Knight Frank Daily Update Tuesday 30th June

Global house prices, an air traffic lift-off and the reasons for the fall in UK mortgage lending
Written By:
Liam Bailey, Knight Frank
3 minutes to read

Good morning,

Need to know

China’s parliament has passed national security legislation for Hong Kong. The British government previously said the measures violate China’s international obligations and its handover agreement.

Positive news from China saw manufacturing activity climb in June, suggesting its recovery remains on track. The official manufacturing purchasing managers’ index - where a reading above 50 signals growth - rose to 50.9 from 50.6 a month earlier.

Boris Johnson will promise today to lead Britain out of the coronavirus crisis with what is expected to be a £5 billion programme of accelerated capital spending on hospitals, roads, rail, prisons, courts, schools and high streets.

That comes after the government yesterday imposed a lockdown on Leicester, which has a much higher infection rate than anywhere else in the country.

Confidence among British businesses improved in June for the first time since January, according to a survey by Lloyds Bank. The reading rose by three percentage points to its highest level since March but remained in negative territory at -30%.

The property market

Knight Frank's Global Residential Cities Index for Q1 is topped by Manila, which leads the annual rankings for the second consecutive quarter with price growth of 22%, according to Kate Everett-Allen.

Budapest continues to lead European cities with growth of 16%.

The data is backward-looking and covers the period up to 31 March when Covid-19 was at its peak in parts of Asia but had yet to take its toll on large parts of Europe, North or South America.

Flora Harley's analysis of real time global economic indicators reveals air traffic across the 20 locations we track increased 3% in the past week. That's up 30% on the same time last month.

Six locations - Shanghai, Madrid, Paris, Vancouver, Los Angeles and Vienna saw their average departures rise by double digits.

Meanwhile, a new report names Switzerland as the world’s safest country due to its economic resilience and its cautious, staged approach at easing out of lockdown.

UK mortgage approvals for house purchase collapsed 90% between February and May, the Bank of England said yesterday. The data reflects the gap in sales during the market's shut down and will undoubtedly show improvements next month.

Of more concern is the emergence of a two tier mortgage market, as lenders have largely withdrawn from higher loan-to-value lending ahead of the wind up of government support schemes this autumn, according to Hina Bhudia of Knight Frank Finance.

The picture is completely different for borrowers with larger deposits of 15% or more, who have much wider access to finance at historically low interest rates.

In the latest agent's diary, Tim Hyatt, who took over as head of Knight Frank’s UK residential business a week after lockdown began, tells Chris Druce why the company's productivity levels have climbed during lockdown, and gives his view on how long the prevailing surge in property market demand will last.

If you missed it the first time, read Lisa Attenborough’s thoughts on the outlook for property debt and the risks of a second credit crunch here.

Finally, Anna Ward has the latest from the UK's top climate advisors, which last week called on ministers last week to support “shovel-ready” and “labour-intensive” net zero projects to get the economy moving again.

If you have any questions, please contact me, or the team.