A Nu variant, European investors go long residential & unpicking UK's hottest new property sector
Making sense of the latest trends in property and economics from around the globe.
4 minutes to read
A Nu variant
Several of this morning's papers lead on the emergent of a new variant in South Africa that may be either more transmissible, more resistant to the vaccines or both. Travel from South Africa and five other southern African countries will be banned from noon today.
This is a good explainer from Tom Whipple, Science Editor at the Times. The Delta variant has pushed the herd immunity threshold to between 85% and 90%. The Nu variant, as it is likely to be designated by the World Health Organization, may push that higher, but you can’t have a herd immunity threshold above 100%: with each rise in transmissibility the gains are less.
According the piece, if it’s more transmissible, we have more infections, we vaccinate more, and we end up in the same place a little later. If the variant is resistant to vaccines, the government may have to develop variant vaccines, which will take weeks to develop, rather than a year.
Residential investments
European residential investment sectors are going to have a record year. Investment hit €15 billion in Q3 2021, up 28% on the same period of 2020. That brings the total to €50 billion year-to-date.
The sectors, which encompasses student housing, multi and single family rental, co-living and seniors housing, are attracting a larger slice of the total invested in real estate with each year that passes (see chart). The outlook is supported by affordability constraints in the sales market, the increasing pace of urbanisation, whilst ageing populations mean there is a need for purpose-built accommodation across age groups.
We've surveyed leading investors who combined account for €64 billion in residential assets under management across Europe. The results suggest they plan to invest a further €87.5 billion over the next five years.
Key to increasing allocation will be diversifying investment across age groups. Currently, just 18% of respondents invest across all the residential sectors in Europe - from student to seniors housing. In five years’ time this is expected to rise to 45%. See the analysis from Oliver Knight for more.
Suburban renters
More people than ever are likely to rent throughout their lifetime, through both choice and necessity. As a result, few sectors are more attractive to institutional investors than the fledgling UK suburban built-to-rent sector.
We saw another new platform launched this week, this time between Aviva Investors, and Packaged Living. The new partnership will create a single-family rental platform seeded with an initial allocation of up to 1,000 homes. Knight Frank Research indicates there’s £7.8bn of capital ready to be committed to the market over the next five years.
On our podcast this week, Packaged Living managing director Jonathon Ivory joins Anna Ward and Oliver Knight to discuss the opportunities, the challenges of getting the product to market and why it's a totally different proposition to its urban relative. Listen here, or wherever you get your podcasts.
Net additions
New data reveals the impact of the pandemic on housing delivery: “net additions” figures for the 12 months to 31 March 2021 - a period which covered the first initial lockdown in spring 2020 - found that 216,489 homes were added to supply in the year, down 11% from the 242,702 in the previous year, and the lowest level since 2015/16.
More timely data capturing energy performance certificates (EPCs) granted to new homes, which can be seen as a lead indicator for completions, suggest output had recovered to pre-Covid levels earlier this year. In recent weeks, however, delivery has slowed again, as materials shortages and rising build costs limit output, despite strong demand for new homes. From the start of September to early November, output has been 12% lower than the same period in 2019.
In other news...
A patch of virtual real estate sells for a record $2.4 million (Reuters), HMRC moves to Newcastle (BBC), China emissions fall as economy buffeted by property downturn (FT), Wall Street grudgingly allows remote work as bankers dig in (NYT), the remarkable turn in the US jobs market (NYT), UK house prices surge to 5½ times annual pay for first-time buyers (Times), the Bank of England abandons forward guidance (Bloomberg), Hong Kong detects two cases of the Nu variant (Bloomberg), Asia is the global inflation exception due to its handling of the pandemic (FT), what the ‘big quit’ tells us about inflation (FT), and finally, Landsec wins plaudits with new strategy for retailers (Times).