Rewilding with Ed Sheeran, Germany's carbon problem and is the UK housing market starting to cool?
Making sense of the latest trends in property and economics from around the globe
4 minutes to read
Cooling
Lenders expect demand for mortgages to cool over the next three months, according to a closely-watched survey by the Bank of England (BoE).
The survey, conducted before the BoE hiked the base rate last month, adds to a growing body of evidence suggesting activity in the mortgage market is returning to something resembling the long-run average after two record years. Mortgage approvals for house purchase remained relatively unchanged at 67,000 in November, close to the pre-pandemic average of 66,700.
Despite cooling demand, lenders expect mortgage availability to improve during Q1, particularly for borrowers at loan-to-values north of 75%. Separate data from Moneyfacts shows product availability at a 13-year high. Despite the hike in the base rate, pricing is holding relatively steady for the time being. The BoE survey showed spreads narrowed in Q4, and were expected to be unchanged in Q1.
The latest monthly overview of key housing market data from Chris Druce also shows signs of cooling. UK residential property transaction data from HMRC revealed there were 96,290 transactions in November, 16.4% lower than the same month a year earlier.
Solar
Germany will be carbon neutral by 2045, the government pledged back in May. The new target brought the previous milestone forward by five years and hitting it would make Germany among the first of the major economies to become carbon neutral.
The early signs don't look good. The government has now missed its emissions targets for two consecutive years and will likely do so again both this year and next, according to Robert Habeck, Economy Minister in the new coalition government and co-leader of the Greens. The country faces a “mammoth task” to get back on track, he said during a speech in Berlin.
Germany plans to increase the share of renewable energy in its power mix to 80% by 2030 and real estate forms a central part of the plan. Solar panels will be mandatory on new commercial buildings and become the norm on new-build homes as part of a "solar acceleration" plan. That follows the model pioneered in Berlin, which last year approved legislation making solar panels mandatory on new buildings from 2023.
It's worth noting the degree to which the UK has opted to tackle the issue from a different angle, throwing its weight behind heat pumps instead of solar.
Inflation
The US measure of consumer price inflation hit 7% in December, the largest increase since 1982. After spending months telling markets that inflation would ease on its own, getting the rate back in line with the 2% target is now the Fed's primary goal.
Economists expect Fed officials to make three or four interest rate increases in 2022. Those are likely to be incremental moves, but investors are already offloading rate-sensitive stocks - particularly those in tech. The Nasdaq sank 2.5% yesterday.
We talk a lot about US inflation in these notes and it might seem irrelevant to some readers located elsewhere but the Fed's own research shows quite how large the spillovers of higher US interest rates are. In fact, hikes in the US are felt in overseas economies about as much as they are in the US itself. After three years, a 100 basis point rise reduces GDP in advanced and emerging economies by 0.5% and 0.8% respectively.
Rewilding
Knight Frank data published last week revealed the degree to which rewilders are driving values in England's farmland market. The price of bare farmland climbed 10% last year and it's clear the move to rewild large swathes of land has caught the imagination of investors large and small - see Ed Sheeran's plan to rewild as much of the UK as he can.
News last week that farmers in England will be given taxpayers’ cash to rewild their land and it has triggered widespread debate. We dive into that debate in the latest episode of our Intelligence Talks podcast.
Anna is joined by Knight Frank’s rural research head Andrew Shirley and head of agri-consultancy Tom Heathcote. They dissect the government’s plans for large-scale nature recovery projects and what they could mean for land ownership. Listen here, or wherever you get your podcasts.
In other news...
Bank of England tells banks to quantify climate risks properly (Reuters), not everyone likes ESG (Bloomberg), losing the plot over ESG (City AM), the UK financial services sector is growing (Reuters), UK job vacancies grow at the slowest pace in eight months (Reuters), and finally, Google bets on return to office with $1bn purchase of London building (FT).
Photo by Danist Soh on Unsplash