Monday property news update - 1st March
Support for first-time buyers, the impact of the Budget and more on the outlook for London's offices
4 minutes to read
Support for first-time buyers
The government will this week announce a new Mortgage Guarantee Scheme allowing buyers in England to obtain a mortgage with only a 5% deposit.
Under plans to be announced in Wednesday's budget and launched in April, the Treasury will guarantee a portion of the loans on homes worth up to £600,000. That will enable mortgage lenders to step back into a market they have largely stayed out of since the onset of the crisis.
Product availability in the mortgage market is at an 11-month high and the largest increase in new products in recent weeks has been at 90% loan-to-value, however 95% LTV has proved a sticking point. With employment proving more resilient than many had anticipated, we had expected availability at this level to improve as the year progressed, however the guarantee scheme will bring that recovery forward, unlocking the market for many buyers that have been frozen out to date. It is a significant moment, particularly for first-time buyers.
The home straight
Tom Bill has more on the likely contents of this week's budget and speaks to experts across tax and law to better understand the implications. For the property market, like the rest of the economy, the announcements will be focussed on getting the economy down the home straight of the pandemic rather than what happens on the other side.
The stamp duty holiday will now likely end in June rather than 31 March, and the chancellor will opt not to push on with the mooted plan to align rates of capital gains tax with income tax, though our expert panel think it will happen eventually, possibly in the autumn.
Meanwhile the FT has been walked through new OBR forecasts - usually published on budget day - showing the growth rate for 2021 will be the fastest the UK has experienced in almost 50 years, with output likely to recover to the 2019 peak early next year.
The outlook for London's offices, continued
We talked on Friday about London office occupiers opting to release office space in response to business restructuring and new methods of working. In a new report on the London office market, Faisal Durrani lays out in greater detail how we expect this to impact the market as a whole.
Our forecasts are predicated on a long term structural shift in the market, translating to a projection that occupiers are, on average, likely to shrink their existing office footprints by up to 10% over the next five years. As a result, we expect a decline in prime headline rents in 12 of the 18 submarkets we track of up to £2.50 per sq ft this year, before rents begin rising from 2022 onwards.
This is in large part down to a long-term shortage of high quality space. We have run various scenarios to test the market’s resilience to declining long-term take-up and even in the unlikely hypothetical scenario of a 30% decline in average take-up over the next three years, the market would still be faced with a shortfall of 7.6m sq ft.
The engine of the global economy
Economic data from factories across Asia suggests the recovery is extending beyond China as the region's export-reliant economies gain from improving global household consumption.
In Japan, manufacturing activity expanded at the fastest pace in over two years while South Korea’s exports rose for a fourth straight month in February. China’s factory activity grew at the slowest pace in nine months following a localised outbreak of the virus, though analysts expect this to be a temporary blip.
Strong manufacturing figures also emerged in India, the Philippines, Indonesia and Vietnam. Evidence of a sustained region-wide recovery has big implications for both the global economy and property markets locally. Here's Stephen Wong with the latest on local logistics markets.
In other news...
In a new Rural Market Update, Andrew Shirley looks at Labour's olive branch to the sector, and Stephen Springham has the latest from the retail sector following the government's 'roadmap out of lockdown'.
Plus, Australia home prices surge as the recovery blitzes expectations, More than 20 million in Britain get first vaccine dose, vaccines for over-40s in UK to begin this month, six million accidental savers 'created by Covid crisis', single Covid vaccine reduces risk of going to hospital by 90%, and finally – don’t forget to sign up to watch The Wealth Report launch film tomorrow morning at 9am.
Photo by paul silvan on Unsplash