Monday property news update - 8th February 2021

Renters return

While property market headlines have been dominated by the “rural exodus” happening global sales markets during the pandemic - see the FT on Rome this weekend - a shift in the other direction has been taking place in London's lettings market.

We talked last month about people moving to Canary Wharf due to cheaper rents and the ability to walk to work. We can now see the trend emerging across larger areas of central London as people take advantage of the benefits of living in zone 1, writes Tom Bill.

The number of new prospective tenants registering in prime central London who came from outside the area was 35% between June and December 2020, up from 26% in the same period in 2019. Furthermore, their average distance from the boundary of PCL more than doubled to 3.1 miles from 1.5 miles over the same period - that's a mirror image of the prevailing pattern in the sales market.

The tapering, continued

UK house prices declined 0.3% in January, Halifax said Friday. That's the second key index to show prices softening in a week, after Nationwide's index showed an identical decline on Tuesday.

As we said last week after publication of the Nationwide data, this is likely a gradual tapering of momentum towards something that looks more like normal conditions. The continuing success of the vaccine roll-out, plus an impending economic recovery is likely to underpin momentum beyond the end of the SDLT holiday in March.

Indeed, as Halifax managing director Russell Galley notes in the release - the number of transactions already in the system, plus powerful structural demand changes that include the search for more space, could sustain underlying market activity for some time to come.

The investment case for London offices, continued.

We talked on Friday about the scale of the London office market's shortage of grade A space, and why that is likely to be a key factor underpinning demand from investors over the coming years, regardless of how the debate over the future of work evolves. Knight Frank's capital gravity model enables us to see the size of that likely investment, and where it is likely to come from.

The model suggests overseas investors will spend as much as £10.2 billion on London offices in 2021, up from £7.8 billion last year, writes Victoria Ormond. Over the next five years, investment from the US is expected to reach £13.4 billion, positioning the country as the single largest source of potential capital flows into the market.

There is more to this than the supply crunch theme. As Victoria notes, factors from oil prices to currency hedging provide powerful incentives to invest. Plus, £12.8 billion in London office assets exchanged hands in 2016, and on the basis of a five-year hold or financing period, at least some of these assets could be approaching the end of their fund life or business plans.

D-day approaches for retailers

The bosses of some of Britain’s biggest retail chains have joined forces to call for an overhaul of business rates to help them to compete with online giants such as Amazon.

The government held a consultation on the business rates system last year though is yet to publish any findings, or whether the Covid-19 rates relief will be extended beyond April - the report in the Times suggests the chancellor may set out reforms in the budget.

April is also when the moratorium on retail evictions is due to end - some £4.5bn of unpaid rent remains outstanding. For on the current conditions in the retail market, see Stephen Springham's latest update.

In other news...

Plus, a new commodities boom beckons, China reports no new local Covid-19 infection for first time in nearly two months, UK says Covid-19 booster and annual vaccinations very probable, Britain will not introduce vaccine passports, pandemic turns up pace of workplace innovation, and finally, last gasp for town halls’ property stampede.