Monday property news update - 12th April
The super rich buy in London, remote work in New York and how important is the stamp duty holiday?
4 minutes to read
London takes the crown
The ultra-wealthy spent almost $4bn on super-prime properties ($10m+) in London last year, more than any other city. Moves towards closure on Brexit and the weak pound helped the capital leapfrog Hong Kong and New York in the rankings. The UK capital saw transactions rise by 3%, while Hong Kong and New York saw theirs fall by 27% and 48% respectively.
The US real estate market is typically slow leading up to a presidential election year and real estate showings were prohibited between March and July. Waterfront property markets in the US, on the other hand, stood out. Sales in Miami more than doubled to 87. Transactions in Palm Beach and Los Angeles also climbed from 50 to 89, and 123 to 155, respectively.
Globally, the number of super prime sales fell just 1% in 2020. Volumes, or total spend, dipped 5%. As Flora Harley notes in her analysis, super-prime markets are often dominated by international buyers, so a largely flat market for the year demonstrates the scope to which the pandemic has caused domestic buyers to reassess their needs, often seeking out larger properties or homes closer to open spaces.
The impending recovery
Several new gauges of economic sentiment suggest the UK economy is set to roar back to life over the coming weeks.
Confidence among big businesses about their profits in the year ahead has hit a record high, according to a large Deloitte poll of CFOs, and consumers are the most optimistic they've been since August 2018, according to an analysis by YouGov and the Centre for Economics and Business Research.
Meanwhile, BDO puts job market optimism at a three-month high and a separate survey by the Federation of Small Businesses found that confidence was at its highest since 2014 (both in the Times piece linked above). Today's Times also reports people in their forties are due to be invited for vaccinations from tomorrow.
How long can the surge last?
Following news that March was a record breaking month in the UK property market, Tom Bill asks: how long can it last?
A combination of factors, including the vaccine roll-out and stamp duty holiday, means it will also be a strong second quarter. However, an important question is what happens after that as the stamp duty holiday tapers away.
Closer analysis of data from March, when the number of homes put under offer soared 30%, provides some clues. The £500,000 to £1 million price bracket experienced the biggest increase (57%) followed by the £1 million to £1.5 million bracket (40%). Below £500,000, the band in which the stamp duty holiday creates the largest saving, the increase was just 26%. Above £1.5 million there was a 10% rise in the number of properties going under offer.
The stamp duty holiday has been an important motivating factor for buyers but the figures show that it hasn’t boosted activity to a greater extent in lower-value markets.
NYC offices
Late last week the New York Times carried this bearish piece on the city's office market. City Hall estimates the value of office buildings across the city in order to project tax revenue, and its calculations published on Wednesday point to a 25% annual decline in office values in Manhattan.
That follows JP Morgan CEO Jamie Dimon's letter to shareholders last week, in which he said that for every 100 employees his bank “may need seats for only 60 on average.”
Office market dynamics are highly localised and the impact of dips in demand for office space will depend on other, longer term factors such as vacancy rates and the development pipeline. It's likely NYC's declines in office values will be felt by most second-hand, dated space. Meanwhile, roughly 17% of office space in Manhattan is available for lease.
By way of comparison London, which has long suffered from a shortage of best-in-class offices, had a vacancy rate of 7.4% at the end of Q4, just above the long-term average of 6.7%.
In other news
In a new Rural Market Update, Andrew Shirley finds dissent among the food-and-farming ranks over the consequences of Brexit.
Plus, reformed nimby to build 6,000 homes, Fed chief says the US economy is at an inflection point, Britons prepare to spend their savings as lockdown eases, Europe steps up vaccination campaigns after slow start, and finally, the 'mother of all recoveries' ignites bullish trades across Europe.
Photo by James Padolsey on Unsplash