Friday property news update
Jabs to double, hope for first time buyers and investors go long London offices
4 minutes to read
Jabs and forecasts
The government plans to increase its vaccination programme to such a degree that it believes all over-50s could be vaccinated by the end of March, according to the Times this morning. That means vaccinating as many as half a million people a day, which would leave the government on track to vaccinate all of the 15 million most vulnerable people by mid-February.
There are early signs that infection rates are slowing or falling, depending on location. Britain reported 1,248 new deaths on Thursday, down from a record high of more than 1,500 seen the previous day. Hospital admissions in London appear to have peaked on January 6th and the 7-day rolling average of new cases in the capital is falling notably.
Economists in a new Reuters poll believe the economy will take two years to return to pre-pandemic levels. The economy is likely to contract 2% during the first quarter of this year, before growing 3.9% in Q2 and 2.5% in Q3. That would leave the economy on track to grow 4.9% this year and 5.3% in 2022.
Lenders worked hard over Christmas
Respondents to the same poll expect the Bank of England to hold the base rate at its record low 0.1% until at least 2024. That should, in theory, mean lower mortgage rates for longer, though in recent weeks we have seen mortgage rates detach from the base rate and begin climbing as the major lenders struggled with an influx of new business, particularly at higher LTVs.
A shift is now underway, and the major lenders are reintroducing products and cutting rates at higher LTVs, according to Knight Frank Finance.
This appears partly because the banks have managed to work through a backlog of mortgage applications over the Christmas period, and partly due to a traditional rise in lending at the start of the year as banks with fresh annual targets set out to gain market share - though this year the rise is a little more subdued than the long-term average.
Some softening emerges
Housing market activity continued to climb through December, though the rate of growth slowed, according to a new RICS Residential Market Survey. In a new Agent’s Diary, Chris Druce is also finding new signs of hesitancy.
A net balance of +15% of RICS respondents saw an increase in enquiries during December. That still indicates growth, but is down from +26% the previous month. A national net balance of +7% of respondents reporting an increase in new instructions, and agreed sales returned a net balance reading of +18% in December, compared with +24% the previous month.
A net balance of +24% expect national house prices to be higher a year from today. We adjusted our five year forecasts for house prices this week in light of the latest lockdown. You can find them here.
Investors go long London offices
There was little detail on financial services in the end-of-year trade deal agreed by Britain and the EU, so we'll be tracking what is likely to be intense speculation as to the outlook of London's finance companies during the week ahead. Bloomberg this morning has this take on the $2.1 trillion fund management industry.
Investment in central London offices will be a reliable barometer as to how global investors view the capital's prospects, and for now the outlook appears positive. Some £4.9 billion of London offices transacted in Q4, well above the £3.4 billion quarterly average, according to Faisal Durrani. There were more than £2 billion in transactions during December alone.
The momentum is expected to continue into 2021, with the London office market now having 58% more stock available than at the beginning of last year and greater clarity following the trade deal. Opportunistic investors will target assets in the City and West End given that London’s office yields outstrip most major European gateway cities.
In other news...
ECB's Lagarde pushes back on gloomy forecasts as Europe braces for tougher lockdowns, the Fed will not raise interest rates any time soon, new US unemployment claims rise sharply, Taylor Wimpey looks past stamp duty holiday, London leads Europe with $10.5bn funding for tech start-ups, China's economy is beating the world a year after Covid began, and finally, the City of London sets out five year post-pandemic recovery plan.