Friday property news update
Housebuilding climbs, the private banks show strain and a closer look at those OBR forecasts
3 minutes to read
The challenging year ahead
New forecasts from the Office for Budget Responsibility, published after the chancellor's spending review on Wednesday, suggest the economy will now be 3% smaller in 2025 than the spending watchdog expected back in March - before the real impact of the pandemic was clear.
Forecasts for the housing market - see p.65 - suggest house prices will fall back in 2021 due to the ending of the stamp duty holiday and an expected hit to household incomes caused by pressure on the jobs market. The OBR predicts a steady recovery from 2022 onwards.
It's becoming increasingly clear that a tapered withdrawal of the stamp duty holiday, rather than an abrupt halt on March 31, would be a sensible move. That would avoid what is likely to be a build-up of pressure in the conveyancing system as buyers attempt to squeeze deals through ahead of the deadline. It would also maintain many of the benefits to the wider economy prompted by housing market activity - something we looked at last week.
The outlook for housebuilding
There is a sizeable time lag in the government's publication of housing supply data and, as a result, new data published yesterday only provides figures for the 12 months to 31 March 2020. By that count 243,770 additional homes were added to supply in England during the year, up 1% from the previous year, and the highest since this figure started being recorded in 1991/1992.
The data includes a 3% rise in national new build completions. Meanwhile, 41,718 homes were added to supply in London, up 14% from the previous year, writes Anna Ward.
Leading indicators suggest this data will likely represent a peak in delivery. In the second quarter of this year, for example, just 28,498 Energy Performance Certificates were allocated to new homes in England, 57% lower than Q2 2019. Our expectation is that private housing delivery across the UK in 2020 will be around 35% below what it would otherwise have been without the pandemic.
The resilience of global prime property
Fiscal stimulus on a significant scale along with pandemic-fuelled pent up demand has underpinned resilience in prime global property prices this year. Average annual prime price growth increased from 1.2% in June to 1.6% in September, writes Kate Everett-Allen.
New restrictions and the outlook for global travel will have an impact in the months ahead. Five global airlines will introduce a digital health pass enabling passengers to certify they are Covid-free before travelling. United Airlines, Lufthansa, Virgin Atlantic, Swiss International Air Lines and JetBlue will begin rolling out the Common Pass in December.
Meanwhile, Kate takes a look at new rules that will allow UK residents to reduce their quarantine by more than half if they pay for a Covid-19 test after five days, and what they might herald for Ski property markets.
An insight into the private lending
The Bank of England will on Monday publish new data for mortgage approvals in October that is likely to show further rises in activity. That follows September's data that revealed banks approved more loans for house purchase than any month since September 2007.
In recent weeks we've monitored the upwards pressure all that activity has had on mortgage rates across the high street lenders at all loan-to-value ratios.
Alex Ogario of Knight Frank Finance this morning checks in on the private banks, who have been competing for new wealthy clients and the valuable investment management relationships that can follow. Some private lenders have released tranches of funding at tracker rates that make even the high street banks look expensive, however there are now a few signs of strain beginning to show, with the levels of new business suggesting timing could become challenging.
In other news...
Rishi Sunak is right to keep spending billions, says Bank of England governor, once Australia's COVID-19 hotspot, Victoria goes 28 days without an infection, AstraZeneca eyes extra global vaccine trial as questions mount, the UK takes steps to get AstraZeneca vaccine approved before EU, and finally, a third of England face toughest Covid curbs - but London is spared for now.