Monthly Snapshot

Source: ONS, Markit, Bank of England

* PMI’s are a leading indicator of economic activity; >50 represents expansion, <50 represents contraction

** Month-end figure

KEY FORECASTS

• As was expected, forecasts for GDP growth in 2020 fell below 0% in both April, May and June as a consequence of all markets closing due to the government-imposed lockdown effectively halted all market activity. Some economists have suggested the downturn in 2020 is likely to result in sharp growth in 2021, which has been reflected in the forecasts revised from 1.4% in February’s report to 6.2% in June.
• Where GDP, inflation and house prices are expected to recover in 2021, the forecasts for unemployment are expected to remain higher than in the pre-COVID figures. While the government’s furlough scheme has helped to protect many jobs, the economic downturn as a result of COVID-19 is likely to result in the collapse of more businesses over the coming months, contributing to the higher forecasts.

Source: HM Treasury comparison of independent forecasts

RESIDENTIAL

• As was expected, property transactions and mortgage approvals declined in March and fell dramatically throughout April.
• Both the Nationwide and Halifax indices continued to point to growth in house prices, despite the market effectively closing for business due to government-imposed restrictions on buying and selling houses. However, given that so few transactions took place across both months, these figures must be treated with a degree of caution.
• Rental growth across the UK has remained broadly steady however regional variations were apparent. The South West experienced growth of 2.6% in April followed by 2.3% across the East Midlands, while the North East and North West saw lower, but positive, growth of 0.7% and 0.9% respectively.

Source: Nationwide, Halifax, HMRC, Bank of England, ONS, Glenigan, ONS

* Residential projects valued up to £100 million

RURAL

• As at May, year-to-date publicly marketed farmland was at an all time low, largely due to the delay of launches which were originally earmarked for March and April. Supply levels have been constrained for some time, and the lockdown measures pushed figures for 2020 down significantly. However, now that measures have somewhat eased, the market has opened up and we expect an increase in acres available on the market over the coming months.
• The oil market has also been impacted and has driven major oil companies to slim back production as a result of storage capacity reaching its maximum level.

Source: Farmers Weekly, AHDB

COMMERCIAL (OCCUPIER)

• Quarterly rental growth reduced across all sectors in April and further in May, with the retail market showing the biggest fall. Many tenants, across all three commercial sectors, have sought relief from landlords in deferring their rent bills, and many are seeking government support in order to weather the current storm.
• The fall in the retail sales index was the largest in recorded history, as a consequence of all retailers closing down because of the lockdown. However, retail sales were already showing signs of reducing as internet sales strengthened.
• Consumer confidence has taken a large hit, with the overall index falling to -34 in April from -9 in March. The expectations for the general economic situation over the next 12 months fell by 29 points to -52 in April, while the personal finance measure over the next 12 months reduced by 11 points to -14.

Source: MSCI, CoStar, Carter Jonas

* Central London, Oxford, Cambridge, Birmingham, Bristol, Bath, Leeds, Manchester, Glasgow, Edinburgh

Key economic drivers

Source: ONS, GfK

* All retailing exc. automotive fuel

COMMERCIAL (INVESTMENT)

• While equivalent yields were already loosening, April saw a sharp rise, particularly in the retail sector.
• All property capital values fell by 5.3% in the 3 months to May, the lowest quarterly decline since June 2009. The all property figure has, however, disguised the sectoral differences. Across the same period, retail values fell by 9.6%, compared with a 3.5% reduction across the office sector and a 2.7% fall in industrial capital values.
• Total commercial property investment values fell significantly in the three months to March and April, although transaction levels remain robust at £12.9 billion in the three months to April, compared with a five-year average of £14.3 billion.
• The UK’s 10-year bond yield has fallen for five consecutive months and is now at a historic low at 0.18% as at the end of May.

Source: MSCI, FT, Property Data

* Month-end figure

FOOTNOTES:
1. All data is externally sourced
2. Historic index figures may be revised
3. Data correct as at 17 June 2020

For further market information, or to speak directly to one of our property professionals, please contact us.