Checking in on the housebuilders

January 22, 2021
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Information is power. As part of our ongoing efforts to provide you with relevant and important market information, please find an update from our international partner, Knight Frank, and our President and Chief Operating Officer, Scott Durkin.

The two camps of Covid

An interesting piece from The Telegraph yesterday shed some light on what now appear to be the two emerging approaches among nations to the Covid-19 end game.

"The new conflict is between those countries pushing for eradication, and those arguing that the greater public good is to end coercive restrictions and open up the economy as soon as we reach tolerable levels of immunity", writes Ambrose Evans-Pritchard. The piece quotes research from Jefferies stating the world is splitting into two camps: ‘eliminators’ in East Asia, Australia, New Zealand; and ‘suppressors’ in the Americas, Europe, and the UK, which will embrace freedom sooner.

The challenge the article highlights is: how quickly will countries which have adopted eradication, Singapore for example, open up to travelers?

Is China's recovery reaching a plateau?

China's consumer prices returned to growth in December, after dipping briefly the previous month. That follows dips in both manufacturing and non-manufacturing CPIs that may suggest economic growth that has led the world out of the crisis may be beginning a plateau.

Meanwhile, the Chinese government recorded more than 100 new cases for the first time since July, amid an outbreak in Hebei. A reminder that January 23rwill mark one year since the government imposed a lockdown in Wuhan aimed at containing the novel coronavirus Covid-19.

Checking in on the housebuilders

Housebuilder Vistry yesterday said the second national lockdown had little impact on sales, which were up about 20% in the final six weeks of the year compared to a year earlier. There is a theme building here, see Barratt's trading update last week.

Our analyst on the ground Anna Ward tells me sentiment remains strong among the housebuilders who continue to build out schemes with sales outlets open, however constraints on construction are in some cases starting to put pressure on their ability to complete. Those constraints include both managing the challenge of working on site while maintaining a Covid-safe environment and shortages of materials.

Meanwhile, the FT reports Chancellor Rishi Sunak is fiercely resisting calls for further tightening of the lockdown in sectors such as the housing market, construction and manufacturing.

The problem with negative interest rates

Two speeches by Bank of England senior officials reveal more of their thinking on the introduction of a negative interest rate.

Both the governor Andrew Bailey (speech not yet online, Times write up here) and Ben Broadbent, the deputy governor (transcript here), fear the move risks lowering lending volumes by reducing banks’ profitability, something they are eager to avoid. Meanwhile, Mr. Bailey said Britain’s official jobless statistics understated the true rate of unemployment, which is likely to be closer to 6.5% than the 4.9% in the latest official figures.

In addition, the economy is likely to have contracted in Q4 last year and will do so again during Q1, before the roll out of vaccines begin to fuel a more meaningful recovery. The euro area appears to be following a similar path.

In other news...

For a summary of all the data you need to understand what's happening in the property market, see this wrap from Chris Druce.

Plus, the US perspective on China's recovery, it could be a great year if your business survives, Land Securities and British Land on rent collection, a Croydon bankruptcy offers cautionary tale for cash-strapped councils, Bloomberg goes long on cask whisky, Morgan Stanley abandons calls for a weaker US dollar, and finally, is the Brexit deal a platform on which to build.

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