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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
Housing starts back on a downward trajectory September’s decline in starts supports our view that last month’s increase was a one-off and starts will fall further in the coming months. We expect the rise in mortgage rates to near 7% to continue to weigh …
Strength of core inflation points to another 75 bp hike The Bank’s core CPI inflation measures were unchanged in September but, as we expected a decline due to more favourable base effects, that increases the odds of another 75bp interest rate hike next …
The surge in housing starts to a 10-month high in September casts doubt on our view that there is much worse still to come for residential investment, especially as the recent stabilisation of the sales-to-new listing ratio implies that the downward …
18th October 2022
UK headline inflation may have surpassed 10% in September… (07.00 BST) … but CPI inflation in Canada probably dropped back (13.30 BST) We think US housing starts slumped last month (13.30 BST) Key Market Themes The yen ’s latest weakness has pushed its …
Strong inflation will prompt further rapid tightening The much stronger than expected rise in consumer prices in Q3 will encourage the Reserve Bank of New Zealand to hike rates by another 50bp at its November meeting and poses upside risks to our view …
17th October 2022
The weaker economic growth outlook will weigh most heavily on the retail and apartment sectors, where we have made the largest downgrades to our rental growth forecasts. But the relatively small size of those revisions mean the impacts of higher bond …
14th October 2022
A deterioration in the economic outlook and renewed rise in mortgage rates to a 16-year high in September means the housing market is set for a further slowdown. We estimate that mortgage payments as a share of median income rose to 26% in September. …
Despite the hot September US CPI print from yesterday, we still expect Treasury yields to drop back over time. And we think the drop will mostly be driven by falls in the real yield, rather than inflation compensation. Our US Economics Service is the …
Credit conditions already tightening prior to market turmoil The Q3 credit conditions survey doesn’t capture the impact of the market turmoil of recent weeks, with the deadline for responses falling a week before the “mini-budget”. Nonetheless, it shows …
13th October 2022
Growing acceptance price falls are in the pipeline While optimists can still point to limited supply, a fifth consecutive drop in new buyer enquiries in the RICS survey in September has convinced a majority of surveyors that house prices are heading for a …
With a mild recession now built into our forecast, the outlook for commercial real estate performance has worsened. But because this is a relatively small downgrade and it is joined by an expectation that the Fed cuts rates sooner than previously thought, …
12th October 2022
Q3 investment growth outlook still strong Although “core” machinery orders dropped sharply in August due to a crash in non-manufacturing orders, Q3’s average still points to an expansion in non-residential investment growth this quarter, chiming with …
Note: This report has been updated in the 6th paragraph to reflect 11th Oct. comments from BoE Governor Andrew Bailey. Given that the surge in gilt yields that has forced the Bank of England to intervene in the market was initially driven by the …
11th October 2022
Its widely accepted that the jump in mortgage rates from 1.5% last autumn to 6% means that a significant fall in house prices is now inevitable. In this Update we set out how we came to our forecast that prices will fall by around 12% in nominal terms, …
10th October 2022
One result of the rise in near-term interest rate expectations is a deterioration in the outlook for global housing markets. We already expected house price falls in a handful of countries. Now those falls look set to be bigger, while corrections are …
7th October 2022
Halifax confirms that house prices have stalled The 0.1% monthly fall in the Halifax house price index in September echoed the message from Nationwide earlier this week that house prices have now stalled. Given the sharp rise in mortgage rates over the …
August surge largely due to favourable base effects Labour cash earnings jumped in August, but this was largely due to favourable base effects for hours worked and should slow over coming months. Preliminary estimates for August showed overall earnings …
REIS data show rent-free periods dropped back in the first half of the year, hinting at a tightening market. But with occupiers still rationalising their office portfolios, we expect vacancy to tick higher over the next 18 months, which will continue to …
6th October 2022
Against a backdrop of higher mortgage rates, a weaker economy and prices falling earlier than expected, we have cut our forecast and now expect a peak-to-trough fall in house prices of 8%, down from our previous view that prices would drop by 5%. That …
Improving supply chains temporarily boost construction activity The surprise increase in the construction PMI reflected an improvement on the supply side, as easing demand cut delivery times and improved contractor availability. But a slowing economy …
We think the Charlotte office market will continue to outperform the US average, as firms capitalise on the city’s affordability and position as a prominent financial district. As such, even though completions will be strong this year and next, we …
5th October 2022
Demand falls as mortgage rates hit 16-year high The sixth consecutive month of falling home purchase activity in September was driven by a sharp rise in mortgage rates to 6.75% at the end of the month. With a significant easing in credit conditions not …
An upward revision to our 10-year Treasury yield forecast and a widening in spreads have led us to upgrade our mortgage rate forecasts. We now expect the 30-year fixed rate will stay close to 6.5% for the remainder of the year before falling to 5% by …
4th October 2022
Falls in Paris Centre West vacancy are expected to support a further pick-up in prime office rents in the second half of the year. But this will be short-lived, with the deteriorating outlook for employment growth set to weigh on occupier demand and …
Looser-than-expected fiscal policy following the mini-Budget means we now expect Bank Rate and gilt yields to be higher. All else equal, that would push the spread between the 10-year yield and all-property equivalent yields to its lowest since the GFC. …
Capex projections scaled new heights Today’s Tankan survey suggests that while the services sector is benefitting from the subsiding virus wave, the outlook for the manufacturing sector continues to worsen. The Tankan’s headline index for large …
3rd October 2022
Jump in approvals likely a rush to beat soaring rates The surprise jump in mortgage approvals in August probably reflected a rush to lock in mortgage offers as interest rates surged. There is a possibility that could be repeated next month, but …
30th September 2022
The stall that precedes the fall The stall in house prices in September was little surprise given the growing downward pressure on demand from rising mortgage rates. We suspect that, despite the reduction in stamp duty announced last week, this marks …
Industry to struggle while retail sales outlook improves Both industrial production and retail sales growth quickened in August and while the rebound in industrial production will lose steam, retail sales will continue to expand as the record virus wave …
Losing metros showing little sign of reaching pre-pandemic peaks The greater number of metros seeing a decline in total jobs in August comes as little surprise given the slowdown in the national data this month. But for the major six metros and poorer …
28th September 2022
With developed market (DM) central banks clearly in hawkish moods, we have revised up our forecasts for the yields of most 10-year DM government bonds. We no longer expect these yields, in general, to fall much over the remainder of this year. But we …
House prices fall in July, with more to come The fall in prices reported by the FHFA in July supports our view of a sustained decline over the next 12 months. With mortgage rates rising to above 6% in September, we think it is only a matter of time …
27th September 2022
Post-virus services recovery underway September’s flash PMIs indicate yet another slowdown in the manufacturing sector, with the manufacturing PMI falling from 51.5 in August to 51. Demand weakened again but this appeared to be mostly caused by domestic …
26th September 2022
Overview – The overriding story this quarter is that although weak demand and steady inventory growth in the next couple of years will push up vacancy in many metros, we still see asking rents growing solidly as firms compete up rents on new, high …
23rd September 2022
We expect rate hikes in Mexico, Colombia, Thailand, Hungary and Nigeria next week US real personal consumption probably changed little in August (Thu.) We think euro-zone CPI inflation rose further last month (Fri.) Key Market Themes We think …
We think retail sales fell sharply in Canada in July (13.30 BST) Flash PMIs in the UK and Europe are likely to show activity slowing further in September Sign up here for our Drop-In on Tuesday to discuss recent moves in FX markets Key Market Themes We …
22nd September 2022
Inflation in final stages of ascent Headline inflation jumped in August to yet another high since 1991 and it still has a stretch higher to climb. That said, the Bank of Japan will remain steadfast in maintaining its ultra-easy monetary policy. Headline …
20th September 2022
We expect a sharp slowdown in apartment rental growth across the board, as job growth slows, affordability constraints bite and an influx of supply pushes up vacancy. But some markets will perform better than others. Rent prospects are strongest in the …
16th September 2022
GPIF could shift back to domestic assets The release of stronger-than-expected US inflation figures on Tuesday contributed to a further rise in US long-term interest rates. They are now the highest they’ve been since mid-June. With the Bank of Japan …
Deficit to shrink as import prices ease Japan’s trade deficit widened to yet another record high in August, but the peak shouldn’t be far away now. Commodity prices continue to ease, and the yen should end the year stronger than its current lows, which …
15th September 2022
A forward-looking fair value analysis of the 17 apartment metros that we forecast suggests that Phoenix and the Western markets look most overvalued. This insight underpins the changes to our yield forecasts in our forthcoming Apartment Metros Outlook . …
14th September 2022
Business investment to remain strong this quarter Although the surge in “core” machinery orders growth in July was driven by a handful of non-manufacturing sectors, the result still points to strong non-residential investment growth this quarter, chiming …
Despite the rise in volatility lately, compensation for risk across several major asset classes still seems quite low relative to history. That means, in our view, that if volatility were to remain high, it could spark further selloffs across asset …
9th September 2022
No respite in sight for German industry German industrial output fell a bit less than anticipated in July but that was mainly due to a rebound in construction activity and there were signs that manufacturing production is starting to be hit hard by the …
7th September 2022
Consumers to fall back on pandemic savings as real wages fall Labour cash earnings growth weakened slightly in July as growth in bonuses slowed and further moderation is in store from August with the end of the summer bonus season. Overall earnings growth …
6th September 2022
Real wages to continue shrinking but spending will be supported by savings Labour cash earnings growth weakened slightly in July as growth in bonuses slowed and further moderation is in store from August with the end of the summer bonus season. Overall …
Office employment showing signs of shrinking in some key office markets Almost all metros saw further gains in total employment in July, with Dallas continuing to lead, and joined by Houston, Charlotte and Miami as the fastest growers. But office-based …
31st August 2022
Recovery to stall by September Industrial production made another stride towards pre-virus levels in July but the recovery should stall by September. Meanwhile, retail sales are in for a weak quarter despite a decent showing in July, as soaring inflation …
Japan is facing its largest terms of trade shock since the second oil crisis in the early-1980s. While we don’t expect Japan to follow other advanced economies into recession, we’re slashing our 2023 GDP growth forecast from 2.6% to a below-consensus …
30th August 2022
