Monday property news update - 19 July
Rising rents, net zero and the divide over flexible working
4 minutes to read
Rents
We've talked in recent notes about a shift underway in US residential rental markets as Americans flock back to cities. The return to work is beginning to drive similar themes in London, which is why the largest rise in rents during the second quarter of the year was in Wapping, an area popular with workers in London’s two main financial districts. Meanwhile, rents in Aldgate, an area next to the City, saw the biggest increase in the month to June (+3.5%).
Rents in London and the surrounding commuter zones are also being pushed higher by a shortage of houses as the race for space intensifies. The shortages have become more notable in recent months, exacerbated by large numbers of landlords selling up ahead of June’s stamp duty holiday deadline.
With all that in mind, we now expect rents to rise by 5% in prime central London and by 3% in prime outer London over the next six months. For all forecasts covering London and the UK for the next five years, see the full piece from Tom Bill.
Flexible working
New polling from YouGov covered in the Times highlights the degree to which flexible working is likely to be a key point of difference for companies seeking to attract talented staff over the coming months.
Of the 4,400 employees surveyed by the pollster, 40% of those currently working from home said they would consider defecting to another employer if they were forced to return to the office full time. Some 17% of those polled said they wanted to return to the office full time, while 24% said that's what their employers are requiring of them.
Knight Frank's survey of more than 400 global business leaders for the 2021 edition of (Y)our Space, suggests most organisations know employees can be engaged or productive in either setting if it is conducive to the work they are doing. These leaders are now focussed on how to use technology to ensure those who choose to work remotely can do so effectively and are not isolated or excluded.
Indeed, back in the 2018 edition of (Y)our Space, we said new technologies such as artificial intelligence, virtual reality, augmented reality, automation and robotics – what we referred to then as next wave technologies – will force structural change across the global labour market. Work on the latest edition confirmed (see p.24) that these trends, though somewhat neglected in recent debates about the future of work, could have a more dramatic impact on the long-term nature of jobs and job creation than the virus itself.
Net zero
The Bank of Japan will offer zero-interest loans to lenders that finance climate change projects, in the latest move signalling global central banks are likely to play a central role in tackling emissions.
Earlier this year the UK government altered the Bank of England's mandate, requiring it to support the shift to a net zero economy by 2050. Meanwhile, the European Central Bank earlier this month said it will take greater account of climate change in its core policy decisions. Both BOE governor Andrew Bailey and ECB President Christine Lagarde have been keen to stress that climate change policy should be led by elected governments and parliaments, however it's increasingly clear governments think monetary policy should play a greater role in spearheading the transition to net zero.
Elsewhere in ESG, moves to better define what constitutes green investments are having an impact. New data from the Global Sustainable Investment Alliance reveals the European market for sustainable investments contracted by $2 trillion between 2018 and 2020 following the introduction of anti-greenwashing rules.
Mortgages
The latest data from Moneyfacts reveals that last month mortgage product choice for UK consumers reached the highest level since the onset of the pandemic. Lenders introduced 269 new products in June alone, which caps nine months of consecutive increases in mortgage availability.
There have been few better times to borrow for lenders with large deposits. In May, average rates at 60% LTV on a two year fixed basis dropped to 1.20%, according to the BoE - that’s the lowest they’ve ever been.
Rates for borrowers with deposits of 15% of less have remained high relative to historic norms, however a turn appears to be underway. Speaking to the Guardian, Knight Frank Finance's Hina Bhudia says a price war is emerging at higher LTVs with most of the big names on the high street announcing cuts to their range.
"Lenders, which have huge amounts of capital on their books, are anticipating a drop off in sales as the stamp duty holiday tapers off,” Hina adds. “Boosting activity among high LTV borrowers by dropping rates will enable them to retain market share as normal conditions begin to return to the property market."
In other news...
Blackstone and APG bed down in student halls, China's luxury retirement homes draw millions from investors, Wall Street is paying young bankers more than ever, the UK's happy shoppers are eager to open their wallets, offshore wind put at risk by planning rules, Inditex and the future of retail, two big reasons to doubt the global boom, and finally, why was the 'death of cities' prophecy so alluring?
Image by Ana Gic from Pixabay