Oil at $120 a barrel, the confusion over green homes and should you invest in the metaverse?
Making sense of the latest trends in property and economics from around the globe.
4 minutes to read
Inflation
The FTSE dropped 2.6% yesterday as soaring commodity prices rattled markets, capping its worst day since the onset of the conflict in Ukraine. A barrel of Brent crude came within a whisker of $120, it's highest level since 2012, and could finish the year at $185 a barrel if the disruption hitting Russian crude volumes continues, according to a JPMorgan note quoted in the Times.
Rising prices in commodities markets will feed into household bills, whether for energy, food or a range of other goods, adding to uncertainty as when rising inflation is likely to peak. A handful of economic data points published over the last 24 hours reveal an economy with deep-set, broad-based rising prices and a jobs market ripe for wage inflation.
Firstly, the Bank of England's monthly panel of 2,699 chief financial officers reported another rise in output inflation to 5.4% in the three months to February. A separate survey from the CBI said business and professional services firms were more likely to raise prices than at any time since the survey began in 1998. Consumer services companies' pricing plans were the highest since 2007.
Finally, the number of active job adverts soared 40% in February, with an increase in demand for every category of job role, according to the Recruitment & Employment Confederation. There are now around 1.82 million vacancies.
Pricing in financial markets suggest the BoE remains on course to raise the base rate in March, but beyond that things look much more uncertain.
Solving the green homes problem
We talk a lot about the government's lack of clarity over how to address the residential sector's huge carbon emissions. Back in August, fourteen executives from major companies and organisations including British Gas, Eon, Nationwide and The Federation of Master Builders urged the government to "urgently" develop a strategy to slash emissions from the UK's stock of existing homes.
The industry's frustrations continue to mount and the UK still lacks a "credible" plan to meet its net zero targets, according to a report from the House of Lords Industry and Regulators Committee. Interviews with senior figures in the energy industry suggest there remains confusion in government as to whether to commit to hydrogen, heat pumps or what mix of the two is appropriate.
The government has delayed mandating its preferred boilers until 2026, leading to an "unwillingness to go into full-scale production” among manufacturers, Dr Tony Ballance, Director of Regulation and Strategy at Cadent Gas tells the Committee. It's one of a range of unanswered questions interviewees cite. Others include what level of insulation will be needed to efficiently operate heat pumps, whether hydrogen for heating will be available as a source of heat for all homes, what this means for the continuing use of the gas network, and how to deliver the required major changes in people’s homes.
An inflection point
Property markets across Southeast Asia (excluding Singapore) are still in the late stages of a downcycle, yet 2022 is likely to provide an inflection point as prices bottom out and stabilise, writes Christine Li, Knight Frank's head of Asia-Pacific research.
The number of investment opportunities are growing as the region emerges from a protracted wave of the Delta variant of Covid-19. The introduction of REITs in the Philippines has got off to a roaring start with five new listings in less than two years. Meanwhile, overseas investors are increasingly targeting Vietnam. About 20% of units in CapitaLand’s high-end project in HCMC sold out within two hours.
For more on the region's outlook, see the full analysis.
Smart cities or the metaverse?
In the first in our monthly series of bonus episodes for The Wealth Report 2022, out this week, we explore the rise of new smart cities and the metaverse.
Anna is joined by Wealth Report deputy editor Flora Harley and our guest speaker Dr Sarah Moser. Sarah is an associate geography professor at McGill University in Montreal Canada, specialising in new cities and urban mega-developments.
In this episode, we look at the rise of new smart cities built from scratch and virtual ones in the metaverse. Is it worth investing in them? We look at which new cities are closest to reaching completion, Big Tech’s view of smart cities and the metaverse and why Google’s Sidewalk Lab city project in Toronto went wrong. Listen here, or wherever you get your podcasts.
In other news...
The Bank of England survey of chief financial officers cited in the first section above puts the percentage of workers on business premises at 72% in February, up from 64% in January. Meanwhile the Recruitment & Employment Confederation survey in the same section reports soaring demand for childminders as people return to work.
Los Angeles mega-mansion sells for $141 million at auction (Bloomberg), house price rises create own risk, says Taylor Wimpey (Times), BoE's Cunliffe says Russia crisis will add to risks from rates shift (Reuters), and finally, can workers climb the career ladder remotely? (NYT)