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The Bank of England followed the Fed by slowing the pace of interest rate hikes from 75 basis points (bps) in November to 50bps hike today as widely expected, which took rates from 3.00% to 3.50%. But unlike the hawkish Fed, the Bank sounded a touch …
15th December 2022
This is part of a series of reports outlining our key macro and market calls for 2023. Click here to view the full series. Property markets rebounded strongly after 2020, in part boosted by favourable structural shifts brought on by the pandemic. But …
This is part of a series of reports outlining our key macro and market calls for 2023. Click here to view the full series. Our latest EM Outlook can be found here . EMs will experience one of the broadest slowdowns in GDP growth in 2023 since the 1990s. …
Office rental growth in London and RoUK was similar in the third quarter. But as the recession takes hold London firms will have a greater incentive, and opportunity, to make savings from the shift to working from home. That will cut demand just as a …
14th December 2022
While today’s agreement on the EU’s “Carbon Border Adjustment Mechanism” leaves vital questions unanswered, it is a step towards the valid goal of making users pay for the emissions that they consume – wherever such emissions are produced. This Update …
13th December 2022
The rise in net lending to real estate over the past couple of months may reflect some investors looking to buy commercial property assets at discounted prices. But a repeat of the mid-2000s, when lending held up even as commercial values started to fall, …
9th December 2022
We are nudging up our euro-zone GDP forecast slightly to reflect the small improvement in the economic data in recent months and an easing of the energy crisis. Nonetheless, we still think euro-zone GDP will contract much more than the consensus …
6th December 2022
There is a good chance that CPI inflation has peaked or will peak before the end of the year. There are even some signs that inflation is becoming less persistent. This may contribute to the Bank of England slowing the pace of rate hikes from 75 basis …
2nd December 2022
Following the Nationwide data showing a larger-than-expected fall in house prices in November, we hosted an online Drop-In on 1 st December to discuss how far prices could fall and what the downturn could mean for transactions and construction. This …
As we now think Bank Rate will peak at 4.50% next year as opposed to 5.00%, mortgage rates will be a bit lower in 2023. But ultimately, the surge in mortgage rates over the past year will leave the cost of buying a home with a mortgage exceptionally high, …
30th November 2022
The sharp fall in employment we expect next year will drag on Italian office rents. While prime rents should hold up better than the wider market as the shift to the best quality space continues, we don’t think that this will be enough to prevent them …
29th November 2022
The Treasury has started to make payments to the Bank of England’s Asset Purchase Facility (APF) to cover the losses it has racked up because of the Bank of England’s gilt purchases. While this won’t force the Chancellor to tighten fiscal policy …
25th November 2022
The latest IPF Consensus survey showed a significant upgrade to 2022 European office rent growth expectations, largely due to strong rent outturns in Q2 and Q3 this year. A slowdown is expected in 2023, but in our view the consensus is still too …
24th November 2022
The record-low yields on rental properties and fall in house prices we forecast imply poor returns for Buy-to-Let (BTL) landlords over the next few years. Moreover, the jump in mortgage rates means a significant minority of them will see mortgage …
23rd November 2022
We think that headline inflation in the euro-zone is nearing its peak and will begin to fall quite sharply early next year. But the core rate will probably peak a little later and decline more slowly. Data released on Monday showing a sharp fall in German …
Italy’s draft 2023 budget confirms that, for now, the new right-wing government is committed to fiscal responsibility. As a result, the risk of turbulence in BTP markets has fallen, but it remains high given Italy’s large public debt and the prospect of …
22nd November 2022
Although we think the yields of high-grade, long-dated government bonds will fall in general in the next couple of years, we expect those of Bunds to fall by less than those of Treasuries, as comparatively sticky inflation in the euro-zone keeps monetary …
21st November 2022
Wage growth in Germany will be far lower next year than some headlines about recent wage deals suggest, but it will still rise above levels compatible with core inflation of 2%. German unions demanding and, in some cases, securing pay rises in the region …
18th November 2022
Our downbeat economic forecasts for the euro-zone underpin our view that equity markets there will fall further in the coming months. Within the region, we think the downside risks for equity prices are largest in southern Europe. Even after falling by …
The cost-of-living crisis will have an impact on UK high streets for much of the next year. That will not be helpful for retail property rents, although given they are starting from a low base, we think the sector will avoid the meltdown of the pandemic …
The October inflation data highlighted a contrast between the US and Europe, with core price pressures easing materially in the US but staying stronger in the euro-zone and UK. We think this will be an enduring feature of relative inflation prospects in …
Euro-zone industrial production and GDP have been stronger than we had expected so far this year. Several factors have contributed to this, but one of them is the distortions to Ireland’s economic statistics. The picture in the rest of the euro-zone is …
16th November 2022
The recent surge in rental growth to a record high has been widely reported, but the usual explanations are unsatisfactory. Population indicators don’t suggest a sudden rise in demand, and there is little evidence of landlords selling up. Instead, we …
Even as Central London office vacancy rates rose to a 12-year peak in Q3, annual rental growth ticked-up to a three-year high. That marks a reversal from the situation prior to COVID-19, when a tight market failed to spark a strong rise in rents. But we …
15th November 2022
Falls in Paris prime retail rents are set to continue into 2023 as weaker domestic and foreign spending weigh on tenant demand. And while the prospects for both are brighter for 2024, we think the high level of vacancy will ensure only a modest rebound in …
11th November 2022
We doubt the recent underperformance of UK high-yield corporate bonds relative to those in the euro-zone will continue given the relative outlooks for monetary policy and economic growth. Corporate bond yields in developed markets (DMs), as measured by …
10th November 2022
The ECB might start quantitative tightening next year but that’s not guaranteed, and even if it does so we doubt that it will make much of a dent in its government bond holdings. As a result, interest rates will remain the most important tool for …
9th November 2022
Spanish office rental values are expected to be harder hit than the euro-zone average as the looming recession weighs on occupier demand and higher interest rates push up yields. However, at a market level, Barcelona is most exposed given its looser …
In line with changes in our global economic view, we have made significant downgrades to our commercial real estate forecasts for the next couple of years. As a result, we now expect a much bigger drop in property values next year that will cause annual …
8th November 2022
While front-month European natural gas prices have fallen sharply as concerns have eased around shortages this winter, longer-dated futures haven’t fallen by as much. That reflects how difficult it will be to fill storage without Russian gas flows next …
4th November 2022
The differing tones of the Fed, ECB and BoE at their recent meetings have seen yields rise in the US more than elsewhere and reignited the rally in the US dollar. That pattern could last a few more months. But we expect falling inflation in the US to mean …
3rd November 2022
The recent easing of global supply chain problems could put some downward pressure on euro-zone goods inflation soon. But equipment shortages are still a major problem for manufacturers, while their price expectations are high. And with the labour …
Today’s decision by the Norges Bank to slow the pace of rate hikes is the beginning of the end for its tightening cycle. But we don’t expect a pivot towards interest rate cuts next year. The Bank signalled at its last meeting that after raising its policy …
German prime office rental growth is expected to slow sharply next year as the economy experiences the deepest recession in the euro-zone. Even so, we don’t expect rental growth to underperform as the low level of vacancy means the German markets are in a …
2nd November 2022
Russia’s decision to withdraw from the Black Sea Grain Initiative will exacerbate sky-high prices and tight global supply, and adds to the likelihood that prices hover around historical highs for the next few months. To recap, the Kremlin announced at the …
1st November 2022
An acceleration of the slowdown in European commercial property investment in Q3 is evidence that economic growth concerns, higher interest rates and tightening credit standards are weighing heavily on activity. We expect investment to decline into 2023 …
28th October 2022
After raising rates by 75bp today, the ECB laid the groundwork for a slower pace of tightening to come. But we still think that the deposit rate will reach 3% next year. And while the Bank will set out some “key principles” for QT in December, we doubt …
27th October 2022
Helsinki office vacancy jumped in Q3 and is likely to trend higher over the next couple of years as occupier demand weakens, completions rise and there are fewer office-to-residential conversions. As such, rental growth will slow, with prospects a bit …
Industrial demand is relatively well-placed to weather the upcoming recession. Vacancy is low going into the downturn and the gradual shift to online shopping will continue. It should therefore be the only sector to avoid a fall in rents. However, …
26th October 2022
A closer look at core inflation across EMs suggests that underlying price pressures have started to ease. But they remain very strong by historic standards in most countries – and particularly so in Central and Eastern Europe (CEE). The CEE economies …
Money and lending growth accelerated in September, but the latest Bank Lending Survey revealed that there was a sharp drop in loan demand and that banks have become much more cautious about lending. With the cost of borrowing likely to keep rising, …
We expect European natural gas prices to be high in 2023 as the EU will need to replace Russian gas supply for the entire year. This means demand for LNG imports will be strong, even if gas consumption falls. We forecast that the natural gas price (TTF) …
25th October 2022
Despite stabilising a bit recently, the valuation of UK mid- and large-cap equities in general has fallen recently in both absolute terms and relative to comparable indices elsewhere. While that doesn’t imply that they are bound to outperform in the …
Although the energy crisis in Europe has dealt a blow to the EU’s near-term green ambitions, a combination of economic incentives, NextGenEU funding, and geopolitical expediency will cause the bloc to re-double its decarbonisation efforts. However, …
24th October 2022
Note: We’ll be discussing key takeaways from our Outlook published last week on Tuesday, 25th October. Register here . Italy’s new government may initially steer clear of major fiscal loosening, but it will have to provide some more support to cushion the …
We have downgraded our expectations for Athens prime rental growth over the next two years on the back of a weaker outlook for economic activity. However, with the Greek economy still expected to be relatively resilient, we think all-property rental …
Policymakers in Turkey have doubled down on their new economic model of “lira-isation” by pursuing more extreme de-dollarisation policies in recent months. These appear to be having an impact in terms of stemming lira depreciation. But the central bank …
20th October 2022
The deep recession faced by the euro-zone in the coming year will cause a sharp slowdown in prime rental growth, which we now expect to drop to 0% at the all-property level next year. We don’t think any sector will be immune from the rental deceleration, …
The UK property market has a long history of either causing or worsening recessions. But that history has taught both banks and regulators a lesson. So while higher debt payments, falling property prices and a slump in construction will play a major …
19th October 2022
With interest rates now higher, we have made downgrades to our forecast for UK GDP growth. We expect that this will bring a sharper deceleration in rental growth at the all-property level, with falls now likely during 2023, led by the office sector. We …
17th October 2022
