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The Q2 Mortgage Lenders and Administrators statistics showed that higher rates are limiting lending and making it more difficult than ever for single-income households to get onto the housing ladder. Meanwhile, arrears took a step up as another cohort of …
12th September 2023
Market implied rates suggest that investors expect inflation to normalise in the US and Europe in the next couple of years. While we share that view, we think they are overestimating the level of policy rates required to achieve inflation targets. As a …
8th September 2023
The recent rise in oil prices to $90 per barrel means CPI inflation is likely to rise from 6.8% in July to 7.1% in August, but it won’t prevent inflation falling to the 2% target by the middle of next year. Even if oil prices climbed to $100 per barrel, …
According to Halifax, house prices are up by 20% compared to 2019 even after their recent falls. But adjusted for inflation they slipped to a seven-year low in August. High mortgage rates point to a further fall in prices in both real and nominal terms. …
7th September 2023
The latest real estate data suggest that the current drop in capital values in the euro-zone will be as bad as the post-GFC correction. But market sentiment has been less negative this time, particularly for occupiers, which we think largely reflects the …
6th September 2023
The higher share of floating rate mortgages in Italy and Spain means that household interest spending in both countries has risen much further than in Germany and France. Interest spending is also set to keep rising much more quickly in Italy and Spain in …
The German government is unlikely to announce the kind of big stimulus package that some are calling for. However, fiscal policy will remain much more supportive than it was before the pandemic. The German economy has struggled since the pandemic. In Q2, …
The adoption of remote work meant central London was left out of the COVID-19 house price boom. But with house prices in outlying towns and rural areas around the capital starting to stagnate too, there are tentative signs that the relative …
5th September 2023
The Bank of Israel (BoI) left its policy rate on hold again today, at 4.75%, and while our baseline forecast is that the tightening cycle is now over, the BoI’s hawkish comments support our view that it won’t turn to interest rate cuts until Q2 next year …
4th September 2023
The news that the UK economy may now be 1.5% bigger than its Q4 2019 pre-pandemic size, rather than 0.2% smaller, suggests the economy has been much stronger than we previously thought. But with the UK still likely to be suffering from a labour supply …
1st September 2023
The repayment of ECB TLTROs by banks has gone smoothly so far and we expect the rest of the TLTROs to be repaid by the end of 2024 without significantly affecting financial conditions or interest rates. That said, the replacement of TLTROs with short-term …
31st August 2023
Turkey’s policy shift has ticked a lot of the right boxes so far and the central bank’s large rate hike this month will go a long way to rebuilding confidence among investors. But there are still question marks about how much tightening will be delivered …
While the macro backdrop was broadly unchanged, rents were stronger and yields were higher than expected in Q2, forcing us to re-examine our 2023 real estate view. As a result, we have edged down our end-year all-property view for capital values. This now …
A strong rebound in tourism has bolstered retail rents in Spain and Portugal over recent quarters. However, we think this boom has run its course. Alongside a weak domestic consumer outlook, this should keep Iberian retail rents subdued for the rest of …
30th August 2023
Denmark’s economy has been among the fastest-growing since the pandemic and, although growth will slow in the coming months, we expect it to continue outperforming the euro-zone. Nonetheless, the DNB will probably keep its policy rates below those of the …
24th August 2023
Having risen in value by much less than houses over the past three years, flats were selling at the biggest discount to houses on record at the beginning of the year. But higher mortgage costs are causing buyers to reassess what they can afford to buy, …
The German retail market has been one of the weakest in Europe since the beginning of 2022 and rental performance so far in 2023 has been well below the euro-zone average. But, with consumer confidence and high street footfall improving, vacancy …
The increase in the spot and particularly futures prices of European natural gas in the past few weeks suggests that there is an upside risk to our forecast for euro-zone inflation next year. However, prices would need to rise much further to …
23rd August 2023
In an environment in which firms feel able to pass on higher energy costs in their selling prices, the latest leap in wholesale gas prices poses an upside risk to our forecast for core CPI inflation to fall to 2.0% by the start of 2025 and to our forecast …
While difficult to quantify, we estimate that the growth of tourism added around 0.3% to euro-zone GDP growth in the first half of 2023. However, we think growth will be much slower in the second half of the year as the sector has now broadly regained its …
22nd August 2023
Price volatility in the wake of news of possible strike action at Australian LNG export terminals serves as a reminder that natural gas markets are still carrying the scars of Russia’s invasion of Ukraine. High volatility is likely to remain until …
21st August 2023
Property yields have risen less sharply this year, but there remains considerable uncertainty about where they will peak. We returned to our yield model for guidance and, while a re-specified equation supports our view that office yields will top out at …
18th August 2023
Mortgage arrears were still low in Q2, but the number of Buy-to-Let (BTL) mortgages in early arrears increased at an alarming pace. We suspect that will continue in Q3. A growing number of landlords inability to meet their mortgage costs is likely to lead …
17th August 2023
Norges Bank is very close to the end of its tightening cycle. After today’s 25bp hike, taking the deposit rate to 4%, we expect one final 25bp increase in September. We have then pencilled in a faster pace of rate cuts next year than policymakers …
The support to industrial production from the end of major supply chain disruption has run its course. And while the drop in gas prices over the past year could give a boost to some firms, output expectations in the most energy-intensive sectors are …
16th August 2023
The decision by Russia’s central bank to increase its policy rate by 350bp, to 12.00%, at an unscheduled meeting today underscores the challenges that policymakers are now facing to maintain macroeconomic stability in an economy that is being distorted by …
15th August 2023
Core inflation has been falling for around a year in the US and we suspect that it won’t be long before it starts falling in the euro-zone too. However, while core goods inflation in the euro-zone is likely to follow that in the US by dropping sharply, we …
14th August 2023
We are unconvinced by Christine Lagarde’s claim that the recent strength of employment in the euro-zone is due mainly to labour hoarding and shifts in the sectoral composition of employment. Instead, we suspect it is mainly due to understaffed firms …
10th August 2023
We think Norges Bank will go through with its plan to raise its policy rate by 25bp next week, to 4.0%, and follow that up with a final hike in September to 4.25%. At its last meeting, in June, Norges Bank raised its policy rate by 50bp, to 3.75%. That …
Bucharest offices have been CEE’s best performing so far this year, as rent growth has accelerated rapidly. Although we expect growth to slow sharply from 2024, constrained supply of prime space and persistently high inflation suggest prime rents will …
Market conditions continue to worsen Given the recent rise in average mortgage rates to their highest level since 2008, we are not surprised by the further deterioration in the RICS headline survey figures. And as we do not expect market conditions to …
While Paris rents have been flat for some time, there are signs that the post-pandemic rebound in tourism is starting to boost high street luxury retail. And the upcoming Paris Olympics in 2024 will also add to demand, meaning retail rental growth should …
8th August 2023
The appreciation in the Swiss franc this year has been largely at odds with moves in many of the factors which typically drive the currency. We believe this is mostly due to intervention from the Swiss National Bank (SNB) in foreign currency markets. …
7th August 2023
With CPI inflation soon to fall below average earnings growth, the cost of living crisis appears to be coming to an end. But households won’t suddenly stop feeling the pinch. We suspect the level of real household disposable income will remain below where …
Economies in Central and Eastern Europe (CEE) have experienced large and persistent net migration outflows in recent decades, but the tide has shifted in the past five years or so as outflows have dropped sharply. This is likely to continue, with net …
Extreme weather phenomena in Europe as well as worldwide, including El Niño , could push up food and energy prices. But we think that these only pose a very small upside risk to our inflation forecasts. Over the past few years, warmer temperatures and …
4th August 2023
The French stock market’s strong showing since 2018 appears to have been built on solid ground. But French equities have stopped outperforming their German peers this year, and the bar is quite high for them to start doing so again. French and German …
3rd August 2023
Note: We’ll be discussing the implications of the Bank’s decision for the economy, the housing market and financial markets in a 20-minute online Drop-In at 3pm BST today. (Register here .) Today’s 25 basis point (bps) rise in interest rates from 5.00% …
We recently held a Drop-in titled “Office Sector Armageddon – Who gets hit hardest?”, which you can view on-demand here . This Update addresses some of the specific European questions we received during the event. Which European cities will do better? At …
Warsaw industrial rents have seen an unprecedented surge in recent months on the back of strong demand and supply constraints due to the war in Ukraine. And while growth is set to slow significantly from here, we now expect the market to outperform the …
1st August 2023
The 0.3% rise in euro-zone GDP in Q2 was largely due to a huge increase in Ireland’s GDP and the export of a cruise ship from France. Neither of these is a sustainable source of growth. With more of the hit from tighter monetary policy to come, we still …
31st July 2023
Europe benefitted less than the US from information-communications technology between the mid-1990s and mid-2000s because most of the innovative tech firms were based in the US and structural factors slowed the diffusion of new technology through the …
28th July 2023
H1 2023 was the weakest six months for European investment in over 10 years. And the difficult financing conditions and stretched valuations that have sapped investor sentiment are unlikely to relent much over the rest of the year. Further ahead, even as …
The ECB’s decision to raise rates by 25bp today and Christine Lagarde’s guidance that another hike was a “decisive maybe” will not have surprised anybody. On balance, we think the Bank will probably nudge rates up to 4% in September or October and keep …
27th July 2023
Data released this week show that tighter monetary policy has led to a sharp slowdown in money and lending growth, consistent on past form with falling GDP. Together with the latest business surveys, this supports our non-consensus view that the euro-zone …
26th July 2023
The Israeli government’s decision to press ahead with its controversial judicial reforms won’t necessarily cause foreign investment into Israel to dry up, but the direction of policymaking threatens to push the economy onto a permanently lower growth …
25th July 2023
Italy has already accumulated so many delays in spending NextGenerationEU (NGEU) money that it will only be able to use a fraction of the funds and any boost to growth is likely to be much smaller than hoped. Meanwhile, timidness in implementing reforms …
24th July 2023
New home construction has been surprisingly resilient to weaker demand so far this year. But that partly reflects activity being brought forward before building standards were tightened in June. With that boost now over and survey data indicating a …
Occupier demand in Amsterdam has been more resilient than we expected so far this year. In tandem with supply constraints caused by construction delays, this suggests that prospects for rental growth are brighter than we had anticipated over the coming …
After trailing the rest of Europe last year, the Dublin industrial market has had a change of fortune in 2023 as rent growth continued to improve. With industrial demand set to benefit from a relatively strong domestic economy, greater trade with Northern …
21st July 2023
