Midweek property news update - 14 July
The return to cities, wealthy homebuyers in France and the global economy's conflicting signals
4 minutes to read
Cities
An interesting piece in the Washington Post reveals rents are spiking across scores of US cities as the economy reopens and Americans "flock back". There's a lot to unpack - millennials and Gen-Z renters are returning after spending the pandemic with family and friends, baby boomers have been selling up and renting following record gains in house prices, plus those able to work from anywhere are continuing to move to smaller cities.
Zillow data covered in the report reveals San Francisco and New York City are among only a handful of cities where the typical rent price is still below pre-pandemic levels, though both cities are now seeing rebounds. Jonathan Miller's latest housing notes reveals there were 9,642 new leases signed in Manhattan during June, the highest number since 2008.
We talked last month about corporate America calling its workers back. There is still some way to go - about a third of office workers are back in large buildings according to security company Kastle Systems - but it’s clear what once looked like a great reset is going to be something much more tame.
It's early days but there are similar signs in London. The number of weekly enquiries to Knight Frank’s corporate relocation team reached its highest level since September at the end of June. The strongest monthly rental value growth recorded in June was around London's financial districts, most notably in Aldgate (+3.5%), followed by 1.2% in Wapping.
British Land
In a trading update yesterday British Land said it no longer expected to make rent concessions due to the fact trading restrictions had been substantially lifted and the vast majority of its customers are trading well and paying the rent due.
Across the business, £87m of rent was due for payment in the June 2021 quarter, comprising £43m in retail and £44m in offices. As of July 8th, 11 working days after the quarter end, the company had collected 85% of the total amount. That compares to 72% of the total amount collected at the same point following the December quarter end and 76% following the March quarter end.
Prime France
Kate Everett-Allen takes a deep dive into the prime French property market.
Provence and the French Alps have been the busiest French markets during the pandemic, and due to the prevailing complications of international travel, 60% of all sales by Knight Frank’s French sales team were to French buyers (or buyers already resident in France) – the highest on record.
It is still, however, a sellers market and will remain so until Q1 2022, when more pent-up demand is released and borders reopen. Activity is then likely to slow ahead of the May 2022 Presidential Election.
France is now home to over 15,500 ultra-high-net-worth individuals, each with over $30 million in assets. That figure is set to rise 53% to almost 23,700 by 2025, according to The Wealth Report 2021. President Macron’s decision in 2017 to remove the wealth tax on everything except property assets, helped cement the view that France was pro business, reversing the outflow of wealth evident during Hollande’s presidency.
Financial stability
The Bank of England's bi-annual Financial Stability Report, published yesterday gave a largely positive take on the outlook for the economy - write up in the Times here.
Banks are in a resilient position and companies’ debt levels have increased only “modestly” since the onset of the pandemic, though the report notes increased risk taking in financial markets with asset prices in some markets elevated compared to historic norms. The section on housing suggests some of the prevailing strength of demand is likely to continue beyond the end of the stamp duty holiday.
A separate report from Linkedin shows hiring surged in June ahead of the relaxing of Covid-related restrictions. Hiring rose 7% from May to stand almost 16% above June 2019 levels.
The global economy
Another eye-popping inflation report from the US shows consumers prices are rising at the fastest pace for 13 years. The reading will reignite the debate over surging prices and whether they really will subside following the initial burst of economic activity as economies reopened - as the Fed and other central banks have been arguing for several months.
The Biden administration quickly pointed out that much of the move was tied to temporary supply issues. A surge in the price of used cars accounted for more than a third of the increase, for example.
Meanwhile, the latest Chinese exports data flies in the face of growing fears the global recovery is slowing - we touched on that in Monday's note. Exports rose by 32.2% compared with the previous year, beating forecasts for a 23% improvement.
In other news...
Bloomberg on new homes sales in London, Biden's tax plans and the outlook for Ireland, why the global growth scare is a false alarm, Slaughter and May trials flexible working schemes with junior lawyers, American Airlines sees first positive cash flow since the onset of the pandemic, and finally, UK banks to start paying dividends again.