Filtered by Region: Europe Use setting Europe
The Socialist Party’s victory in yesterday’s election means there will be no substantial change in economic policy, but the government should be more stable. In any case, Portugal’s economy is set to grow rapidly this year, from a fairly low base, as the …
31st January 2022
By re-electing Sergio Mattarella as president and ensuring that Mario Draghi remains prime minister, Italy’s political establishment has achieved what appears to be the best possible outcome. The Recovery Plan should remain on track and Mr Draghi could …
There is a perception that a shift in workspace preferences brought about by the pandemic has redirected demand towards higher quality office space. But while there is some evidence of a flight to quality in Central London office data, the evidence is …
28th January 2022
While we think the direct risks to property from the pandemic have reduced, the uncertain impact of structural change and our expectation that interest rates will now be increased from late this year reinforce our view that Stockholm property returns will …
We expect the major central and eastern European (CEE) currencies to depreciate against the euro this year. We think that the Czech koruna will continue to fare better than the other CEE currencies, although not by as much as last year. To recap, the …
27th January 2022
The early data indicate that Paris offices recovered last year, though much of this reflected strength in the core CBD market. With the economic background supportive and supply relatively contained, we expect further prime office rental growth at a touch …
The sell-off in Russia’s financial markets in response to the reassessment of the likelihood of conflict with Ukraine has pushed up the risk premium on Russian assets to a similar level to that which followed the annexation of Crimea in 2014. There is …
A Russian military invasion of Ukraine would adversely affect the euro-zone economy by further disrupting the market for energy, pushing up inflation and reducing households’ real incomes. However, any economic fallout would probably be fairly small and …
25th January 2022
Euro-zone inflation would be even further above target if owner-occupied housing costs were included in the region’s headline measure. Their formal inclusion won’t take place for a few years yet, but the ECB has pledged to take them into account in the …
Italy’s presidential election, which will begin next week, threatens to reignite political uncertainty that has been quiescent since Mario Draghi became prime minister last year. While we agree that losing Mr Draghi as prime minister would put the …
21st January 2022
The long and detailed account of December’s Governing Council meeting underlines that there are significant differences of opinion about the inflation outlook. We suspect that the balance of opinion will shift in the coming months towards forecasting …
20th January 2022
The looming squeeze on real wages means that the near-term outlook for consumption and GDP has weakened. That said, we don’t expect anything as bad as the squeeze in 2008-14. In fact, real household disposable income may well recover by early 2023. Real …
The industrial sector had its best year in over three decades in 2021 as demand soared and supply struggled to keep up. Although we expect the sector to perform well again this year, we don’t think that yields can continue to fall at the rate seen in …
Turkey’s central bank (CBRT) followed kept its one-week repo rate on hold at 14.00% today and, even though inflation is likely to breach 40% in the coming months, President Erdogan is unlikely to permit interest rate hikes. We think it’s more likely that …
After twelve years in the job, Øystein Olsen was never going to spring a surprise at his last meeting in charge of the Norges Bank. Instead, the Bank left its policy rate unchanged at 0.5% and reiterated that it “will most likely be raised in March”. We …
With the notable exception of Turkey, net capital outflows from emerging markets have eased over the past month. However, the global backdrop for EMs this year will be challenging, particularly for those countries where external vulnerabilities are high …
19th January 2022
A breakdown of house price growth over the past two years confirms that remote working has altered the nation’s housing needs. But what households can afford, rather than what they desire, will be a more important driver of house prices over the next few …
The shift to current account surpluses in Indonesia and South Africa suggest that these economies may be better placed to weather any fallout from rising US interest rates than in the past. But current account deficits have become an increasing cause for …
18th January 2022
While we now expect the ECB to start its tightening cycle earlier, we don’t think the change is significant enough to prevent further property yield compression over 2022-23, albeit at a slower pace than in 2021. We recently revised our ECB policy view …
Having been hit hard in 2020, improving economic conditions supported flexible office take-up in 2021, albeit caution and consolidation limited the net increase in space. While we expect take-up to remain low compared to the pre-virus period, we think it …
17th January 2022
The deadlocked end to talks between Russia, the US and NATO and subsequent hawkish noises from Russian officials have caused a risk premium to emerge on Russian asset prices and will keep the prospect of tighter Western sanctions on the table. The …
14th January 2022
Real estate potentially has a significant role to play in helping achieve ambitious climate targets. We have estimated the size of the risks in the transition to net zero for the commercial property markets that we cover. This risk varies widely across …
Recent data have reinforced concerns about inflation risks in the UK. We remain of the view that property investments provide only limited long-term protection against higher prices, but of the individual asset types, we think industrial and residential …
We think that rate differentials and commodity prices will be the key factors driving the relative performance of six “high-beta” DM currencies in 2022, continuing last year’s trend. We expect all these currencies to lose ground against the US dollar this …
13th January 2022
We expect policymakers in Denmark and Switzerland to match the 50bps of interest rate hikes that we now forecast in the euro-zone next year. And against the backdrop of rising global interest rates, we now think that the Riksbank will start a tightening …
We think that emerging market (EM) equities will continue to underperform their developed market (DM) peers over the next couple of years, even if that underperformance is far less stark than it was in 2021. EM equities underperformed those in the …
With pandemic-related inflationary pressures proving a bit more intense and persistent than we had anticipated, and policymakers sounding more willing to tighten policy, we think the ECB is most likely to end net asset purchases in December 2022 and raise …
12th January 2022
While the general perception is that higher inflation is unambiguously good for the public finances, the reality is a bit more nuanced. The Chancellor will almost certainly be gifted with a lower public debt ratio. However, inflation will probably mean …
We doubt that “fiscal dominance” – worries about the impact of higher interest rates on debt sustainability – would stop the ECB from raising interest rates. But it might encourage the Bank to backstop the bond market even after raising rates by …
11th January 2022
We think GDP growth will come in below expectations this year. Even so, inflation will ultimately settle at a higher level than is currently appreciated and this feeds into our hawkish interest rate forecasts. We expect currencies to struggle in an …
10th January 2022
An expected improvement in spending is encouraging for prime high streets this year. Nevertheless, with a growing share of retail turnover made online and city-based retail more vulnerable to remote working, prime high street rental growth is generally …
Omicron will reduce economic activity in the coming weeks due to tighter restrictions, consumer caution and absenteeism. Our best guess is that economic activity in the euro-zone will decline in January but for now we assume it will rebound in February. …
6th January 2022
We think that GDP growth in Switzerland and the Nordics will be slower than most anticipate this year, and the boosts to inflation from energy prices will subside over the year. But while the SNB will keep interest rates on hold at a record low, …
Strong demand will ensure that house prices maintain their momentum in the first half of the year. But rising mortgage rates will weigh on demand further out, causing prices to cool. The three key forces that have driven house prices higher over the past …
Our new forecasts for 2022 envisage CPI inflation rising further than most expect to a peak of 7% and the Bank of England raising interest rates quicker, from 0.25% now to 1.25% by the end of the year. COVID-19 has the capacity to spring more surprises. …
We don’t expect slower near-term economic growth to derail the property upturn in 2022. Rather, we think that continued falls in property yields and a rebound in all-property rents will support further increases in capital values. That said, the pace of …
We think euro-zone GDP growth will be lower than most anticipate this year, at around 3.5%, while inflation will come down towards 2% by year-end allowing the ECB to leave interest rates unchanged and continue net asset purchases. The big risk is that …
5th January 2022
While office performance surprised on the upside and we could have been much bolder in our forecast for industrial yield falls, our other forecasts for 2021 proved to be broadly correct. With the arrival of a new year, it is always worth looking back to …
With central banks across Central and Eastern Europe (CEE) raising interest rates to tackle inflation, we think the risks of a wage-price spiral are low. Even so, persistently above-target inflation, tight labour market conditions and strong domestic …
Given the huge surge in cases throughout December, the COVID-19 situation is once again set to be the biggest determinant of the performance of the economy over the first few months of 2022. We aren’t factoring in any additional UK-wide restrictions, but …
December’s PMIs suggest that EM manufacturers ended last year on a firm note, with headline indices rising in much of Emerging Europe and Emerging Asia. Encouragingly, input and output price components dropped back in many EMs, suggesting that inflation …
4th January 2022
The National Bank of Poland (NBP) raised its policy rate by another 50bp, to 2.25% today and we expect at least another 75bp of tightening, to 3.00%, in the next few months. But with energy bills set to surge and wage pressures strengthening, the risks …
The recent sale of a 25% share of the Bluewater shopping centre has provided further evidence of the slump in retail values. And while there are signs that the worst of the correction may now be over, we don’t think that a turnaround is likely soon. The …
24th December 2021
Despite tight supply and the boost to demand from e-commerce, we think Turkey’s recent currency crisis will further weigh on Istanbul industrial rents and that rental growth will slow sharply after this year. Echoing the trend seen elsewhere in Europe, …
23rd December 2021
This year’s surge in natural gas prices means that HICP inflation may be up to one percentage point higher next year than it would otherwise have been. However, aggregate energy inflation is still likely to come down during 2022, because transport fuel …
22nd December 2021
The Czech National Bank (CNB) hiked rates by 100bp (to 3.75%) today and Governor Rusnok struck an incredibly hawkish tone after the meeting. The tightening cycle clearly has further to run and we now think the CNB will bring interest rates to 4.50% by …
International travel restrictions and domestic containment measures have dealt the hotel sector a massive blow over the last two years. The outlook for the sector is more positive, but a slow relaxation of restrictions, tourist hesitancy and reduced …
We always expected European natural gas prices to remain high over the winter because of low stocks, but heightened uncertainty about supply from Russia has caused prices to skyrocket again. Assuming supply isn’t affected, though, our expectation is that …
21st December 2021
A new scheme announced by Turkey’s President Erdogan last night, which compensates holders of lira deposits for exchange rates losses, has triggered a sharp rally in the lira and will help to mitigate some of the risks that had started to crystalise in …
Foreign investors have been net sellers of EM assets for much of this year and tighter monetary policy in the US and a stronger dollar suggest that the environment for EMs next year will remain challenging. The good news is that most major EMs should be …
20th December 2021
