Midweek property news update - 10th March

"Recovery is in sight"

The OECD yesterday raised its outlook for global growth following the successful, though uneven vaccine roll-out and the huge government stimulus approved in the United States. There were already signs of a rebound in goods trade and industrial production towards the end of 2020 and as a result, the group expects global GDP growth to hit 5.6% this year, an upward revision of more than 1% from its December forecast.

That means world output is expected to reach pre-pandemic levels by mid-2021, though much depends on the vaccine production, roll-out and new variants of the virus. Activity is already above pre-pandemic levels in China, India and Turkey, helped by strong fiscal measures and a manufacturing-led recovery, and output shortfalls remained mild in Asia-Pacific economies that successfully contained the virus, including Australia, Japan and Korea.

A more gradual upturn appears likely in major European economies, reflecting
continued containment measures in the early part of 2021 and more limited fiscal support, although the acceleration of vaccine deployment should help momentum to build, particularly in the UK, the group said in the full report.

Flexible working

IWG, world's largest flex office company, has been making headlines this week. First in the FT for signing a deal Japanese telecommunications group Nippon Telegraph and Telephone (NTT) to provide access to its global network of offices for NTT’s 300,000 employees, then in an interview with the Times, chief executive Mark Dixon said he could open centres in Cornwall, rural Wales and the Hebrides as people working remotely move away from cities permanently.

As Lee Elliott noted in the London Report, the growing role of flexible, serviced space has been a central, if somewhat divisive, theme in the London office market for some time. In 2020, the sector accounted for 21% of take-up, second only to finance and banking (28%).

Your views on the outlook for the sector will likely depend on how you believe remote work will develop.The NTT deal, in which staff will be able to choose from more than 3,300 offices owned by IWG in which to work for the next three years, is unlikely to be isolated as large occupiers seek to balance flexibility with a more productive working environment. Lee spoke to six providers to find out how they think the next few months are likely to play out.

40-year mortgages

Next week, Habito will begin offering fixed rate mortgages with terms between 10 and 40 years for borrowers with deposits of at least 10%. It's unclear exactly how the pricing will stack up, but according to the write up in the Times: depending on the loan-to-value and the term, the interest rate will be between 2.99 and 5.35% with a £1,995 product fee.

Whether or not this appeals will depend on borrowers' individual circumstances, though it's worth noting product availability in the mortgage market has now been climbing for five consecutive months as lenders compete for market share, according to Moneyfacts. Average two and five year fixed rates at 75% LTV are now at 2.27% and 2.46% respectively, though it's possible to lock in rates a good deal cheaper.

Cladding

The RICS this week issued new guidance for buildings with cladding that seeks to clarify types of properties that will require additional inspections as a result of concerns about fire safety.

The key part of the overhaul concerns external wall safety (EWS1) forms, significantly reducing the number of homes that require them. The Government has estimated that 492,000 households will be freed from the tests.

It's a big step forward, however there appear to be snags that still need work: the Telegraph highlights the fact the new guidance may not be enough to overwrite previously failed assessments. From this morning's paper:

We asked "eight of Britain’s largest lenders if they would now consider a property with a failed EWS1 that no longer required one to be newly mortgageable, and none said yes."

In other news...

David Bourla on the resilience of the Paris residential market.

Plus, UK consumer spending hit again as lockdown goes on, Australia's central bank to hold rates at record low for years to come, China February factory prices roar back, pandemic blamed for falling birth rates across much of Europe, Capital & Counties has high hopes for rosy summer, and finally, greenwashing in finance: Europe’s push to police ESG investing.