Vaccine will not provide a quick fix for real estate

News about a vaccine has boosted financial markets and we have revised up our global economic expectations for the next two years or so. But while we think that this bodes well for the medium term, next year is still likely to be tough for most property markets.
Andrew Burrell Chief Property Economist
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More from US Housing

US Housing Market Chart Book

Housing activity surges even as mortgage rates rise

Housing market activity has surprised on the upside over the past month and home sales look set for a strong end to the year. Even as mortgage rates increased to an eight-month high, home purchase mortgage applications have surged, pending home sales are trending up, and a rise in buyer traffic points to a resurgence in new home sales. The arrival of the Omicron variant has also brought interest rates down, which may give activity an added boost over the next month or so. However, stretched affordability and a lack of inventory means the resurgence in existing home sales is likely to prove short-lived. Indeed, house price growth is slowing, and we expect it will fall from around 20% y/y now to 3% by end-2022. The rental market is also booming, with vacancy rates falling back even faster than we expected as cities have reopened.

7 December 2021

US Housing Market Data Response

Mortgage Applications (Nov.)

A rise in mortgage rates to an eight-month high of 3.31% by the end of November failed to dampen home purchase demand, which surged to a nine-month high. The drop in 10-year Treasury yields from the arrival of the Omicron variant implies mortgage rates will fall back over the next couple of weeks, which may provide some further support to demand. But with affordability stretched we doubt the current level of home purchase applications can be sustained beyond the next few weeks.

1 December 2021

US Housing Market Data Response

Case-Shiller/FHFA House Prices (Sep.)

Annual house price growth fell for the first time in 16-months in September, and stretched affordability means it should continue to slow. It is too soon to say what impact the arrival of the Omicron variant will have on the housing market. But one immediate effect has been a fall in interest rates, which if sustained may give prices some support over the remainder of the year.

30 November 2021

More from Andrew Burrell

UK Commercial Property Update

Office markets to shrug off end of furlough

The government’s furlough scheme is regarded as one of the successes of the UK’s coronavirus policy response, but all good things must come to an end. Over the next few months, its unwinding will bring some risks, though we do not expect these to have a major impact on UK office markets.

2 July 2021

Non-Euro European Commercial Property Outlook

Emerging Europe: Industrial still a bright spot

With virus restrictions set to be eased further, we expect the recovery in economic activity to gather pace from Q3, which should give occupier markets a lift. But the pick-up will not be enough to prevent falls in office and retail rents this year. And further out, large supply pipelines and structural change will keep rental values in check. Meanwhile, with monetary policy set to normalise earlier than we had initially anticipated, we have now pencilled in sharper property yield rises across all sectors from 2023. As a result, we expect capital values to barely grow over the next five years. In turn, total returns will be dominated by income returns, with industrial outperforming offices and retail, echoing our sectoral rankings for western Europe.

25 June 2021

UK Commercial Property Update

Remote working one year on

A year ago, we were just digesting the impact of remote working, but already permanent change looked likely. And while we know more now and continue to refine our views, we see little reason to change our conclusions from last summer that office demand will suffer a major hit from this shift.

23 June 2021
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