Post down lockdown recovery, but when will it stop? Kate Faulkner - - PowerPoint PPT Presentation

Post down lockdown recovery, but when will it stop?

Kate Faulkner BSc(Econ) MBA CIM DipM

What did we say in May?

• Economically we were expecting a ‘V’ shaped recovery

– Recovery by 2022

• We weren’t sure what would happen when the property

market opened

– Would the 373,000 homes complete held up during lockdown? – Would buyers and sellers be hesitant? – Would prices and rents fall?

OMG – we did not expect what happened next!

Property market bounces back

England and regional trends

Rightmove Halifax Nationwide Region Average Annual Average Annual Average Annual change Annual change house price change house price change house price this quarter last quarter

England £337,884 2.9% £258,178 1.9% 1.9% North East £157,291 2.3% £140,147 2.0% £129,505 0.0%

• 0.3%

North West £206,909 3.1% £180,923 5.0% £170,216 4.8% 4.1% Yorkshire & Humber £202,502 4.1% £167,337 3.8% £162,870 1.9% 4.3% East Midlands £236,110 2.5% £198,150 4.0% £187,812 1.5% 3.6% West Midlands £238,123 3.0% £205,947 3.9% £194,577 0.6% 2.5% East of England £363,066 2.6% £282,706 1.7% £230,652 0.7% 1.3% London £628,284 1.5% £500,632 2.8% £475,448 2.1% 1.0% South East £419,595 2.3% £331,547 1.8% £282,936 2.1% 1.7% South West £321,996 3.4% £246,340 3.0% £251,392 2.3% 1.5% Sources: Rightmove IHS Markit Nationwide

Most property price reports suggest house prices are up!

Lettings market goes wild!

• First call was 7.15 am on the 13th May
• Property enquiries increased by 245% vs previous April

– Tire kickers were filtered out

• Lettings increased by 15% vs previous year
• There were 35% less properties available
• All properties advertised at 4% higher than previous

tenancy agreement

– Zero negotiation on rental

But the media aren’t necessarily telling you what’s actually happening !

Beware the doom and gloom!

Reality behind their headline:-

Beware the doom and gloom!

https://www.nationwide.co.uk/-/media/MainSite/documents/about/house-price-index/2020/Jun_Q2_2020.pdf

• Jobs headline:

Coronavirus: UK payrolls shrink by 649,000 jobs in lockdown

• But in reality:-

– Unemployment has not surged as expected

• Unemployment figures

– Tend to report unemployment, not jobs being created

• M&S announces 950 job losses
• Hermes to create 10,000 jobs

Beware the doom and gloom!

What are the current forecasts? Who is worth listening to?

Office of Budget Responsibility

Economic forecasts Could be 2-5 years to recover

https://cdn.obr.uk/OBR_FSR_July_2020.pdf

Recovery less of a ‘V’ shape then expected

https://cdn.obr.uk/OBR_FSR_July_2020.pdf

Unemployment is expected to get scary, in 2021

https://cdn.obr.uk/OBR_FSR_July_2020.pdf

Other economic forecasters

• Capital Economics

The level of GDP may not return to its pre-crisis peak until the first half of 2022. By the end of 2022, the unemployment rate will probably still be at least 1 percentage point above the pre-crisis level of 4% CPI inflation will probably be closer to 1% than the 2% target.

https://www.capitaleconomics.com/publications/uk-economics/uk-economic-outlook/

CEBR

What can be done to limit the pain? I believe we need to take bold steps, including:

• Stamp duty holiday for home-buyers
• Measures to stop zombie firms all going bust at once
• 10 per cent pay reduction for non-essential public sector staff
• Cut VAT temporarily
• Allow talented techies to come to Britain freely after Brexit
• Pay off the Government’s pandemic debts over 50 years

Recovery will be faster and easier if we accept economic life may never return to what we considered normal.

https://cebr.com/reports/article-in-the-daily-mail-by-douglas-mcwilliams-targeted-tax-cuts-a-boost-for-tech- and-50-years-to-pay-off-our-corona-debt-one-experts-view-on-how-to-get-britain-back-to-work/

Why does this matter to property?

• Economics influences

– Consumer confidence

• This usually influences people’s willingness to buy/sell

– Wages ‘set’ rents – Unemployment

• Determines who your tenants are

– Interest rates influence mortgage costs

• Lower the better, possibly at their lowest?

– Lenders

• Lending is based on many factors

– One fear is the levels of unemployment – Current is ‘workload’ and market pressure

The economy feeds into property supply, demand and pricing

Based on economic forecasts how is the property market expected to perform?

Latest forecasts

Savills 5 Yr Savills 5 Yr Property Price Forecasts Savills Savills Savills Savills Savills compound compound 2020 2021 2022 2023 2024 growth growth Date of publication/source (Jun 20) (Jun 20) (Jun 20) (Jun 20) (Jun 20) (Nov 19) (Jun 20) UK

• 7.5%

5.0% 8.0% 5.0% 4.5% 15.3% 15.1% London

• 7.5%

6.0% 3.0% 1.5% 1.5% 4.0% 4.0% South East

• 7.5%

8.0% 5.5% 2.5% 2.5% 10.9% 10.7% South West

• 7.5%

3.0% 8.0% 5.5% 4.0% 13.1% 12.9% East of England

• 7.5%

8.0% 5.5% 2.5% 2.5% 10.9% 10.7% East Midlands

• 7.5%

7.0% 7.5% 5.5% 5.5% 18.2% 18.4% West Midlands

• 7.5%

2.0% 10.0% 7.0% 6.5% 18.2% 18.3% North East

• 7.5%

2.0% 10.0% 8.0% 7.0% 19.9% 19.9% North West

• 7.5%

8.5% 9.0% 7.0% 6.0% 24.0% 24.1% Yorks & Humber

• 7.5%

3.0% 10.0% 8.0% 7.0% 21.6% 21.1% Wales

• 7.5%

2.0% 10.0% 7.0% 6.0% 18.1% 17.7% Scotland

• 7.5%

7.0% 8.5% 6.0% 5.5% 19.9% 20.1%

Price reduction forecasts are anything from 5-16%

https://www.savills.co.uk/insight-and-opinion/research-consultancy/residential-market-forecasts.aspx

Kate’s forecasts

• Some property prices will not fall at all
• Other property prices could fall by the ‘recession falls’ of 20%
• Rents react to wages

How do you keep up with market information?

Kate’s favourite sources

• Media

– Radio 4 am/pm programmes tend to be more balanced

• Economics

– https://cebr.com/ – https://www.capitaleconomics.com/ – https://www.gov.uk/government/collections/data-forecasts

• Property market

– https://www.propertychecklists.co.uk/ – https://www.savills.co.uk/insight-and-opinion/ – https://www.hometrack.com/uk/insight/uk-house-price-index/ also Zoopla reports – https://www.knightfrank.co.uk/contact/people/liam-bailey-00000294 – https://www.rightmove.co.uk/house-prices.html

• Sold property price data

Need to know!

PRS – new developments

• Current changes:-

– Stamp duty

• Save the ‘homeowner rate’ previously paid up to £500,000
• Still have to pay the ‘additional SDLT’ for second homes 3% etc

– New court case rules on possession

• https://www.landlordzone.co.uk/news/get-ready-new-possession-hearing-rules-

will-add-time-and-cost-to-existing-evictions-as-ban-end-looms/

• Future changes?

– Leasehold rules

• Potential good news for length of lease and costs of extensions
• Changes to right to manage
• https://www.alep.org.uk/article/831/alep-responds-to-law-commission-rsquo-s-

leasehold-reforms-recommendations

• Capital Gains Tax

– Will this be increased? – Previously proposed to align with income tax rates

You can always talk to me and Maxine!