Monday property news update – 26 July
Pingdemic stifling growth, Europe divided and housebuilder headaches
4 minutes to read
Supply chain issues
With UK housebuilders raising concerns around supply chain shortages, as well as ongoing issues with securing land to build new homes, our quarterly development land index, which launched this morning, provides a timely snapshot of the views of leading volume and SME housebuilders.
Our survey finds that supply chain shortages are causing a far greater concern as we move through 2021. Over a quarter of all respondents pointed to ‘supply shortages of key building materials’ being a challenging factor this quarter, up from only 7% in Q1. Respondents are also of the view that delays and shortages are likely to run into the third quarter.
Supplies of materials and labour for construction work have become less resilient in recent months due to a surge in new orders reflecting strong housing demand set against Covid-19 disruption, and the delivery of major infrastructure projects such as HS2.
Despite supply chain issues and rising build costs, housebuilders are seeking to replenish their pipelines after scaling back during 2020. The rise in demand for land is pushing land values in some areas, particularly greenfield sites, as housebuilders focus on building housing schemes with access to open space.
ECB divisions
The European Central Bank’s (ECB) decision to become more tolerant of inflation before raising interest rates has been criticised by its more Hawkish policymakers.
The FT reports that after its latest policy-setting meeting on Thursday, the ECB said it would keep buying bonds and maintain its deeply negative interest rates in an attempt to shift the eurozone economy out of its persistent pattern of sluggish inflation.
The German and Belgian bank heads, who sit on the ECB’s 25-person governing council, objected to the wording of the stance, according to people familiar with the discussions. Jens Weidmann, president of Germany’s Bundesbank, complained that the new conditions set by the ECB were too aggressive and increased the risk of inflation surging above its intended ceiling.
Pingdemic problems
Last Friday we mentioned the impact the so-called “pingdemic” was having on supermarket supply chains, with over half a million people forced to self-isolate in the week ending 14 July .
Reuters reports that the UKs rapid economic bounce-back from the coronavirus pandemic slowed sharply in July as a new wave of cases forced hundreds of thousands of workers to self-isolate under government rules to limit the spread of the disease.
The IHS Markit/CIPS flash composite PMI dropped to 57.7 in July from 62.2 in June, its lowest since March and a sharper fall than most economists had forecast in a Reuters poll.
"July saw the UK economy's recent growth spurt stifled by the rising wave of virus infections, which subdued customer demand, disrupted supply chains and caused widespread staff shortages, and also cast a darkening shadow over the outlook," Chris Williamson, chief business economist at IHS Markit, said.
However, to combat the staff shortages, the BBC reported on Friday that Supermarket depot workers and food manufacturers will be exempt from quarantine rules.
Country market surge
A surge in activity ahead of June’s stamp duty deadline and tight supply saw house price growth in the prime country market reach a level not seen since before the global financial crisis (GFC) in the second quarter, according to research from Chris Druce this morning.
Average values increased by 3.7% in the three months to June, which was the strongest rate of quarterly growth in 15 years. This compares with price growth of 2.8% in the first quarter of 2021.
It means average prices are 10.5% higher than a year ago, which is the strongest rate of annual growth since Q1 2007.
Chris noted that: “while market appraisals for sale have been back above their five-year average in recent months this hasn’t yet converted into enough new listings to meet strong demand for space – putting upwards pressure on prices.”
In other news…
First up, two episodes from the always excellent Wall Street Journal podcast. The first is a follow up on the recent Champlain Towers tragedy which asks “Who’s in charge of fixing Miami’s aging condos?” with some critical questions around liability and risk, and secondly in “Wall Street CEOs say working from homes isn’t working” get ready to feel relieved or disappointed depending on your post-pandemic return to work plan.
Finally: The FT asks whether sharing bank branches could help save the high street. KPMG banking audits are considered “unacceptable”, the UK will have to ramp up EV charge points, electricity demand fuels coal prices, US business activity cools further, US companies raise product prices, and Luxury real estate is still flourishing.