Knight Frank Daily Update Friday 10th July

Good morning,

Need to know

Economic indicators, from mortgage lending to high street footfall, are improving from record lows as the UK government continues to reopen the economy.

Shoppers have been returning to the high street since the reopening of non-essential stores on June 15. Footfall was down 63% in annual terms in June, although this was 19 percentage points above May’s reading.

Theatres in England will be able to hold outdoor performances from this weekend and beauticians can reopen next week. Indoor gyms and swimming pools will be able to reopen from July 25.  

Despite an improving economic picture across Europe, more than half of respondents in a Bloomberg survey predict an increase in the ECB’s 1.35 trillion-euro pandemic purchase program by December.

Australia will tighten inbound travel and review quarantine procedures after a spike in cases in its second-largest city and the US yesterday hit another daily record in new cases. 

We're yet to see how the recent acceleration of new cases across southern and western states will affect the US economy. The number of Americans filing for jobless benefits dropped to a near four-month low last week, though a record 32.9 million people are collecting unemployment benefits.

Concerns among investors over various 'Whack-a'-Mole'-style strategies to stem new outbreaks is starting to weigh on markets.

The property market

Kate Everett-Allen this morning takes a closer look at the recent outbreak in Beijing. 

On discovering the new spread, the response in Beijing was fast and effective: schools were closed, access to the infected areas was strictly controlled and mass coronavirus testing was carried out. 

Despite the successful containment, Kate says a number of corporate occupiers of office space are now going through a level of decision paralysis, unsure about how conditions will look in the coming months and putting off expansions or relocations.

It seems that until an effective medical solution (either therapeutic or vaccine) is introduced, many markets are likely to go through similar patterns of outbreaks, restrictions and economic consequences.

The pandemic has provoked renewed questions as to the role of cities and whether the increase in urbanisation we've seen in recent decades will continue as the threat subsides. I shared some thoughts on LinkedIn earlier this week.

City planning has a role to play via its impact on factors known to affect the spread of the virus, whether that be distribution of wealth, commute times, or the concentration of multi-generational households. Some cities are already making necessary modifications. Lisbon plans to have over 30km of emergency cycle lanes by September and another 20km by the end of 2020, according to the latest global economic analysis by Flora Harley.

Traffic congestion across 19 cities is now 28% below the 2019 average, compared to 38% below in April ,and workplace activity is on average 25% below, up from 48% below baseline in April.

Staying with the theme, in a new Intelligence Talks podcast, Grosvenor’s residential development director in Madrid Javier Martin shares his view of the market there and discusses how city living could evolve in the wake of the pandemic. Anna Ward also delves into Knight Frank’s latest Spanish research with Kate Everett Allen in London and partner Carlos Zamora in Madrid. Listen on Apple, Spotify or Acast.

In the UK, Persimmon yesterday said its construction teams are now achieving normal levels of production and weekly average net private sales reservations since reopening its sales offices have been about 30% higher than the same period last year. Total forward sales stand about15% higher than last year.

Vistry said trading conditions are improving, prices have remained stable and it is seeing deflationary pressure in its supply chain.

Our later life finance expert David Forsdyke explains what homeowners should consider when looking to borrow money against their home.

Finally, thank you to all those who contributed to our survey – your contributions will help us develop the regularity and content of this update through the summer.

Any questions, please contact me, or the team.