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Prague retail saw an unexpected rental uplift at the end of 2022, ending three years of decline. But we think that will be a false dawn and expect that a subdued consumer outlook will combine with existing structural weaknesses to push rents down again …
13th February 2023
We expect “high-beta” developed market (DM) currencies to weaken against the dollar over the coming months as risk sentiment worsens and, in some cases, yield gaps move against them. But we anticipate a rebound in appetite for risk later this year and …
9th February 2023
Slowing jobs growth, a tech-driven slump in net absorption and a strong supply pipeline underline our view that Dublin prime office rents will fall slightly this year. This would mark a sharp correction from the bumper rent growth in 2022 and is more …
We think business insolvencies may rise to a record high of around 8,400 per quarter by Q2 2024 and take until at least early 2025 to return to a more “normal” level of just over 4,000 per quarter. The total rise in insolvencies above this normal level is …
A stronger than expected end to last year only postpones the euro-zone recession in our view. That will weigh slightly more heavily on property performance this year, as all-property rents may now fall slightly. But with yields rising faster than expected …
7th February 2023
Most, but not all measures of house prices show that they are falling. That has led some to contend that cash buyers may be supporting prices. But we think it is just a matter of time before the ONS House Price Index (HPI) catches up with the Nationwide …
6th February 2023
The rise in yields in the final quarter of last year was larger than that seen at the start of the GFC. While the magnitude of the rise can be explained by the jump in risk-free interest rates, the speed of the repricing has been a surprise. The surge in …
3rd February 2023
Whereas the Bank of England and (arguably) the Fed delivered dovish surprises over the past twenty four hours, we think the ECB decision did not amount to a clear change of policy stance. The ECB is still likely to raise its deposit rate from 2.5% today …
2nd February 2023
The reversal of China’s zero-COVID policy means Chinese tourists could return to European high streets sooner than expected. While this should help support occupier demand, it seems unlikely it will be sufficient to offset weakness in domestic spending. …
While raising rates by 50 basis points (bps) today, from 3.50% to 4.00%, the Bank of England implied that rates are very close to their peak. We still think that rates may rise to 4.50%, but perhaps via two 25bps increases rather than one 50bps rise. …
Concerns over democratic backsliding and an escalation of the Israeli-Palestinian conflict associated with Israel’s new far-right government won’t necessarily mean that foreign investment into Israel dries up or that the economy suffers in the short run. …
1st February 2023
While we expect employment to weaken, it’s happening at a glacial pace. That feeds into our view that once interest rates peak (perhaps at 4.50% up from 3.50% now) they will stay high for all of this year. Employment rose by 27,000 between August and …
31st January 2023
We think that the euro-zone will enter a recession in the first half of this year and then experience a slow recovery. Our new GDP forecasts show a 0.5% contraction in 2023 and growth of only 0.8% next year. Data released this morning confirmed that the …
Early data indicate that German offices saw the steepest increases in yields on record in late 2022. And we think that with policy rates set to go higher, it is too early to rule out further rises in 2023. That suggests a peak-to-trough fall in German …
The shift away from floating-rate to fixed-rate mortgages presents risks as well as benefits. It will protect homeowners who are lucky enough to have a long time remaining on their fixed rate contract from higher mortgage payments. But that reduces the …
30th January 2023
A streak of stronger-than-expected economic data in the euro-zone has given markets there a boost this year. But with much of the good news seemingly already discounted, and, in our view, a still hawkish ECB, we expect rallies in equities and government …
27th January 2023
The reversal of temporary subsidies and changes to weightings will probably push headline German HICP inflation back up in January. But the bigger picture remains that the headline rate will fall sharply this year and that the ECB will continue to focus …
Euro-zone investment contracted sharply in Q4 2022 and we think further interest rate rises will prolong this weakness throughout much of this year. But we expect a recovery in transactions towards the end of the year, when economic activity should be …
December’s euro-zone money and credit data show that the effects of rising interest rates were starting to be felt. Households and firms shifted their money into longer-term deposits which are less likely to be spent, and lending growth slowed. Overall, …
Although we think there is still a decent case for UK equities to continue outperforming those in the US over the next few years, we don’t expect the UK’s stock market to perform significantly better than stock markets in the euro-zone over that period, …
26th January 2023
S ince the end of last year, developments have been more positive in the retail sector. However, we still think 2023 will be a difficult year. The weak outlook for consumer spending and more spending online and in out-of-town shops point to rising high …
25th January 2023
A closer look at Spain’s inflation data shows that there are significant measurement difficulties affecting both energy and core price data. However, we still expect measured headline inflation to remain lower in Spain than in most of the euro-zone and …
24th January 2023
Recent data have shown that activity in the US is weakening as we had expected while that in the euro-zone has been surprisingly resilient. The resilience seems to reflect a combination of supply and demand factors, including easing shortages, lower gas …
Near term economic headwinds suggest the slowdown in investment activity in Scandinavia will continue in 2023. However, with policy rates near a peak, and improving economic activity and falling bond yields expected later in the year, we think that the …
23rd January 2023
We now think German industry will continue to grow in the coming months as lower gas prices, easing supply shortages and high backlogs of orders support production. One of the reasons for the resilience of the German economy in the face of the energy …
20th January 2023
The account of the December meeting, along with data released since then and recent comments from policymakers, suggest the ECB will raise its deposit rate from 2% to 3% by March rather than May as we had previously expected, and that QT will accelerate …
19th January 2023
Movements in REIT pricing provide a good indication of where property capital values are heading. And the latest data are consistent with our expectation that all-property values will see a peak-to-trough fall of around 20% by the end of this year. But …
18th January 2023
The process of “global fracturing” that we outlined in our annual Spotlight series last year will remain the dominant macro theme for the next decade. But speculation that it will result in the rise of a “petroyuan” on a scale sufficient to challenge …
17th January 2023
Office markets started to lose momentum at the end of last year and the expected weakness in employment this year suggests the slowdown will continue. That said, we think prime rents will avoid falls in most euro-zone markets, though the risks to this …
The fall in Spanish gas and electricity prices that has already happened is likely to cause energy inflation to slump to minus 20% in the coming months and this in turn will pull headline inflation below 2%. Core HICP inflation will probably also remain …
16th January 2023
The recent resilience of the economy to the dual drags of high inflation and higher interest rates doesn’t mean the pain has been avoided. Instead, our analysis suggests that higher interest rates will become a bigger drag on activity in the most …
While euro-zone equities face some meaningful short-term headwinds which threaten their recent run of outperformance, we still expect them to fare better than US equities over the next couple of years. Euro-zone equities broke a long run of …
13th January 2023
The euro-zone economy held up a bit better than we expected at the end of last year. On balance, the data point to GDP flat-lining or contracting only slightly in Q4. Germany’s statistics office this morning published its first estimate of GDP in 2022, …
The recent commencement of stricter office EPC legislation in the Netherlands has raised concerns that Dutch office valuations may be on the edge of a regulatory precipice, given the large proportion of non-compliant stock. However, we think the …
November’s money and credit data showed that the effects of tighter ECB policy were only just starting to be felt. So while some of the recent economic data have been a bit stronger than expected, the drag from tighter monetary policy is set to …
11th January 2023
Real estate equity prices pointed to around a 10% fall in euro-zone all-property capital values in 2022 and we expect a similar size fall this year. But while the latest REIT data show landlords were in a better financial position than before the GFC, the …
Reform of the French pension system is notoriously difficult and it is possible that the proposals unveiled yesterday will be watered down or even withdrawn completely. However, on balance, we think there are more reasons for cautious optimism that they …
After a stellar first six months, rising interest rates and a slowing economy brought commercial property returns crashing down in the second half of 2022. All-property total returns are therefore set for their worst year since 2008. And 2023 will not be …
10th January 2023
While the shift towards higher taxes and spending after the pandemic appears to be here to stay, there is little to suggest an expanded state would curtail GDP growth. But without supply-side reforms aimed at solving the UK’s fundamental problems of low …
Mortgage rates have probably now peaked, but they remain at a level that makes further steep falls in house prices and a slump in housing market activity inevitable this year. If anything, the hard data show that the housing market slump has already begun …
9th January 2023
While we think the hawkish ECB poses a near-term threat to euro-zone government bonds, we still expect their yields to be lower, in general, by the end of this year . Having climbed throughout December, developed market government bond yields have …
6th January 2023
The property repricing in response to higher interest rates has not yet run its course. Coupled with a recession-driven slowdown in rent growth, this means 2023 is shaping up to be another bleak year for European real estate. Given the rapid rise in …
The recent plunge in wholesale gas prices means that utility prices for households may fall below the government’s price freeze in July. As a result, CPI inflation will be around 0.3 percentage points (ppts) lower than we previously thought in the second …
We have revised our European wholesale gas price forecast down and, as a result, now expect euro-zone inflation to fall more rapidly than we had previously anticipated. In turn, this means that real incomes and economic activity might be slightly …
5th January 2023
The latest MSCI data show that prime property values underperformed the wider market last year. But with the rest of the market more vulnerable to the economic recession and as MSCI values catch up, relative performance is likely to shift in 2023. The …
Although prime property in Turkey saw strong rental gains in 2022, a slowing economy looks set to weigh on occupier demand and cause rent growth to decelerate next year. Meanwhile, the risk of a sharper depreciation of the lira risks pricing out local …
22nd December 2022
The impending recession will hit jobs growth across the office-based sector. But the impact on office demand is likely to be greatest in markets that have a large exposure to the tech sector. This reflects that the recent pace of tech jobs growth looks …
21st December 2022
The EU’s new policy to limit gas prices is unlikely to be activated next year. And with so many caveats built in, it seems the only thing countries agreed on was that a cap was indeed needed to show unity. We are sceptical that the EU’s mechanism to cap …
20th December 2022
Following on from our recent background note on the EU’s Carbon Border Adjustment Mechanism (CBAM) and the signing off on the tool by EU Ministers over the weekend, this Update examines which countries may be most affected by the eventual introduction of …
Today’s 50bp rate hike came alongside hawkish comments which are consistent with our view that the deposit rate will peak at 3%, significantly higher than the consensus forecast and a touch above what was priced into the market. The press release also …
15th December 2022
