Luxury house prices across the globe staged a modest recovery in the second quarter as mortgage rates fell in some locations and central banks neared the end of their interest rate hiking cycles.Average annual prices rose 1.5% during the year to June across the 46 markets covered by the Knight Frank Prime Global Cities Index. That's up from 0.4% in the year to March, though is well down from the recent peak of 10.2% seen in the final quarter of 2021.While policy rate tightening cycles are not yet at an end, there is a sense in many markets that the worst of interest rate uncertainty is past. Meanwhile, some of the markets worst hit by the housing slowdown - Auckland and Stockholm, for example - have turned a corner and saw positive growth during the three months to June. Prices rose in 57% of markets during the period. We delve into the best and worst performing markets in the report. Read it here.
Rents in the ten cities covered by our Prime Global Rental Index climbed 7.5% during the year to June. While that's down from 8.2% in the year to Q1, it's still three times the pre-pandemic average.Luxury rental growth has been easing since the first quarter of 2022, when the 12.2% annual growth marked the peak of the post-pandemic rental boom. The surge was triggered by residents returning to cities following lockdowns, the affordability squeeze as prospective buyers were priced out of sales markets following rate hikes, and weak new supply following the disruption of construction through the pandemic.The overall index has risen 23% from Q1 2021 to date. Growth in specific cities has been even stronger – with New York, Singapore and London seeing rental growth of 56%, 53% and 51% respectively over the same period. Those growth hubs are now seeing moderations. In Singapore, annual growth eased from 31.5% last quarter to 24.5%; in London growth has decreased from 16.9% to 14.4%; and in New York, it has dropped from 10.6% to 6.2%.See the report for more.
For several months, US inflation has slowed while maintaining healthy economic growth and high levels of employment - a process that has become known as "immaculate disinflation". While that's good for much of the economy, it's been bad for the housing market. Conditions have given the Federal Reserve plenty of leeway to ensure it really stamps out inflation, and the rising likelihood of more interest rate hikes has caused mortgage rates to surge. The latest data from Freddie Mac puts the 30-year fixed rate mortgage at its highest level since 2001. More evidence for "immaculate disinflation" appeared yesterday with the publication of the Job Openings and Labor Turnover Survey, or JOLTS report - widely known as the Fed's preferred gauge of labor market health. The number of available positions decreased to 8.83 million in July from 9.17 million the previous month. The reading was far lower than the 9.5 million that economists had been expecting. "Although the labor market is still tight, the degree of excess demand is declining and is coming about through companies reducing the number of vacancies rather than increasing layoffs and unemployment," Conrad DeQuadros, senior economic advisor at Brean Capital in New York told Reuters. "There is plenty here to make the case that not only is the labor market rebalancing but at this point it is doing so without pushing up unemployment."
The Purchasing Managers Index for the Eurozone fell to its lowest level since November 2020. Business activity in Germany, Europe's largest economy, contracted at the fastest pace for three years.A narrow majority of economists polled by Reuters expect the ECB to pause its rate hiking cycle in September. The US PMI revealed an economy approaching stagnation. The marginal growth was the weakest since February. Rising wages and energy prices is pushing up manufacturers' costs, which could be worrying for inflation, however weaker demand is now limiting companies' pricing power, which should help keep a lid on inflation around the 3% mark, according to Chris Williamson of S&P Global Market Intelligence.That US PMI last week was the first data in several weeks that counters the narrative that the Federal Reserve will need to continue hiking to keep a lid on inflation. Yields on Treasuries have risen throughout the summer, which has pushed mortgage rates higher. The 30-year fixed rate mortgage is now running at7.31%, the highest rate since December 2000. Existing home sales hit a six month-low during July.
Take-up of science-related space in the golden triangle totaled 314,325 sq. ft during Q2, an increase of 20% compared to the same quarter in 2022 and 125% above the five-year average, according to the latest figures from Jennifer Townsend. Oxford accounted for 52% of this activity, with take-up boosted by Moderna pre-letting 145,000 sq. ft. at Harwell Campus.Elsewhere - UK proposes probe into large land holdings of top homebuilders (Reuters), UK house sales set for slowest year since 2012, says Zoopla (FT), and finally, French tax adds to woes of second home owners (Times).
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