Monday property news update

Covid mutation

The UK outbreak of a Covid-19 variant that computer modelling suggests is 70% more transmissible than other strains will likely warrant an extension of Tier 4 restrictions to other parts of the country, according to officials quoted in this morning's Times. In addition, the EU is expected to announce a blanket ban on connectivity between the UK and the bloc as early as today.

There is no evidence that the new strain is affecting the course of the illness in people who are infected, or the effectiveness of vaccines under development. The strain appears similar to variants found in Spain and South Africa earlier this year, scientists tell the FT.

How these new developments impact our outlook for property markets and the wider economy depends on the scope of any new restrictions, the length of time they are likely to be imposed and the timings of the vaccine roll out, and we'll continue to share our outlook via these notes through the Christmas and New Year period.

The global picture

The price of oil dipped during trading in Asian markets this morning due to the prospect the new strain may warrant further lockdowns that will weigh on demand. That's the first sign that new developments are, for the time being, tempering optimism for the year ahead until more facts are known.

Meanwhile, evidence of a substantial, positive shift in sentiment prompted by news of vaccine rolls outs is now being borne out in the data. British business confidence recorded its biggest improvement in more than four years this month, according to a survey from Lloyds Bank published this morning.

The situation has changed markedly in a matter of months. Flora Harley this morning takes a moment to revisit our five key trends in global real estate markets, published back in August, to see what the latest data suggests about the weeks ahead.

The UK property market outlook

It has been a year of extremes for the UK property market.

Demand in London surged in the early weeks of 2020 following the decisive general election result. It appeared a traditional London-led recovery was under way as buyers and sellers tuned out Brexit risks. Then, following an eight-week shutdown due to the pandemic, demand in suburban and country markets was ignited as buyers looked for more space.

Tom Bill this morning tracks the property market's remarkable path through 2020, and lays out a range of key indicators to provide a full picture of where we stand as we prepare to move into 2021.

Fresh US stimulus

Volatility across financial markets is likely to be limited to some extent by the $900bn agreement struck yesterday between US lawmakers that will include more relief for small businesses and direct payments to American families.

The deal is the second-largest economic relief bill in US history after the $2.2tn Cares Act signed in March and comes at a key moment as the US recovery was showing signs of faltering.

The year in review

This week and next the research team here at Knight Frank will be sharing their reflections on an extraordinary year. First up Kate Everett-Allen and Flora Harley on global wealth and housing markets: -

Although written in August our note on how new wealth from the stock market surge was targeting property rings even truer today. The Dow Jones has broken 30,000 several times in recent weeks and the S&P sits around 15% higher than the start of 2020, from a plunge of over 30% in late-March. With the average ultra-high-net-worth having just under a quarter of their wealth in equities, according to The Wealth Report, this will have a sizeable impact of wealth and confidence. Wealth is on the move. Private Jet travel has bounced back more strongly than commercial air travel. Barbados’ visa for digital nomads has spurred demand on the Caribbean island whilst demand for second passports have soared.

Back in May we expected prime prices globally to struggle in 2020 as lockdowns spread and travel restrictions took hold, but pent-up demand soon emerged as buyers reassessed what and where they wanted to buy, expats looked to gain a foothold back home and digital nomads were tempted by access to visas. Prime prices have proved resilient with Auckland, Seoul and Chinese cities performing strongly. Our 2020 forecast now sits closer to 0% with Shanghai and Cape Town frontrunners for 2021. All eyes are now on Brexit, the changing tax landscape, the vaccine rollout and the easing of travel restrictions.

In other news...

Read the latest from Andrew Shirley on Rural Markets.

Plus, the wrangle over fish drags on, the good news you might have missed, Damac warns on supply in Dubai, and finally, global banks boost Singapore hiring to mitigate Hong Kong risk.