Your daily market update from Knight Frank Research, Wednesday 15th April
Good morning
2 minutes to read
Economic headlines
The International Monetary Fund (IMF) yesterday urged governments to ramp up economic stimulus once the coronavirus contagion starts to abate as it predicted a 3% contraction in global growth for 2020.
The IMF’s World Economic Outlook adopts a baseline scenario in which the pandemic fades in the second half of 2020 and containment efforts are then gradually unwound. It projects that the global economy will grow by 5.8% in 2021 as economic activity normalises, helped by policy support. The IMF expects UK unemployment to rise to a comparatively modest 4.8% this year.
Meanwhile, the Office for Budget Responsibility, the UK's spending watchdog, published a scenario that assumed a three-month lockdown leading to a remarkable economic contraction in Q2 this year, with the UK economy shrinking by around a third, and with unemployment temporarily rising to as much as 10%. Like the IMF, the OBR sees a fairly swift recovery as restrictions are lifted.
Markets were little changed overnight before a raft of scheduled company earnings reports. Gold hit a seven-year high on the back of the IMF report.
Property market headlines
This morning, Knight Frank publishes its London Residential Development Report, examining trends, rents, demand, the development pipeline, construction costs and more. Coronavirus will have implications for supply chains with developers seeking to diversify supply sources to minimise disruption risks in future, writes Anna Ward.
Oliver Knight's analysis of the purpose-built student accommodation market finds operators are concerned about income over the short term. Many have offered existing tenants refunds and discounts on their accommodation. There are new costs to factor in, including the liabilities many may have for Council Tax payable on vacant rooms. The longer-term outlook is potentially brighter, with student numbers often increasing during times of uncertainty as students look to ‘up-skill’.
Kate Everett-Allen checks in on Madrid, where workers in “non-essential” industries have been permitted to return to work after a two-week hiatus. Early data shows both Madrid and Spain registered marginal month-on-month increases in prices in March, but slight declines when measured over a three-month period.
Andrew Shirley's analysis of rural markets notes that the House of Commons Environment, Food and Rural Affairs select committee has announced a fast-track enquiry into the impact of Covid-19 on the agricultural and food sector after the outbreak exposed the weaknesses of the UK's just-in-time supply chain
Stepping back
We continue our analysis of longer-term themes from our recently launched flagship reports, all of which shine a light on problems and solutions brought about by the Covid-19 crisis.
This morning Tilda Mwai examines: Africa's ability to be self-sufficient in a global crisis; why social distancing rules have brought new impetus to solving a staggering shortfall of 56 million affordable homes; and how the continent's adoption of technology has enabled it to sustain daily routines.
If you have any questions, please contact me, or the team.