COVID-19

Global Residential Outlook - 28 August

Key takeaway: Despite the virus, housing markets continued to display a degree of resilience over the summer months with countries such as the US seeing sales reach a 13-year high. Further national lockdowns would put the brakes on activity, but most governments look to be considering national lockdowns as a measure of last resort. Low mortgage rates and shrinking inventory levels of good quality stock in key markets will continue to support prices in the short to medium term.
Written By:
Kate Everett-Allen, Knight Frank
5 minutes to read
Categories: Covid-19 Global

Need to know

  • Asia has now surpassed North America as the largest source of new Covid-19 cases, though some European countries are also undergoing new spikes including Spain, France, Germany and Greece. 
  • The German Government has announced an extension of support measures such as short-term work subsidies and financial help, due to end in March 2021 this support will be extended to the end of 2021 costing around €10 billion.
  • Preqin reported that, as of August, US$337 billion of capital was targeting real estate globally, down only 9% from US$371 billion at the end of 2019
  • Bahamas and Bermuda have followed Barbados’s lead in offering new working visa schemes to digital nomads
  • Due to currency shifts, a sterling-denominated buyer purchasing in the US on 25 August 2020 would see a 14.2% discount compared to 23 March when the pound hit a 35-year low against the dollar. 
  • The global tourism industry lost around US$320 billion in the first five months of 2020, as tourist arrivals have more than halved around the world according to the United Nations World Tourism Organisation.

Europe

  • Knight Frank Dublin has agreed more than €70 million in sales across 160 transactions since in-person viewings were permitted in Ireland on 8th June 2020. According to Knight Frank’s Director of New Homes in Ireland, Ray Palmer-Smith:“For developments with unit values of between €1.5 million and €10 million we are seeing expats account for more than 20% of new enquiries with a particular emphasis on locations like Ballsbridge, Sandymount, Blackrock, Mount Merrion and Malahide.” 
  • In the UK, analysis of sales data from Rightmove shows sales activity increased 61% in the week ending 16 August compared with the same week in 2019. The biggest increase in deals agreed since the end of lockdown has taken place in the prime market, mirroring the pattern seen after the 2008 Global Financial Crisis. The number of properties with sales agreed above £1 million was 100% higher than the same week in 2019, our analysis shows, whilst for properties valued between £750,000 and £1 million the jump was an even larger at 119%.
  • In Spain, Knight Frank’s latest residential snapshot confirms that sales nationally are expected to reach 325,000 in 2020, 30% below the total for 2019. However, as we forecast in May, prices have proved resilient with new build prices nationally averaging €1,900 per sq m, up 1.2% year-on-year. 

Asia Pacific

  • A third wave of cases in Hong Kong led transaction volumes to fall 12% in July month-on-month with a total of 6,133 transacting according to the latest Hong Kong Monthly Report. Mass residential prices edged up by 0.1% in June, according to the latest statistics from the Rating and Valuation Department. Meanwhile, a study by our Hong Kong research team confirms that the Hang Seng Index continues to act as a long-term forward indicator of luxury residential prices in Hong Kong with a lead time of three to six months. In the medium term, however, unemployment and house prices are found to have a high correlation according to our new report.

  • Seoul which currently sits in ninth place in our Global Residential Cities Index, registering 13% annual price growth in the year to Q1 2020, is seeing middle income families move out of the city  not due to the pandemic but instead due to escalating prices and a lack of affordability. This is despite nearly 20 rounds of cooling measures being introduced by the government in recent years.   

United States

  • In the US, despite the virus, both existing and new home sales surged to 13-year highs in July, as record low mortgage rates, pent-up demand from the spring and a shortage of existing homes for sale all boosted activity. Existing home sales jumped 25% month-on-month in July and 9% on an annual basis, while new homes surged 14% on a monthly basis and by 36% year-on-year.  

  • Sales of single-family homes in the US have been particularly strong exceeding 90% of all residential sales in the past four months, its highest share since records began in 1989. Suburban living is seeing heightened activity, but pent-up demand from spring and low mortgage rates are also playing their part. Declining inventory levels are expected to slow sales rates by the end of the year.
  • In New York, residential sales totalled US$2.67 billion in July, up from US$2 billion in June according to the Real Estate Board of New York but still below the figure of US$5.3 billion recorded in July last year. In the week to 23 August, contracts were signed for 14 homes priced at US$4 million or above in Manhattan, matching the total for the same week last year. 

Africa

  • Prime residential prices and rents in Nairobi continued to decline in the first half of 2020 due to the unfavourable economic climate, continued oversupply of residential developments, low liquidity and the departure of a number of expatriates. Knight Frank’s Kenya Market Update confirms that prime residential prices in Nairobi fell by 2.9% over the first half of 2020, pushing the annual decline to 5.1% in the year to June. Prime residential rents slipped by 7% in the first six months of the year, taking the annual decline to 8%.

This week’s recommended listening – Why are super-prime residential markets outperforming?

  • In our Intelligence Talks global podcast this week, our ‘In Conversation with the Private Office’ series continues with an exploration of Knight Frank’s recent research on super-prime residential markets. In this episode, our Global Head of Prime Sales Paddy Dring delves into the report which found the global average super-prime price rose by 15% between March and June 2020.  Paddy takes a close look at Los Angeles, Hong Kong and London and reveals where he would invest US$20m dollars. Paddy speaks to report author Flora Harley, Associate Partner in Residential Research, Ernie Carswell, a Los Angeles-based broker with Knight Frank’s residential strategic alliance partner Douglas Elliman and Charles Penny, Partner in the Private Office team and specialist in the prime central London market. 
    Listen on Apple, Spotify or Acast