Friday property news update - 13 August
The UK rebound, landlords sell up and an update on the two camps of Covid
4 minutes to read
The economy
Official figures released yesterday revealed that the UK economy expanded 4.8% in the second quarter amid the easing of Covid-19 restrictions.
Growth outpaced other nations that have published early estimates of Q2 GDP, namely France, Germany, Spain and the United States, leaving the UK economy 4.4% smaller than it was at the onset of the crisis.
The data puts the economy on track to recover its pandemic losses before the year is out and, as noted by Gurpreet Narwan in this morning's Times, even the looming end of the job retention scheme is no longer expected to lead to the big jump in joblessness many once feared, largely because the economy will have almost recovered fully when it is withdrawn. The sectors with the largest proportion of staff on furlough, such as hospitality, are now struggling to recruit staff fast enough amid a surge in demand.
Construction
Construction data published alongside the GDP figures show a slight dip in output, which is now about 0.3% below pre-pandemic levels.
The CPA's Noble Francis has this useful thread on the key points, though he suggests the official figures appear to be heavily underestimating private housing output. Even so,the trend is clear: new orders grew by 17.6% - or nearly £2 billion - during the quarter compared with Q1, taking that measure above pre-pandemic levels for the first time.
Sales and lettings
A new residential market survey from the RICS shows an unsurprising cooling in housing market activity during July following the onset of the stamp duty holiday taper.
The survey shows another decline in listings, with the net balance for new instructions moving to -46%, down from -35% in the previous survey. That's the weakest reading since April 2020 and marks the fourth monthly contraction. We expect the severe imbalance between supply and demand to begin righting itself soon, as outlined by Tom Bill in his Monday note.
There are some interesting numbers from the lettings market, with the metric of tenant demand rising for the fifth straight quarter. All parts of the UK saw a firm pick-up in tenant enquiries over the latest three month period while landlord instructions remain in decline as meaningful numbers continue to exit the sector.
Against that backdrop, a net balance of +50% of respondents expect rents to rise over the next
three months. In London, a net balance of +47% of respondents now foresee rents increasing over the near term, marking a turnaround on the net balance of -3% posted in the three months to April - that's the strongest return for that metric in the capital since 2011.
BTR
The RICS survey showing swelling numbers of renters and a dwindling supply of landlords provides a neat illustration of one factor driving investors to the build to rent (BTR) sector.
New data from Oliver Knight reveals investment into the UK BTR market hit £2.35 billion in the first half of this year – over £1.27 billion in Q1 and an additional £1.08 billion in Q2. That represents a 79.8% increase in investment volumes compared with at the same point of 2020, though that period included the first national lockdown.
A strong showing in the first six months of the year puts the sector on track to surpass the record £3.7 billion invested in 2020. Rising investment volumes have also led to yields tightening in some markets - see our yield guide for more on that.
The two camps of Covid
Back in January we looked at research from Jefferies dividing the world into the two camps of Covid. There were 'eliminators’ on one hand, those pushing for complete eradication of the virus before reopening, mainly East Asia, Australia, New Zealand; and then there were the ‘suppressors’, those seeking to reopen amid tolerable levels of immunity, such as the Americas, Europe, and the UK.
The research highlighted the likely challenges eliminators might eventually face, and with herd immunity now looking increasingly unlikely through the vaccine alone, pressure is mounting on the leaders of nations with closed borders.
This piece in the FT has a neat summary of New Zealand's struggle with a shortage of workers, particularly in healthcare. Though it will gradually reopen its international border next year, Prime Minister Jacinda Ardern has pledged to maintain the zero-tolerance policy towards Covid-19.
In other news...
The true cost of net zero, Airbnb charts the travel recovery, delta variant drives wave of US employers to mandate vaccines, commercial rent collection recovery gathers pace, and finally, Hong Kong's population shrinks by almost 90,000 in a year.