Friday property news update - 27 August
The first post-pandemic rate hike, Saudi's vision and a new street battle
4 minutes to read
Alfresco
Westminster council will reintroduce traffic to the streets of Soho at the end of September, thereby ending widely-shared scenes of streets packed with smiling alfresco diners. Disagreement is brewing, with Soho Estates managing director John James saying the decision will send Soho's streets back into effective lockdown.
Mr James and the Soho Business Alliance are understandably concerned about the immediate impact on local companies, but the disagreement taps into a long-running debate over the most effective use of space in crowded cities. New York faces a similar dilemma. Former governor Andrew Cuomo extended New York's outdoor dining plan into 2022, but the long-term future of the scheme remains uncertain.
While residents complain about noise and rubbish, some cities finding a middle ground. The Wealth Report 2021 visited Barcelona, where since 2016 the local government has been carving out car-free neighbourhoods of approximately 40 acres called "superblocks". All vehicles other than those belonging to residents, delivery vehicles or emergency services have been banished to surrounding larger roads, with a view to cutting private car use by 21%.
That model appears to be working. The government wants to transform the entire city grid into 500 superblocks over the long term, radically reshaping how pedestrians use inner city districts.
South Korea
Federal Reserve Chairman Jerome Powell will give a speech to the Jackson Hole meeting of central bankers later today that will be closely watched for clues as to whether the Fed will begin tightening monetary policy. A move in either direction could pave the way for the world's central bankers to begin dialling down stimulus in the face of rising inflation, or keep the purse strings loose amid the spread of the delta variant.
Not all economies are sitting on their hands. South Korea yesterday became the first developed economy to raise interest rates since the onset of the crisis. Capital Economics suggested officials are increasingly confident of the economy's footing in the face of Covid-19 and decided to act in the face of rising house prices (+14.3% during the year to July) and worsening household debt (+10% in the year to Q2).
It is one of scores of central banks unhappy about rising house prices, but many are divided over whether they have a role to play in mitigating worsening affordability. In March, the government of New Zealand ordered its central bank to consider house prices when making monetary policy decisions. Bank of England research recently confirmed interest rates are to blame for the UK's high house prices, rather than supply, and calls for the Bank to follow New Zealand's lead are likely to grow as house prices continue to climb.
Saudi Arabia
Faisal Durrani takes a deep dive in Saudi Arabia's "Vision 2030" plan to become an industrial powerhouse.
Faisal finds close to US$1 trillion of real estate and infrastructure projects have been announced since 2016. Nearly US$300bn of the total spend is dedicated to new infrastructure, including vast new passenger rail networks and a brand-new airport for Riyadh (US$147 billion), which is expected to be the home base for a new national airline.
The scale of the plans from a real estate perspective are huge. Some 8 new cities are planned, mostly on the country’s western seaboard, along the Red Sea coast, where nearly US$575 billion is being spent to deliver over 1.3 million new homes, more than 3 million sq m of offices and over 100,000 hotel rooms.
Shifting sustainability
Jennifer Townsend considers the rapidly shifting attitudes to ESG and climate change and weighs up the real-world impacts for commercial real estate. A total of 70 FTSE100 companies have now made net-zero pledges, a rise of more than 50% in just one year.
Efforts to tackle social and environmental challenges could create 24 million jobs globally by 2040, which will give rise to scores of new sources of demand, from electric vehicles to renewable energy and climate tech. See the full piece for more.
In other news...
Stephen Wong tracks efforts to repurpose assets in Asia in the wake of the pandemic.
Elsewhere - labour shortages leave UK farms with 70,000 surplus pigs, US investors cut leverage for first time since the start of the pandemic, demand is growing for overseas remote workers, and finally, Hong Kong home prices rise for a seventh month in succession.