Knight Frank daily update Friday 24th April
Economic activity declines, the virus slows and housebuilding returns
2 minutes to read
Good morning,
Economic headlines
UK manufacturing and services activity contracted at its fastest pace on record between March and April, with the sharpest drops in textiles and clothing as well as car production. Economists at Markit said the PMI reading was consistent with a quarterly fall in GDP of 7%.
The data was released as governments moved to implement further measures to underpin their economies. Germany said it would throw its weight behind an EU "recovery fund", and the US Congress passed a $484bn economic relief package for small businesses, hospitals and coronavirus testing.
Markets dipped overnight once again with benchmarks down in Tokyo, Seoul, Shanghai and Hong Kong, though Sydney gained. There is a consistent theme emerging as investors weigh worrying economic data against a steady flow of positive news regarding the spread of the virus.
Italy and France continue to report progress. Spain once again reported fewer daily incidences, as did Austria and Germany, according to Johns Hopkins. Britain's death toll fell for the second consecutive day, while at the same time traffic levels began to inch up while some industries returned to work.
Property market headlines
Some early indications of Covid-19’s impact on pricing is emerging from the wider UK markets. We have assessed asking to achieved price ratios for sales across the UK over recent months. At the start of 2020 the ratio was around 88%, so sales were exchanging on average at 12% off the asking price – this reflects the uncertain climate in which sales were being agreed prior to December’s election.
By mid-March, as some of the post-election improved market sentiment began to be reflected in exchanges, the ratio climbed steeply to 97%. Since the lockdown the ratio has moved lower, although it has only moved marginally and is now averaging around 93% - albeit based on very limited sales evidence. We will have more on this next week.
Taylor Wimpey said yesterday it would restart construction on sites starting 4th May with a revised set of protocols and working practices. They include revised risk assessments, inductions, and changes to site format, including bespoke PPE for two person tasks the developer has designed in-house. Vistry Group also said it would recommence work on a significant number of its sites starting April 27th.
We continue to monitor the pandemic's effect on residential markets around the globe. This morning, Flora Harley finds weakening sentiment among developers in India. Before the pandemic, the government had announced a slew of measures to spur residential market activity that will need to be supplemented with further fiscal and monetary stimulus measures to boost sentiment and demand.
Meanwhile, Justin Eng's analysis finds China was the clear winner from the oil rout with its economy restarting as lockdowns ease.
If you have any questions, please contact me, or the team