Sunday Supplement 08/11/2020

Nov 8, 2020

Sunday rolls around again and that means the supplement!

Another eventful week for the wider economy with more inevitable consequences for both property and the population in general.

This was the week where it seemed the floodgates broke on the further stimulus that it seems, to the observer, that the treasury and the Bank of England have been trying to keep a lid on since such generous stimulus packages were deployed in the first half of this year.

Firstly a little ripple of news around the 150bn extra in quantitative easing that the bank announced. This will effectively provide another 150bn of cheap debt to the treasury to add to the mountain already built up. It will translate into more as not all of the bonds issued will be bought by the bank – however it is more complex than that because debt matures as well and is repaid. But it is a clear sign that the debt will grow and grow before it starts to stabilise and of course could be seen as a pre-Brexit measure as well as an intra-covid measure.

The surprise was the furlough extension until the end of March, alongside an adjustment to the SEISS for the self-employed until the end of April and at 80% of profits not 55% as before. There is clear provision in there for either a much longer lockdown or what looks likely – an unlocking over Xmas and new year, and a relocking in January. Sure to be criticised since those 2 weeks or whatever it ends up being will be a gigantic uptick in cases if revellers go mad over Xmas. Bit of a political nightmare there too because there is also a case that the mental health of the nation will really need something to look forward to at Christmas time and taking a lot of Boris’ rhetoric over the years at face value, I think he would be in that camp.

Meanwhile we see more protests and more social media videos of “conscientious objectors” and civil disobedience around lockdown 2. Some sounds like buffoonery, some sounds quite well-informed. The problem as always will be the element that infiltrate these things with their own agenda of causing trouble and social unrest under any banner.

My observations is that this feels totally and utterly different to lockdown 1. Firstly people have got used to masks now. One way to tell is how far away from the doors of a supermarket they mask up. More are masked up in the car or when they get out the car door rather than putting them on at the doors of a supermarket. No doubt some interesting studies could be done on that. Fewer people looking angry about it. We would expect that – the much-touted 3 month period to form a habit has been passed now.

Estate agencies this time round are also still open for business. We are selling a house and the agent has been covid-compliant and secure from day 1….and the lockdown has changed nothing. The house has to be empty for all viewings – which we were doing anyway, making sure the agent gets room to do their job.

The stamp holiday end (or should we say theoretical end?) Is looming. You’d think if a 2021 lockdown is odds on that the holiday will get a 3 month extension announced relatively early i.e. before Xmas. But on the government’s current timescales there’s no guarantee of that! Lots of time would be needed because the process takes so long.

The reality of what covid has done filtered through in some data this week. Transactions this year forecast to hit 650k in the housing market in the UK. Compared to last year’s 1.18m.

This supply crunch due to lockdown 1 and covid generally has created this false rising market, stoked by the stamp duty holiday. However the forecast I read forecast only 850k transactions next year which will keep prices artificially high (higher than they should be that is) and if no lockdown affects the market next year and that forecast is accurate, it tells us that in reality values are a bit lower than prices, because fewer transactions is the one real sign of a housing market drawdown (even if the prices struck don’t actually go down! Go figure).

It would be fair to assume the 3% holiday (at 500k thats the effective % of it) would put 3% on prices, not every purchase saves 3% but also 3% off in tax has rational and irrational complications for people, so 3% of it attributed to the holiday is a fair shout. Does this mean an extension of the holiday for longer we wonder…..

Put this alongside other big questions for commercial landlords and operators – will the rates holiday be extended for another year now it is clear that government see major issues until end of march 2021 and inevitably covid carrying on having a massive impact throughout 2021? You would think so.

Jobs figures are the last topic for this week. Anecdotally many were already redundant before the u-turn last Saturday night. We are hearing about unemployment at the most rapid rate so far, which was expected.

However some will now have been re-hired and re-furloughed – maybe – although you still needed to be on payroll at 30th October. So anyone who wasn’t at that point (on my understanding, which I will admit, is hard to maintain with the pace of the changes) can’t be rehired and refurloughed and will be looking for a job.

What we’d seen thus far is lower paid lower skilled jobs, widely, being the hardest hit. And lots of lower paid lower skilled jobs also being created. Hence why the last figure was 4.5% for unemployment. Expectations were a huge spike after October. That can will partially now have been kicked into 2021. The bank of England quarterly report (which I will report on in more detail in next week’s supplement) now forecasts 6.3% unemployment by the end of the year rising to 6.7% in q1 2021 but falling in q2 2021 (despite the “new end of furlough”). If these figures are hit then despite the last minute changes these would represent a massive result realistically for the furlough scheme and if we can stay under 7% unemployment throughout this, that will offer far more stability and far less long-term scarring for the future.
I’m sceptical when I read those figures from the bank and to be fair to the bank it is a mugs game making predictions at the moment. I’ve made a lot this year because I’ve been asked to and plenty of them have been wrong! But the skill here is updating and changing your position when new information becomes available, having an open mind and not getting married to any particular theories or data….hard work but also enjoyable!

Stay safe and fingers crossed for a better end to the year than we might think right now!