The tulip withers, wage pressure mounts and the built environment's roadmap to net zero
Making sense of the latest trends in property and economics from around the globe.
5 minutes to read
COP26 Update
The big news from the COP26 'Built Environment Day' was the launch of the UK Green Buildings Council's (UKGBC) roadmap to net zero, which laid out a mixture of policy interventions and actions from industry that will be required to hit ambitious emissions reduction targets - see Flora Harley's take here.
The report confirmed that, when you factor in the transport elements of the construction process, the UK built environment is responsible for 42% of national emissions. Existing homes make up a 60% chunk of that when you include embodied carbon. It's been clear for some time that this is where most progress can be made and the UKGBC confirms that a nation-wide retrofitting program of some 29 million homes would reduce their emissions by 98% by 2050.
That would of course require vast government intervention and, as we've noted previously, the appetite so far has been limited - or as the head of the government's own Climate Change Committee (CCC) noted back in June, there is a gulf between ambition and a willingness to take tough decisions that affect people's lives.
Still, the roadmap puts forward a number of incentives to help retrofit 97% of homes by 2040, including; variable stamp-duty adjusted in line with EPC, removal of VAT on refurbishment, council tax reform, government grants, incentivising banks and lenders to offer low interest and mortgage extensions and loans for retrofitting, and adjusting the gas and electricity tax regime.
The UK economy
The UK economy grew by 0.6% in September and is now just 0.6% below its pre-pandemic size, according to official figures released yesterday. That caps growth of 1.3% in Q3, down from 5.5% in Q2.
Stepping back, the numbers are a mixed bag. The dominant services sector is being held back by weak consumer spending and retail sales. The construction sector returned to growth after two months of contractions, but was still held back by rising prices and the availability of some materials.
These official figures are for September and more recent data suggests the construction sector's staffing and materials woes may have peaked, see the previous two notes. A new study by payroll provider Hudson Contract states that the cost of construction labour is seeing a “gradual return to normality."
Broader staffing shortages are showing little signs of slowing, which will exert further upwards pressure on wages. More than 220,000 job adverts were posted during the first week of November and reveal shortages of everything from driving instructors to prison officers and fork-lift truck drivers, according to data from the Recruitment & Employment Confederation. Meanwhile, more than 80% of the 1,000 companies surveyed by the British Chambers of Commerce said higher prices as well as shortages of goods and workers were hitting their bottom lines, all of which is going to heap pressure on the Bank of England to raise interest rates next month.
Runaway house prices
By the end of next year, interest rates will have risen across many nations. How that will impact housing markets that have seen record growth in the past twelve months remains uncertain, though will depend largely on the speed and size of the hikes.
For governments grappling with discontent from younger generations locked out of the housing market, any cooling will be welcomed. New Zealand has already introduced a range of measures aimed at taming runaway house prices and the results hold lessons for markets from the UK, to the USA and Canada.
To find out more, Anna Ward hosts Kate Everett-Allen and Ben Udy, Australia and New Zealand economist at Capital Economics, for a new episode of Intelligence Talks. Ben shares his insights on New Zealand’s cooling measures, explains why Australia is taking a slower approach and the effect of both countries’ initial Zero Covid policies on housing demand. Kate talks about why the prime end of the market is likely to remain more protected from tougher government finance measures, Knight Frank’s outlook for global house prices in 2022 and the impact of new migration trends. Listen here, or wherever you get your podcasts.
The US economy
The US measure of inflation hit an annual rate of 6.2% this week, the highest reading since 1990.
The timing and scope of the surge moves the issue from economics to politics and is particularly inconvenient for the President, who has sought to secure the economic recovery by passing a $1.85 trillion collection of spending programs and tax cuts.
Economists interviewed by the NYT suggest the bill would create further upwards pressure on prices over the short term, while easing inflation via increased productivity over the longer term. It's a crucial question, the answer to which will shape the US recovery over the coming years. For now, the bill remains in limbo, though Democrats could move it to a House vote as early as next week.
In other news...
More than half of lending to UK homeowners now extends beyond the main borrower's 65th birthday, in part due to a surge in popularity of Equity Release products among the over 55s. David Forsdyke of Knight Frank Finance explores the growth of the sector, and lays out how to effectively plan for retirement.
Elsewhere - Government throws out plans for 305-metre Tulip tower in London (Guardian), Mark Carney warns that China's zero Covid policy puts the global recovery at risk (Telegraph), Taylor Wimpey says rising house prices offset rising costs (Times), Hangzhou is the latest Chinese city to pledge land for affordable rental homes (Reuters), the technology that could turn buildings into climate fighting tools (Bloomberg), and finally, the regeneration gap: would Kings Cross be possible today? (FT)
Photo by Nicholas Doherty on Unsplash