Hong Kong's office revival, Germany's vote on rising rents and the enduring allure of second homes
Making sense of the latest trends in property and economics from around the globe.
4 minutes to read
Second homes
The final tapering of the stamp duty holiday is scheduled for next week and the gradual return of the housing market's seasonal patterns lies around the corner. Still, some trends are stickier than others and the pandemic will unquestionably leave a lasting mark on the UK's property purchasing patterns.
One lingering theme is the heightened interest in owning a second home, which began after the first lockdown in 2020. The number of transactions liable for the second home 3% stamp duty surcharge hit a new high of 84,700 in the second quarter of this year, according to analysis from Chris Druce.
That will include buy to let investors who took advantage of the stamp duty holiday but it is nevertheless the single largest quarterly figure since the Higher Rates for Additional Dwellings (HRAD) surcharge was introduced in 2016. Our own more recent data suggests momentum is being maintained, and second home purchases outside of London increased by 83% in the first eight months of 2021 compared to the five-year average.
Other themes remain in a state of flux. London residential rents are on the rise as students and workers return to the city, particularly around the city's financial districts. To find out whether this is just a temporary phenomenon as pandemic restrictions ease, Anna Ward quizzes Gary Hall, Knight Frank head of lettings and Sacha Hawkins, who heads up our relocation agent team, for a new edition of Intelligence Talks. Listen here or wherever you get your podcasts.
Hong Kong
A turn in Hong Kong's office market is underway. Sentiment rebounded in August, rental values have largely stabilised and the vacancy rate in Hong Kong Island's central grade-A office market has fallen to the lowest level since November 2020, according to this new note from Martin Wong and Lucia Leung.
Tallying with the flight to quality we're seeing in other global office markets, headline rents in premium buildings such as Two IFC and AIA Central recorded increases of 6–8% during August alone. More broadly, landlords have become increasingly flexible to the shifting requirements of tenants and many are offering newly fitted out, read-to-move-in space, reducing costs for tenants and significantly speeding up the leasing process.
Landlords are also increasingly opting to allocate slices of space to co-working - see Shanghai-based Shimao Property Holdings and their “The Center Space”, on the 76th floor of The Center.
Voting in Germany
Germany's centre-left Social Democrats (SPD) have narrowly won the country's national elections, teeing up a drawn out period of coalition talks, but it isn't the only ongoing vote worth following in Europe's largest economy.
Berlin's referendum on expropriating more than 225,000 apartments from Germany's largest landlords was heading for victory as of early Sunday morning. After more than a quarter of votes had been counted, almost 60% had voted in favour of the motion and just 39% had voted against, setting up a clear margin for victory, though we won't know the results until later today.
What happens next is unclear. The vote, taken amid widespread anger over rising rents, isn't legally binding and would require a vote in the Berlin Senate. There are various other obstacles, many of which are neatly summarised in this piece, however the cost of adequately compensating landlords could be enormous - somewhere between 29 billion and 39 billion euros according to this piece over at Bloomberg.
Labour
A couple of policy proposals from this week’s Labour Party conference are worth noting. The first is a proposal to scrap business rates, according to excerpts of a speech to be given by shadow chancellor Rachel Reeves later today.
The Guardian write up suggests the party will "freeze business rates and eventually replace them with a new, as yet undefined system that Reeves said would reward investment, with a particular focus on businesses investing in decarbonisation and green technology." For useful background on business rates, I recommend you read this February note from Stephen Springham.
Elsewhere, the party has pledged to cap off plan sales to overseas investors in new residential developments and give first-time buyers "first dibs" on new builds for six months.
In other news...
In a new Rural Market Update, Andrew Shirley considers a new, potential blueprint for smaller farmers to prosper post-Brexit.
Elsewhere - Unilever’s mandatory 24 hour commute to the office, the end of Covid job schemes still leave US, EU and UK short of workers, Covid has wiped out years of progress on life expectancy, 40,000 homes delayed because homebuilders can't meet environmental regulations, and finally, Paris transforms a pricey landmark into affordable homes.
Photo by Florian Wehde on Unsplash