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The rise in the US homeownership rate has stalled, driven by a drop in the proportion of under-35s that own their home. That’s down to higher mortgage rates reducing the number of first-time buyers (FTBs) that can afford to buy. Our forecast is for …
2nd November 2023
We’ll be discussing the latest Fed, ECB and Bank of England policy decisions in a 20-minute Drop-In webinar at 3pm GMT today. (Register here .) The Bank’s decision to leave interest rates at 5.25% for the second time in a row and to double down on the …
Although consumer spending has remained remarkably resilient in the US so far this year, it has weakened in other advanced economies. And as the lagged effects of high interest rates filter through to households in an environment of low consumer …
The government today confirmed that it intends to welcome an increasing number of permanent residents in the next couple of years. Even if the number of permanent residents continues to rise, however, the record number of temporary residents currently in …
1st November 2023
By leaving rates unchanged while continuing to flag the possibility of further tightening to come, the Fed indicated today that it remains in ‘wait and see’ mode. But Chair Jerome Powell appeared to strike a more dovish tone in his press conference and we …
The September JOLTS data suggest that the labour market is loosening at a slightly slower pace, but still point to a sharper fall in wage growth ahead. There is little support for the idea that resilient activity growth in the third quarter will lead to a …
The Bank of Japan today de facto abolished Yield Curve Control and we think policymakers will call time on negative interest rates as soon as January . A casual reading of today’s statement would suggest that policy settings were left unchanged: the Bank …
31st October 2023
On the back of upward adjustments to our 10-Year Treasury yield forecasts, we now expect to see a larger increase in cap rates. This will see office cap rates rise to over 6.5% by end-2024, pushing the peak-to-trough price fall for the sector to more than …
30th October 2023
Global goods trade rose slightly in August and timelier data point to further gains in September. But we expect global trade to fall again in due course as economic downturns in several advanced economies weigh on their demand for traded goods. According …
27th October 2023
In line with our upwardly revised forecasts for the 10-year US Treasury yield, we’ve raised our projections for 10-year government bond yields in most other developed market economies. But we still expect those yields to fall, in general, by the end of …
The Q3 RICS survey indicated occupier and investment sentiment fell further in Q3, with the latter reflected in weak investment volumes throughout the summer months. But tight credit conditions and a slowing economy mean the trough in confidence is …
26th October 2023
Weak demand and investment, but capital values nearing the trough Having started the year on a somewhat promising footing, all-property occupier demand has weakened since and fell further in Q3. The demand balances for offices and retail remained …
Norges Bank is almost certain to leave its policy rate unchanged at 4.25% next week. And we suspect that, given September’s weak inflation data, it will also soften its language about implementing one final rate hike in December. Next year, we think the …
Although US high-yield (HY) corporate bonds are more attractively valued than at any time since the Global Financial Crisis (GFC), we doubt they will outperform US equities over the next couple of years. The yield of ICE BofA’s index of US HY corporate …
Our new higher forecasts for US Treasury yields mean that mortgage rates won’t fall as quickly as we previously predicted. While we still expect mortgage rates to decline they are unlikely to fall below 6.0% before end-2025, muting any recovery in house …
The -1.4% quarterly return in Q3 meant that there have now been four consecutive negative quarters for all-property total returns. That figure was dragged down by a 5% q/q fall in office values as all-property values fell by 2.4% q/q. That took the …
Although the Bank of Canada maintained its tightening bias today, the rest of its communications suggest that the Bank is growing more confident it has done enough to eventually get inflation back to 2%. We continue to expect the Bank to cut interest …
25th October 2023
The proposed extension to the Mortgage Guarantee Scheme could prove a good counter-cyclical policy in areas where house prices are relatively low. But the scheme has far less impact in London and the South where a much bigger deposit than 5% is needed to …
We suspect that more weakness in the housing market will weigh on real GDP by further reducing residential investment and consumer spending. This is one reason why we think the economy is close to a mild recession, if it isn’t already in one. Higher …
The October flash PMI surveys suggest that economic activity got off to a weak start in Q4, especially in Europe. And with weak activity taking some of the steam out of labour markets and inflation, we are growing more confident in our view that the Fed, …
24th October 2023
Although we have revised up our forecasts for the 10-year Treasury yield between now and the end of 2025, we aren’t inclined to change our upbeat projection for the S&P 500 over this period . This is because the big increase in equity prices that we are …
20th October 2023
Japan’s trade unions are demanding an even larger pay hike in the upcoming spring wage negotiations and we believe that the talks will result in a base pay hike of around 2.5%. While the Bank of Japan may wait until the first round of results of the talks …
We'll be discussing the implications of the end of the ultra-low interest rates era and the rise in r* in an online Drop-In at 12:30 GMT on Tuesday 31st October. (Register here .) As our new higher estimate of the real neutral interest rate, or r*, for …
19th October 2023
The ongoing outflow of funds from the Fed’s reverse repo facility has completely offset the downward pressure on bank reserves from quantitative tightening (QT), suggesting that the Fed could continue to let its asset holdings run down for longer than …
18th October 2023
The weakness of GDP growth in the second and third quarters means that the Bank of Canada is likely to make a marked re-assessment of its output gap estimates in its October Monetary Policy Report (MPR). Some indicators suggest that output has already …
There is a growing body of evidence that suggests wage pressures are past their peak, but it’s not clear how quickly wage growth will slow. The gradual loosening in the labour market and the experience in the US suggests that UK wage growth may ease only …
House prices heading lower again The renewed increases in mortgage rates and new listings mean we now expect house prices to fall by 5% over the next six months. The big risk, however, is that we are underestimating the degree to which forced sales are …
17th October 2023
The Bank of Canada’s quarterly surveys show that businesses’ inflation expectations continue to decline, albeit slowly, and point to a growing risk that the economy will fall into recession. Accordingly, we continue to doubt that the Bank will raise …
16th October 2023
The job-to-applicant ratio has usually signalled earlier than the Tankan that the labour market has taken a turn for the worse. But despite the recent fall in the number of jobs relative to applicants, we still think that the labour market will soon start …
There are growing indications that household finances are coming under pressure as mortgagors struggle with rising debt-servicing costs. Although households benefit from substantial liquidity buffers, we suspect they won’t be rushing to run those down to …
Surging interest rates caused mortgage demand to slump in Q3 at the same time as rising defaults led lenders to tighten mortgage credit conditions. Similarly, it became more difficult to secure commercial real estate loans. We expect availability of …
12th October 2023
Higher interest rates weighed sharply on households’ demand for mortgages in Q3 and banks expect demand for mortgages to fall further in Q4. This is a clear sign that higher interest rates are working. And our forecast that mortgage rates will stay above …
We think euro-zone equities’ recent run of underperformance relative to those in the US will extend over the next couple of years, as bond yields fall back and enthusiasm around “AI” continues to grow. With the bond market sell-off seemingly having abated …
Surveyors reported the most widespread price falls since February 2009 in September as mortgage rates of over 5% took their toll. Looking ahead, a further slide in house prices appears inevitable. The drop in the past prices balance to a fresh 14-year low …
Most of the recent surge in net migration has been driven by the increased arrival of foreign students, who generally spend less, work fewer hours and demand less housing than the average Australian. On balance though, the surge in net migration probably …
The recent strength of core inflation compared to that in the US is mainly due to a rebound in durable goods prices. That has little to do with demand, which has weakened to a greater extent in Canada, suggesting that either the earlier depreciation of …
11th October 2023
Labour has made housing a major theme of its conference, and the party’s attitude towards New Towns and social housing means that the next election could prove a turning point in the structure of the UK housing market. Over the past 30 years successive …
10th October 2023
Any fall in bond prices resulting from higher bond yields won’t affect the BoJ’s balance sheet unless the Bank decides to sell its holdings. By contrast, rising interest payments on commercial banks’ reserve holdings could create losses, though those …
The recent shift towards looser fiscal policy in Italy and increase in sovereign bond yields once again have raised concerns that investors may lose confidence in Italy’s ability to sustain its debt burden. We don’t think this will morph into an acute …
9th October 2023
The ‘higher for longer’ narrative on interest rates that is baked into market pricing is at odds with evidence of widespread falls in inflation. Higher oil prices mean that fuel inflation will be a bit higher than seemed likely a few months ago. But the …
5th October 2023
We expect any rise in bond yields to be gradual and don’t believe it will create major economic or market dislocation. But there are risks that the Bank of Japan loses control over longer-term yields . A rapid surge in bond yields would threaten the …
IWG’s record revenues in the first half of this year may suggest that flexible offices are the answer for many firms as hybrid working cements itself as the ‘new normal’. However, we don’t think current flexible offices currently offer the right product …
4th October 2023
While some measures of optimism have been improving, the majority of the survey evidence suggests the economy is weakening and the chances of the mild recession we have been forecasting have increased. The 0.5% m/m fall in real GDP in July and the decline …
With its assessment of the balance of risks broadly unchanged, the Reserve Bank of New Zealand left rates on hold at its meeting today. Although the Bank will likely retain its tightening bias, we continue to believe that the official cash rate is at its …
Office-based jobs are on course to underperform total jobs this year for the first time since 2009 and there is a growing risk this could be repeated in 2024, though that is not yet our central forecast. At the metro level, we expect differentials to …
3rd October 2023
Although the job openings rate rebounded sharply in August, we suspect that was more noise than a signal that the labour market is enjoying a resurgence. The rest of the JOLTS report presented a more balanced picture, with the latest data still pointing …
While new RBA Governor Michelle Bullock didn’t spring any surprises at her first interest rate decision today, we think that the Bank will hike interest rates to a peak of 4.35% at its next meeting in November . However, we expect the RBA to pivot towards …
By putting upward pressure on JGB yields and the yen, tighter monetary policy could lead to falls in the value of bonds and overseas assets held by Japanese investors. Insurance companies and pension funds have the most to lose. However, we do not think …
September’s manufacturing PMIs suggest that global industrial activity stagnated at the end of Q3, and forward-looking indicators point to further weakness ahead. The recent rise in oil prices seemed to push up the prices of manufactured goods. But …
2nd October 2023
The stakes could not be higher for this year’s presidential election – with the head-to-head rematch between Joe Biden and Donald Trump offering starkly contrasting polices on trade, the environment and international relations. Historically, US …
