Covid-19 Daily Briefing

Daily briefings on the most relevant news affecting our industry from the past 24 hours.

Danton’s Death - or why you shouldn’t bet your life’s savings (just yet) on the Pfizer vaccine

Many moons ago when I was with my then very arty girlfriend, I got dragged along to a small theatre to watch a production of Danton’s Death, a play set during the Terror of the French Revolution.

The protagonist, Georges Danton (a historical figure), fights to end what he created – the office of the Revolutionary Tribunal which can sentence to death anyone for anything, whether real or imagined.

Predictably, for his efforts, Danton ends up having his head nicked off by the guillotine.

The stock market’s booming reaction to Pfizer’s vaccine rather reminds me of the tribunals Danton created and then sought to end.

Fuelled by the real or imaginary, stock markets create tangible windfalls or losses as real as the guillotine’s blade.

Now, obviously, it is on the face of it very good news coming out of the Pfizer camp, and one should expect to see stocks soar.  After all, a vaccine more than 90 percent efficient might spell an end to constant lockdown and return our lives to normal sooner than any of us have dared hope.

But if we should have learnt anything over the last few months, it is to adopt a wait and see approach.

Even assuming the vaccine is approved, the wide-scale rollout of it looks far from being practical – the thing apparently needs to be stored at -70 centigrade the day before it is used. That may make holding vaccinations in GP clinics, care homes and other locations difficult.

Despite this all being relatively easy to find and analyse (even for a man of my intellect), markets soared.

And what is most interesting is that what soared and what plummeted demonstrates that much of the activity in the market was underlined by an assumption that we are now smack-bang back on the road to normality

For example, business heavily impacted by the market, like airlines, made incredible gains.

On the other hand, stocks gobbled up during the pandemic tumbled.

HelloFresh, the meal delivery service, fell 15 percent in Frankfurt while London-listed Ocado, which delivers groceries and sells technology to do so to big supermarket chains such as Kroger of the US, fell 12 percent.

And the curse of modern-day working life, Zoom, the video conferencing service, fell 15 percent. It was only a few months ago when Zoom was valued more than the UK’s top 25 listed property companies combined.

What’s changed off the back of one announcement? Have we seen any tangible change to life yet or any tangible timeline for that? Last time I checked, the pubs were still shut.

Even Boris Johnson – a man who must be longing to call an end to this pandemic – was still sounding a cautionary note at the press conference yesterday.

Stocks may have surged yesterday, but they could equally plummet off a cliff tomorrow if there is negative news about the vaccine.

I would argue that if you are looking for strong investments right now, and with interest rates so low you need to put that money to work, choose income-producing assets.

On the whole, they are underpinned by long-term demographic trends and will be less susceptible to cyclical downturns.

Real estate has a whole heap it can promote, from Later Living to Build to Rent to PBSA. Markets might be jumping today, but I’m still confident that Covid-19’s legacy for institutional investors will be a flight to quality – and alternative real estate should make that case very clearly now. The full dynamics behind this deserve another blog.

Back to yesterday’s boom. Let’s be clear – the stock market is just behaving how it should. It reacts. It goes up. And it goes down. But it doesn’t need to answer why. Crowds never do.

Danton’s Death has, for me, the arching theme of the madness of crowds. The markets are the ultimate crowd. Perhaps a modern version would have as its protagonist a clever broker or fund manager urging his clients not to buy big back into airlines just yet. They probably still would.

Were we too harsh on Boris? No. Here’s why.

We respond to some of the debate yesterday's blog stirred up.

Businesses must get more vocal over lockdown

Winston Churchill once said: “Those who fail to learn from history are condemned to repeat it.”

It’s time to take out Tourism VAT for good

A permanent VAT cut for the tourism sector would boost one of the UK's most vital exports.

What will build-to-rent look like after COVID-19?

The pandemic has impacted all real estate sectors in some way or another - but which are going to come out stronger?

Commercial landlords should brace for more pain

The second rent quarter day of 2020 was dire but the third will likely be worse.

Budget 2020: what’s the outlook for real estate?

Blackstock Consulting's clients' share their analysis of what the new budget means for the property industry.

VAT on Homes Built to Rent

Yes tax is boring, but it’s important too, and despite what you may think it’s extremely important for the Build to Rent sector.

While we may be banging the drum on separate use classes or affordable housing methodology, perhaps we should turn more attention to how VAT is applied on homes for rent.

Homes sold on the open market are ‘zero rated’ and so pay no VAT. But If I rent you the flat, because it is an investment, I have to charge you VAT at 20% on the rent.

But you are not going to pay that, so I would have to make it VAT exempt, meaning I am unable to claim back my own VAT charges.

Given the majority of BTR developers are building new homes – rather than digesting those built for sale as buy-to-let investors do – Build to Rent investors should be treated differently, as far as VAT is concerned.

You can offset it through capital gains, but you cannot avoid it and it is a needless drag and a disincentive that may reduce likely investment into the sector.

As I said – it may not set the front pages alight or be the top recommendation of any white paper, but it’s important none the less.