IPO (Initial Public Offering) and in that time we have delivered on our targets and objectives.

"Our commercial business continues to be a very powerful engine of growth enabling the team to continue to be successful.

"We won our 20th English League title last season and are delighted to have David Moyes lead our football team into a new and exciting chapter."

The IPO saw anger over a lack of voting rights but demand for shares rose

He concluded: "We look forward to a successful 2013/14, both on and off the pitch."

Analysts seized on the new forecasts and the reduction in debts.

Joe Rundle, head of trading at ETX Capital, told Sky News: "The floatation on the stock market was driven by the club's much needed task to pay down its hefty debt pile, which caused much dismay amongst fans.

"The reduction in debt for that reason should quell fears for any fans and investors who felt that listing on the market was not the right direction for the club.

"Clearly, listing on the stock market is paying off and will continue to do so."

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Bosses' Bonuses Fall Amid Investor Anger

The so-called "shareholder spring" has been credited with sparking a dramatic 7% fall in bonus payments to the bosses of FTSE 100 firms.

Research by auditors PwC found chief executives received average payouts of £905,000 in 2013 compared to £975,000 last year.

It meant, the study suggested, that the heads of top-flight companies received on average two-thirds of the maximum bonus they might have been entitled to, compared to a high of three-quarters in 2011.

PwC said the revolt on remuneration carried out by investors was largely responsible for the drop in rewards.

The "shareholder spring", which began in May 2012, claimed the scalps of two high-profile bosses - Andrew Moss at insurer Aviva and Sly Bailey at Trinity Mirror.

Andrew Moss ran Aviva until he was hounded out by shareholders

Tom Gosling, from PwC, said it was unsurprising following the "bruising" year that firms were now keen to avoid the spotlight over executive pay.

He said: "Companies have heard loud and clear from shareholders that bonuses and pay rises that are not closely linked to performance are unacceptable.

"The fact executives are receiving a lower proportion of their maximum bonus entitlement confirms remuneration committees are getting tougher in setting and measuring bonus targets."

The survey showed executive bonuses across the FTSE 100 and FTSE 250 companies fell for a second year in a row, with one in 10 receiving no bonus at all.

Total pay - including salary, bonus, long-term incentive and pension - was largely static across senior management positions at the 350 businesses.

Where increases have been given they have been roughly in line with inflation at 3%.

One in five FTSE 100 chief executives and 15% of those in FTSE 250 companies have seen pay freezes this year.

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Retirement: One In Five Will 'Never Stop Work'

By Rhiannon Mills, Sky News Reporter

One in five Britons now fear that they will never be able to stop working because of shortfalls in their pensions and savings, according to a new report.

The survey, carried out by HSBC, warns that the UK is heading for an "Age of the Unretired", with pensioners in Britain more gloomy about their future prospects than those in other countries around the world.

The global survey, which questioned 16,000 people in 15 countries, shows that 19% of those asked in the UK expect that they will never be able to afford to retire fully.

In America the figure was 18%, in France and Hong Kong it was 12%, but in Brazil - one of the world's new fast-growing economies - only 5% think they will never retire properly.

It is also perhaps not surprising Brits are so downbeat, with nearly half of the British pensioners questioned saying their retirements had not turned out as they had planned, because they have less money to live on than hoped.

Darren Philp, from the National Association of Pension Funds, was not surprised so many are finding themselves short on funds later on in life.

He said: "The Government's own figures suggest that seven million people aren't saving enough for their retirement.

"Also people are living longer, so any money they do save has to last longer and we know that the economic environment hasn't been great over the past years so investments in pensions haven't been what people expected.

"It's tough out there for people."

Christine Foyster, head of wealth management at HSBC, said: "Today's workers should prepare for retirement as early as possible to have some certainty for retirement. 

"Life is full of reasons to prioritise short-term spending over longer-term planning, but the sooner people start saving, the less likely they will have to rely on working in old age."

Raj Bhudia from London is 42 and works for a bank.

Despite working since he was 16 and financially planning for the future, he believes a restful retirement is some way off.

He told Sky News: "I think everyone is going to have to work beyond 65 or 70, because whatever little pensions we do have are not going to be enough to retire on and obviously the Government pension is not there either.

"My sons, they are going to university. They will be coming out with debts so hopefully we can help them, which means we won't have enough money to retire on and we'll have to work longer."

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Apple iPhone: New iOS 7 Ready To Download

Review: Hands-On With iOS7

Updated: 3:57pm UK, Wednesday 18 September 2013

By David MacLean, Sky News Online

It's slick, it's shiny, and you'll feel like you have a brand new iPhone.

Gone is the clunky and dated interface, swept away by a minimalist design with a raft of new functions.

The most useful feature so far has been a swipe-up menu with options to toggle airplane mode, Wi-Fi, Bluetooth, a torch, and sleep mode.

It's a simple feature that has been around for a few years on some other smartphones, but Apple has always cherry-picked features from other gadgets and refined them.

The first change you'll notice is a stripped-down lock screen, followed by the overhaul of the icons for iPhone's default applications. Everything's flattened.

Design chief Sir Jonathan Ive believes we're smart enough to know how to use our smartphones - icons no longer need to look like real-life 3D buttons to let us know we can push them, for example.

By the same token, he's ditched the yellow legal notepad style of the notes app in favour of a clean white background. The icon for photos is no longer a photo - it's a graphic made up of eight interlocking ovals representing a flower.

The way the phone reacts to your movement and touch has changed too. The background image tilts with the phone, giving it a feeling of depth. When you open a folder you appear to swoosh towards the collection of apps inside.

Everything has been updated, Safari seems quicker and more fluid, the camera has a bunch of Instagram-style features, while the messages app has been streamlined with a new cleaner design.

The drop-down menu at the top of the screen has been improved, giving you a succinct rundown of your day ahead based on your calendar entries, reminders, and other apps.

The biggest problem with iOS7 is battery life. I feel as though I've always got one eye on where my next charge point will be.

It's a problem that most iOS releases have had initially, and Apple will no doubt patch it up with an update, but it's an issue nonetheless.

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