Inflation & the consumer, optimism in London offices and the housing market's new north/south divide
Making sense of the latest trends in property and economics from around the globe
4 minutes to read
Inflation
The rate of consumer price inflation hit 4.2% in October, according to official figures. That's the fastest growth in a decade and is more than double the Bank of England's 2% target.
The increase was largely down to fuel and energy prices, though the cost of eating out also rose. It is yet another data point that will heap pressure on the Bank of England to raise rates in December. We talked on Wednesday about the latest job figures suggesting the market has shrugged off the end of the furlough scheme.
Consumers appear largely unbothered by inflation, for now. The GfK Consumer Confidence Index rose for the first time in four months to -14 in November, from -17 in October. Economists polled by Reuters had been expecting another decline.
House prices
UK house prices climbed 11.5% during the year to September, which moves the average property value to £287,895, according to official figures.
There were some large regional differences. Prices in London dipped 2.9% during the month, while average values in the north west soared 5.3%. Values in the north west are now more than 16% higher than they were a year ago. Much of this can be attributed to the big trend of the pandemic: buyers untethered from five-day-a-week commutes opting for cheaper homes with access to more space.
We're seeing a similar story in Scotland. New prospective buyers based in the UK but outside of Scotland made up almost a fifth of all those looking to buy property in Scotland in the first ten months of 2021. London-based buyers made up almost half of that group.
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The office
While the hunt for more space remains prevalent in housing market data, many leading indicators - from office leasing to rental data - point to a repopulation of urban centres.
Both office utilisation and leasing is recovering. British Land yesterday reported "renewed optimism" in London offices, with occupiers more confident of committing to space as their employees return to the office. The value of the group's "Campus" business, which includes Broadgate and Canada Water, climbed 3% during the six months to the end of September.
That comes after Landsec's results earlier this week, in which the group reported a 1.2% rise in estimated rental values across its central London office portfolio for the period. The company said the weight of investor demand for prime London office assets shows no signs of abating yields are likely to tighten further as a result.
Office take up across the capital is now 12.4% below the long run quarterly average of 3 million square feet, according to Knight Frank's Q3 report.
Renters return
We talked last month about London's boomerang buyers - those that opted to leave during the pandemic and are now hunting for a bolthole as they are recalled to the office. The same trend is being felt in the rental market, with stories of price hikes and bidding wars.
This is going to be a dominant trend of the coming months. The Wall Street Journal last week ran this piece on renters who gave up urban apartments during the pandemic that now face a hot market and higher rents.
The swings have been significant. In Seattle, for example, the median rent fell by 20.2% between March 2020 and January 2021, according to data from Apartment List quoted in the piece. Rents have since recovered and now stand 1% higher than their level at the onset of the pandemic. In New York, the median rent rebounded 18.9% between October 2020 and October 2021. It is now 2.2% higher than it was just before Covid.
In other news...
What are the luxury items worth investing in? Find out on November 25th.
Elsewhere - ECB warns of ‘exuberance’ in housing, junk bonds and crypto assets (FT), Australian house price rises hugely outpace wage gains (Bloomberg), London commuters warned that budget black hole risks a return to retro 1970s on the Tube (Telegraph), US economy regaining speed as unemployment claims fall and manufacturing surges (Reuters), economists think the Fed will hike rates in Q4 next year (Reuters), Goldman boosts bet on London to target the world's wealthy (Bloomberg), billionaire buys home in London (Bloomberg), and finally, buy $28,000 in furnishings to rent a home in the world's craziest housing market (Bloomberg).