The right to WFH, Google's big splash in NYC and the fate of Evergrande
4 minutes to read
Evergrande
The fate of heavily indebted developer Evergrande is looking a little less like China's "Lehman moment" this morning after it agreed to make a key interest payment. The government has been injecting cash into the financial system and Morgan Stanley thinks a restructuring of the developer is likely.
The process has some way to run and people are going to lose money. Bloomberg's Matt Levine lays out a few facts. The company appears to owe 1.6 million apartments to people who have put down cash deposits, which it may have trouble delivering. Meanwhile, it owes billions of dollars in cash to people who purchased its “wealth management products”, which it will have trouble paying. It has offered to pay the wealth management customers in apartments instead of money - a position which strikes Levine as inefficient.
For several years China's government has sought to cool speculation in its housing market. Limits on bank lending to the sector, upper limits on developer debt ratios and restrictions targeting speculators are working, and house price growth across China's major cities has slowed to a crawl.
Still, there is enough empty property in China to house over 90 million people, according to Logan Wright, a director at Rhodium Group quoted in this FT piece, and there is likely to be more volatility as the government shifts its economic model to something it views as more sustainable.
The right to WFH
Proposals due to be published by the UK government tomorrow will offer employees the right to request flexible working from the moment they start a job, rather than after six months as things stand at the moment.
The plans date back to the government's Good Work Plan introduced in 2019 covering a range of measures including family related leave and pay and flexible working policies.
Meanwhile, research from the Centre for Economics and Business Research suggests hybrid working could bring as many as four million people back into the jobs market and could add more than £48 billion to the British economy each year.
New York
Google has agreed to pay $2.1 billion for its Manhattan headquarters and will add another 2,000 workers to the 12,000 it already has in the city over the coming years.
The pledge is another big vote of confidence from the tech sector, which has been expanding in the city as others have cut back on office space. Google’s New York presence began in 2000 with a single employee in sales who worked out of a Starbucks, according to the New York Times piece linked above.
The deal is part of a much broader recovery spanning both the commercial and residential sectors, though on both counts the picture is nuanced. For more on that I recommend this week's Intelligence Talks, in which I join Anna Ward and Dan Tubb, senior director of sales at the Towers of the Waldorf Astoria Residences to discuss what happens next.
The Bank of England
With consumer price inflation now running at an annual rate of 3%, the Bank of England's latest decision on interest rates and quantitative easing, due to be published tomorrow, will be closely watched like few others in recent memory.
At this stage the big question is to what degree the MPC opts to cut back on quantitative easing, but with each day that inflation climbs a rise in the base rate draws nearer. The Times has convened a panel of nine experts that include former rate setters, all of whom say the BOE should end quantitative easing early and prepare to raise the base rate from its current level at 0.1%, a record low.
A mortgage price war is underway among the high street lenders and borrowing costs are as low as they've ever been. We'll likely have a clearer picture of how long it's likely to continue once we see the minutes from the Monetary Policy Committee tomorrow.
The West Midlands
The West Midlands is in the process of repositioning its economy away from manufacturing to focus on arts, science and professional services. Anna Ward checks in on the progress so far, and unpicks what it means for the property market.
The number of jobs in the arts, entertainment and recreation are set to grow 21% by 2030, while those in professional services, science and tech will rise 10%, according to Knight Frank analysis of Oxford Economics data.
As the UK's second largest city, Birmingham will be key to meeting the West Midlands’ housing delivery goals. Our analysis of pipeline data shows the city is on track to deliver around 12,000 new units over the next five years. Given the city's annual target of 4,829 new homes, this suggests that it may need to deliver more units in the outer suburbs and release more greenfield land to meet delivery targets. However, this strategy is not currently favoured by the West Midlands Combined Authority, who say they are continuing to pursue a brownfield-first approach to housing by using government funds to unlock derelict industrial land for development.
In other news...
In a new market update, Andrew Shirley weighs the consequences of rising gas prices on rural markets.
Elsewhere - UK’s debut ‘green gilt’ sale draws blockbuster demand, the Chancellor hails London's tech success, and finally, tall residential towers are getting taller.