Knight Frank Daily Update Thursday 25th June
The UK economic bounce, a two tier mortgage market, and what to do when the office reopens...
3 minutes to read
Good morning,
Need to know
The UK economy will likely bounce back to growth next quarter as the economy emerges from lockdown, according to a Reuters poll of 80 economists.
This rebound will help limit the contraction in the UK economy to around 8.7% this year, the poll showed, with growth of 5.5% next year.
A second wave of coronavirus infections was identified as the biggest downside risk to the economy. Finally the survey pointed to no change in the Bank of England Base Rate until 2023 at the earliest.
A separate poll of 26 market strategists by Bloomberg suggested a Brexit deal between the UK and EU is their base case, and this would drive sterling up to above $1.30, the level the pound was at before the March lockdown. Respondents see a 55% chance of a trade deal.
Asian stocks dropped and US equity futures retreated overnight on concerns of a surge in cases in multiple US states, plus countries including India and Brazil. These concerns are pushing investors into safe haven assets.
The International Monetary Fund downgraded its outlook for the global economy, predicting a deeper recession and a slower recovery. It now anticipates global gross domestic product to shrink 4.9% this year, more than the 3% predicted in April. For 2021, the fund sees growth of 5.4%, down from 5.8%.
The property market
Lots going on this morning, first up: a two tier mortgage market is emerging for borrowers with large and small deposits.
Borrowing activity at loan-to-value (LTV) levels up to 80% have returned to pre-pandemic levels. Volumes at 80% to 85% have climbed more than 5% in a fortnight. The picture reverses at higher LTVs, above 85% LTV lending volumes have dropped sharply.
The mortgage market is now particularly challenging for those with small deposits, such as first time buyers, but also the self-employed and anybody reliant on bonuses or commission to complete their income, according to Hina Bhudia of Knight Frank Finance.
A Reuters poll of 21 property market analysts predicted a 5% drop in UK house prices this year, before rising 1.5% next year and 3.5% in 2022. That's slightly more dovish than our May forecast of a 7% dip in UK prices this year, with much of that decline having already taken place between March and May.
In the latest agent's diary, Chris Druce finds a shift in buyer requirements may be underway in the housing market as buyers weigh location with the need for more space at home.
This morning's Commercial Conversations webinar, starting at 09:30 BST, will be focusing on Private Capital flows in the context of commercial real estate investment. Will Matthews is joined by Andrew Shirley, editor of Knight Frank’s Wealth Report, and Alex James, Head of Knight Frank’s Private Client Advisory business. Register here.
You can find practical advice on returning to the office from our London Tenant Representation team here. The update covers everything from shift patterns and rotas to automated technology.
Kate Everett-Allen's latest Global Residential Outlook includes analysis of sales data from the US and the UK, plus coverage of buyer intentions across Europe.
According to data from the US National Association of Realtors, sales were down 27% year-on-year in May and down 10% month-on-month.
Meanwhile, a sentiment survey of our Asia Pacific network not only shows an improving picture for sales and asking prices between March, April and May but also highlights the extent to which sales volumes to date have been affected more heavily than prices.
It's now two months since we launched our Intelligence Talks podcast. Anna Ward shares highlights including views from guests covering the future of stamp duty, retail industry turmoil, expats eyeing a return home and the key investment trends for the post-pandemic world.
If you have any questions, please contact me, or the team.