Cloudy skies can't take the heat off Miami
Making sense of the latest trends in property and economics from around the globe
4 minutes to read
An uptick in mortgage rates took the momentum out of the UK housing market recovery through spring. Metrics spanning new buyer enquiries and agreed sales both weakened in the May survey of estate agents by the RICS.
Respondents are increasingly optimistic that conditions will improve soon. Near-term sales expectations point to sales volumes picking up modestly over the coming three months. The net balance hit +6% in May, up from zero the previous month. The outlook for the twelve-month time horizon looks particularly upbeat, hitting a net balance of +43%, up from +33 % in April.
An improving flow of sales instructions will support a rise in activity. The new listings balance hit +16% in May and has now risen for six consecutive months.
Surveyors' views are naturally closely tied to expectations of when the Bank of England will begin loosening monetary policy. A Reuters poll published on Wednesday showed that 63 of 65 economists believe the first rate cut will arrive on August 1st. Most expect another reduction before the end of the year.
Dot plotting
The US Federal Reserve opted to keep rates on hold on Wednesday and largely ignored what looked like a very positive set of inflation figures for May. The Fed's median rate-setter now expects to make just one quarter-point reduction before the end of the year. Markets had been expecting two.
The headline measure of consumer prices dropped to 3.3% in May. Core CPI hit 3.4%, a little below expectations of 3.5%. "Disinflation is broad-based...the really notable feature of the latest data is that there were so few categories that rose by very much, if at all," writes Matt Klein.
“This needs to become the trend after a series of far too hot readings at the start of the year," ING chief international economist James Knightley tells the FT. "We think it will be, and with unemployment on the rise we expect the Fed to cut rates in September.”
That would provide a boost to President Joe Biden ahead of the November election. The Economist's model, which combines state and national polls with economic indicators, currently puts the chance of a Donald Trump victory at two in three.
Boiling the ocean, continued...
It's manifesto launch week here in the UK. Labour published its housing pledge-packed document yesterday, though there was little in the way of surprises following the steady drip feed to the papers over the past few weeks. Haven't been following? You can check out our policy matrix here.
Tom Bill points out that Labour's plan to increase stamp duty for overseas buyers was rumoured to be a 2% levy, but the manifesto puts it at 1%. The wording on non doms is vague and any proposals will be subject to consultation, which means it will be tight to introduce anything before April 2025. You can read our latest on non doms and prime central London here.
The Conservative Manifesto confirmed that the party would permanently abolish stamp duty for first-time buyers on homes worth up to £425,000.
I talked on Wednesday about industry figures calling for fairly moderate changes to unblock planning rather than seeking to boil the ocean. We got more from Crest Nicholson yesterday after the company posted a trading update: "The land supply side is very constrained and regardless of which party wins the election, this will not change quickly," said CEO Peter Truscott. "The planning system operates at a snail's pace."
Bellway yesterday confirmed it had made several takeover offers for Crest. You can read Crest's latest response, which concluded that the offer "significantly undervalued" the business, here.
Miami heat
I'm writing this email from Miami, where overcast skies can't take the heat off the luxury property market.
The Wealth Report 2024 took a deep dive into the fiercely competitive market for waterfront property (p.26) via Tom Ford's 18-month journey from a US$51 million so-called 'dry plot' to a 17,424 sq ft mansion at 195 Via Del Mar in Palm Beach– a two-minute walk to the water.
Developers have responded and this morning's FT includes details of a $668mn residential construction loan - the largest in Florida’s history - from Bank OZK and Related Fund Management for The Waldorf Astoria Residences by developer PMG. The 387 units in the Waldorf tower range in price from $1mn for a studio up to about $90mn for penthouses.
“The buyer pool is deeper that it’s ever been, and . . . it’s people with high paying jobs who can afford to live in the buildings that are being constructed,” PMG's Dan Kaplan tells the paper.
In other news...
Party manifestos and the British economic reality (FT), and finally, betting against European real estate is getting harder (Bloomberg).