The Knight Frank Daily Update Thursday 21st May
The Knight Frank Daily Update: from negative rates to estate agency in PPE
3 minutes to read
Good morning,
Need to know
The Bank of England is eyeing the introduction of negative interest rates for the first time in its 324-year history in an attempt to stimulate economic growth.
Governor Andrew Bailey confirmed negative rates were under “active review” during questioning from MPs yesterday. Hours earlier, the UK sold £3.8bn of three-year gilts at a yield of minus 0.003% - the country's first negative yielding government bond.
Economists have suggested cutting rates below zero would be the last policy option officials would choose to stimulate growth, likely favouring renewed asset purchases in the shorter term, and the Governor was notably cautious under questioning from MPs - "not ruling it in" and "not ruling it out". However, the prospect of negative rates has ramifications for property markets, from a weakened pound acting as a draw for overseas investors to further falls in borrowing costs. We'll be exploring the issue in greater depth in the coming days.
Global coronavirus cases surpassed 5 million on Wednesday, with Latin America overtaking the United States and Europe in the past week to report the largest portion of new daily cases globally.
In the UK, the number of people seriously ill with coronavirus has dropped below 10,000 for the first time since the start of the lockdown. Some 637 people were admitted to hospital with Covid-19 on Monday, down from more than 3,000 at the start of April.
A contact-tracing system to keep new cases of coronavirus under control will be ready by the end of next week, Boris Johnson has said.
The property market
This morning we publish our outlook for residential markets globally, tracking everything from sentiment among US housebuilders to residential listings in Malaysia.
In the UK, the mortgage market is returning to more normal conditions following last week's resumption of property inspections. It's clear lenders are eager to re-establish a pipeline of new business after cutting their product ranges in an attempt to stem the flow of applications during the crisis.
Clydesdale this week said it would resume residential mortgage lending at 90% loan-to-value (LTV), and buy-to-let lending at 80% LTV. The lender said it will also withdraw the temporary limits on loan sizes and property values that it had put in place during the outbreak.
In this week's agent's diary, Roly Ingleby-MacKenzie in Knightsbridge tells Chris Druce that the number of requests for market appraisals is already above average for this time of year, and paints a clearer picture of what it's like undertaking appraisals under the new conditions, with full PPE and safe social distancing.
Andrew Shirley continues to monitor the outlook for luxury assets with this update on the art market. An uncertain future has split views among collectors, and while those who buy for passion are holding fire, the less risk-averse are seeing an opportunity.
In a signal of the strength of the housing market at the onset of the lockdown, the ONS yesterday said house prices in Greater London climbed 4.7%during the year to March, the strongest annual growth rate since 2016.
Finally, a reminder to sign up for our new weekly Commercial Conversations, the new weekly insights series into all aspects of commercial property, the first edition takes place today at 09:30 UK time.
If you have any questions, please contact me, or the team.