Wednesday property news update – 28 July

Economic uncertainty

A report from the FT yesterday shows that vaccine inequality is threatening global economic recovery. The stark warning comes from the IMF who believe that developing economies’ limited access to Covid vaccines threatens to hinder the global economic recovery from the pandemic. The IMF has upgraded its growth projections for advanced economies but lowered them for other parts of the world.

“Vaccine access has emerged as the principal faultline along which the global recovery splits into two blocs,” the IMF says. Some countries “can look forward to further normalisation of activity later this year” but many others “still face resurgent infections and rising Covid death tolls”.

The IMF cut 0.4 percentage points off its growth forecast for emerging and developing economies this year, to 6.3 per cent.

By contrast, the IMF increased its forecast for advanced economies’ output growth this year by 0.5 percentage points to 5.6 per cent, with notable upgrades for the US, UK, Canada and Italy.

Dubai price surge

House prices in Dubai have accelerated at fastest pace since 2014. Average transacted prices rose by almost 1% during Q2. Favourable currency movements are expected to drive overseas investors.

Faisal Durrani, Partner and Head of Middle East Research at Knight Frank explains: “The momentum that began building late last year has been sustained and we are seeing a slow, but steady upward creep in transacted values. The confidence that has been injected into the economy by the government’s phenomenal response to the pandemic has percolated across the economy”. Larger homes are seeing the sharpest rebound, with prices now about 17% below the last market peak six years ago.

Elsewhere in Dubai, Prime headline office rents have started to stabilise, according to our latest research.

Luxury London bargains

The race for space has left some central London bargains in its wake, according to the latest UK property market outlook published by Tom Bill earlier this week.

The research shows that in addition to a global reputation for cultural venues and shopping, Knightsbridge is one of the highest-value residential markets in the world.

As a result of the pandemic, flats in the neighbourhood south of Hyde Park are also one of central London’s best bargains.

The average £PSF for a flat in Knightsbridge was £1,546 in the six months to June this year, which was 11% below the five-year average. An analysis of apartment prices, which excludes new-build property, shows this was the largest reduction in central London.

“Some parts of central London like Notting Hill are seeing record prices being achieved as people search for more space,” said James Clarke, head of London residential sales at Knight Frank. “Meanwhile, some areas have seen prices as low as they’ve been in many years. As lockdown restrictions are lifted and international travel re-opens, that is unlikely to remain the case for long.”

Bond yields compressing

Globally, bond yields are compressing with uncertainty surrounding the economic outlook and the Delta Covid variant has fuelled increased demand for safety assets.

UK government 10 year gilt yields have fallen to 0.58% and the US 10 year treasury yield has fallen to 1.29%. Meanwhile, German government bonds are at a five-month low of -0.43%.

The most recent leading indicators update highlights key economic and financial metrics and what to look out for in the week ahead. The latest dashboard shows the number of new UK companies is up 12% and UK retail REITs saw the strongest increase in total return, up almost 5%.

In other news…

The Later Life Finance Q2 Report from Knight Frank Finance is out today which shows a national desire for home improvements is driving a surge of activity in the equity release market.

Elsewhere: Tata Motors feels chip strain, Tesco £1,000 HGV joining bonus, UK consider relaxing travel restrictions, US real yields hit record low on growth concerns, China rules leaves private equity firms heading for exit, Danske Bank huge NI profit, UK record number of homes sold in month and Britain eases SPAC rules.