Global Residential Market Outlook - 21 May 2020

Written By:

Kate Everett-Allen, Knight Frank

21 May 2020

7 minutes to read

Categories: Covid-19 Global

Residential digest

The last week has seen lockdown extensions announced in India (to 31 May) and Spain (to 7 June) whilst Italy and Portugal eased restrictions on shops, restaurants and travel on Monday.  The UK property market reopened for business and real-time economic data showed all of the 18 cities we’re tracking saw an uptick in workplace activity in the week ending 9 May.

Many countries with the highest per capita infection rates have now passed their peak, including those in Western Europe. In contrast, countries in the Eastern Mediterranean and Middle East, as well as Latin America have accelerating trends.

From bubbles to bridges, one key development we are monitoring closely is the opening of borders which given the prime market’s international bias, will have an impact on residential markets globally. Alongside, the plans to increase airline capacity as covered in last week’s update, this week we take a closer look at the border announcements to date in our Data Digest below.

Below we present the latest residential news and data from across the rest of our network and beyond.

Europe

The good news is that no country in Europe has had reason to reverse its lockdown plan as yet with housing markets gaining traction across France, Italy, Germany, Switzerland, Portugal and the UK.

This week, the Bundesbank announced “a recovery is under way” in Germany, the EU’s biggest economy, providing markets with a degree of optimism. The EU approved a €500 bn fiscal package, proposed by France and Germany, which will take the form of a grant not a loan although there is some scepticism that for those countries hardest hit by the crisis such as Italy, the real benefit may translate to only 2% of GDP.

This week we shine a light on Berlin which after one of Europe’s shortest lockdown periods is open for business with the latest Oxford Economics forecasts underlining both its youthful profile and the expansion it is set to see in relation to disposable household incomes – a 11% rise over the next four years.

In the UK, a week has passed since the government relaxed restrictions on property transactions and the latest data shows the rebound in house purchase enquiries last week was bigger than the so-called ‘Boris Bounce’ that followed December’s general election result.

US & Canada

In the US, all 50 states are now taking steps to reopen, but at very different speeds. Alaska and Texas have seen most restrictions lifted, whilst Connecticut only lifted its stay-at-home order on Wednesday this week. California's governor, Gavin Newsom, reported that three quarters of the state’s economy is now open. 

Evidence is growing that sentiment amongst US homebuilders is improving. Data from the National Association of Housebuilders (NAHB) shows confidence amongst those operating in the newly-built single-family home sector increased seven points to 37 in May, as more furloughed workers returned to work and interest rates stayed low. According to NAHB-Wells Fargo, prospective buyer traffic also increased from 13 points in April to 21 in May, although the numbers remain some way off pre-Covid-19 levels.

Delta, which does not expect air travel to recover for two or three years, has announced plans to increase capacity to 60% from July onwards, whilst both Delta and United Airlines intend to restart flights to China in June, for the first time since February.

New data from Canada for April shows a 5.3% rise in prices across the country’s 11 major cities year-on-year, but the index from Teranet and Bank of Canada suggest this is the swan song prior to Covid-19’s impact which will be evident in May’s figures.

Asia Pacific

The latest roundup from our Asia research teams shows that residential listings are increasing in Malaysia and Seoul, although strengthening sales volumes remain confined to first tier cities in mainland China and in Hong Kong.

The Singapore Government has announced it will be coming out of ‘Circuit Breaker’ on 1 June but workers are still be encouraged to work from home.

Australia and New Zealand’s housing markets are emerging from lockdown and seeing activity resume. In Sydney, open homes and in-person auctions are now permitted.

Prior to lockdown, the residential market was gaining momentum across most Australian cities, our latest analysis looks at the top ten trends for Australian residential development from the change in apartment sizes to the dominance of high density sites.

Data digest

Bubbles and Bridges - what do we know?

There are tentative steps being taken about travel bubbles and air bridges, they’re essentially the same, a means for countries to open borders with other nations that have a low and controlled number of cases of Covid-19. Detail is scarce, but the assumption is that those returning via such bridges would not have to face a 14-day quarantine period.

Most borders in Europe are closed but for some, plans are afoot to re-open - Italy on 3 June, Germany, Austria, France and Switzerland on 15 June, a list of the latest plans announced by key countries is below.

* In most cases a 14-day quarantine period still applies on arrival

** Reports suggest Greece may be one of the first countries linked by an air bridge with the UK. At present anyone arriving from abroad in the UK must have a health certificate confirming that they don’t have Covid-19, or they must self isolate for 14 days

But what we’re expecting, a bit like the Trans-Tasman link that has has been mooted between Australia and New Zealand, is that small blocs will start to emerge within which the free movement of people is allowed. 

The Baltic states have already implemented this as of 15 May with Estonia, Latvia and Lithuania opening their borders and allow free movement between each. 

The Economist published an article this week, stating that much like trade agreements, the bigger the travel bubble the greater the economic benefits and it estimates we could see two large bubbles emerge globally – one in Asia Pacific and the other in Europe reaching across the Baltic to the Adriatic which would subsume the ones already being formed.

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