Midweek property news update - 2 June
The fate of cities, the rebound grows and a new Help to Buy
5 minutes to read
Cities
A big contributor to rising house prices globally has been a mass reassessment of housing needs in the wake of the pandemic, whether that's been buyers seeking home offices, gardens or just to be closer to wide open spaces. That's given rise to questions as to whether meaningful numbers of people are leaving cities permanently, potentially altering the economics of everything from transport to healthcare and real estate.
But as economies begin to reopen, we're increasingly seeing evidence to the contrary. The latest example comes from Bloomberg, which has a trove of data on changes of address and mail forwarding from the US Postal Service.
Across the US, the number of people making moves they defined as permanent climbed a modest 3% between March 2020 and February 2021. When people did move, they generally didn't go very far. In the 50 most populous cities, for example, 84% of moves were to somewhere within the perimeter of the central metro area.
For the biggest cities like London and New York, part of this story is about the mobility of the wealthy who occupy central urban areas. News footage of Manhattan looked deserted for periods in 2020, however there was a 138% spike in temporary moves. These are people who changed their address temporarily with the expressed intention of returning, a theme we'll be exploring further over coming weeks.
The rebound
The pound hit a three year high yesterday after it emerged that a deluge of new orders resulted in a record increase in British manufacturing activity last month.
The IHS Markit/CIPS UK Manufacturing Purchasing Managers' Index (PMI) rose to 65.6 in May, the highest reading since records began in 1992. The survey is the latest in a raft of economic indicators suggesting a sharp economic rebound is underway and came hours after Nationwide said annual house price growth hit 10.9% in May, the highest rate in seven years.
That reading drew some hawkish comments from Bank of England deputy governor Sir Dave Ramsden, who told the Guardian that “there’s a risk that demand gets ahead of supply and that will lead to a more generalized pick-up in inflationary pressure,” before adding, “that’s something we are absolutely going to guard against.”
Whether or not the Bank acts will depend on how housing market activity is sustained through the summer. There are already signs that a supply and demand imbalance that is contributing to rising is already beginning to right itself, as we discussed in Friday's note.
The everywhere rally
Our new Global House Price Index poses tricky questions for central banks almost everywhere.
House prices globally are rising at their fastest rate since Q4 2006 and twelve countries recorded double-digit price growth in the year to Q1 2021.
Turkey leads the rankings for the fifth consecutive quarter, but strip out inflation and real prices are rising at around 16% per annum. Aside from Turkey the top ten is largely composed of developed nations, including New Zealand (22%), the US (13%), Sweden (13%), Austria (12%) and Canada (11%).
In line with our UK outlook,many markets will move towards relative normality over the medium term. With governments taking action and fiscal stimulus measures set to end later this year in a number of markets, buyer sentiment is likely to be less exuberant, writes Kate Everett-Allen.
Global growth
The OECD this week hiked its forecasts for both global and UK economic growth in light of the successful roll out of vaccines in a handful of developed nations plus the enormous fiscal stimulus in the US.
Global economic growth is now expected to be 5.8% this year, a sharp upwards revision from the think tank's December projection of 4.2% growth. Meanwhile, the UK economy is on course to expand 7.2%, up from the December forecast of 5.1%, which would be the strongest year of growth since the second world war.
The Euro area rebound is projected to begin in earnest in the second half, culminating in growth of 4.3% in 2021 and 4.4% in 2022. The slower vaccine roll out relative to the UK and US plus high infection rates in some locations is keeping growth in check for the time being, however sentiment is now at a three year high and inflation is gathering pace.
Eurozone inflation rose to 2% in May, the first time the rate has surpassed the European Central Bank’s target in more than two years. That will complicate decisions by central bank officials as to how much support the economy warrants in order to keep the recovery on track.
Help to Buy
Newcastle Building Society will become the first lender to offer 95% LTV mortgages to buyers of new build homes under a new mortgage indemnity scheme developed with the Home Builders Federation and its members.
According to the write up in housebuilder magazine, the scheme will provide low deposit buyers with an alternative to both the recently launched government mortgage guarantee scheme and the Help to Buy scheme, which will end in 2023.
Initially it will only be available in the north east of England, involving Barratt, Bellway, Keepmoat and Vistry, but is expected to roll out nationally with other lenders and builders in the coming months.
In other news...
Alex Ogario on why surging inflation poses tough choices for wealthy borrowers, Stephen Springham on the M&S store rotation and Andrew Shirley on the sharp reductions set to hit farmers’ Basic Payment Scheme (BPS) claims.
Elsewhere - how the world ran out of everything, central bankers no longer agree how to handle inflation, UK Covid deaths fall to zero, Australia's economy booms to pre pandemic levels, Lazard on remote work and finally, the BOE doubles down on climate plans.
Photo by Atharva Patil on Unsplash