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Although we agree with the markets that the Bank of England will be patient and won’t pivot from raising interest rates to actually cutting interest rates until 2024, we think that fading inflation will force the Bank to cut rates quicker than investors …
30th November 2022
Peak headline inflation won’t stop ECB hiking Euro-zone inflation may now be past its peak but with the core measure unchanged in November and set to remain well above 2% next year, we expect the ECB to hike rates by 50bp or 75bp in December. The fall …
Despite a sharp rise in property yields, renewed increases in alternative asset yields led to a further deterioration in European property valuations in Q3. (See Chart 1.) All markets were overvalued except for Istanbul, where sharp falls in Turkish …
Peak headline inflation won’t stop ECB hiking Euro-zone headline inflation may now be past its peak but with core inflation unchanged in November and likely to stay well above 2% throughout next year, we expect the ECB to press on with another 50bp or …
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, …
Turkey’s GDP growth probably slowed in the third quarter (07.00) We think euro-zone inflation declined in October (10.00 GMT) Thailand’s central bank is likely to hike by 25bp (15.00 GMT) Key Market Themes Although Bund yields have fallen today amid …
29th November 2022
Headline inflation close to a peak, but core may rise further November’s fall in headline inflation in Germany and Spain suggest that the euro-zone headline rate will come in lower than we had anticipated when it is published tomorrow, and is now close …
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 …
Small improvement in sentiment and fall in inflation The small increase in the EC Economic Sentiment Indicator (ESI) for November suggests that prospects for the euro-zone economy may no longer be deteriorating. We still expect a recession, but it is …
Net lending sees further gains even as capital values fall Falling capital values have not yet deterred commercial property investors, with net lending to property increasing for the second month in a row in October. Bargain hunters may have given lending …
Slump in approvals points to sharper downturn in activity ahead Rocketing mortgage rates led to a sharp drop in mortgage approvals in October. While quoted mortgage rates have peaked they are unlikely to fall much below 5% next year, keeping the cost of …
Small improvement in sentiment and fall in headline inflation The small increase in the EC Economic Sentiment Indicator (ESI) for November suggests that prospects for the euro-zone economy are no longer deteriorating. While we still expect a recession, it …
Higher interest rates are weighing on credit and attracting savings October’s money and credit figures reveal further signs that households continue to remain cautious and higher interest rates are starting to weigh on the economy. The £0.8bn rise in …
Overview – The surge in interest rates in recent months has quickly been reflected in property yields, and as a result we have brought forward some of our forecasted rise in yields from 2023 into 2022. But with gilts yields set to fall back next year we …
28th November 2022
Chief Property Economist Andrew Burrell and Andrew Wishart , who leads our UK housing coverage, held a briefing on the shape of the coming downturn in the UK housing market. During this 20-minute session, the team answered client questions including: …
ECB officials were out in force again this week, disseminating clues about the size of the next rate hike and their plans on quantitative tightening (QT). Their comments suggest that a slowdown in the pace of tightening, from a 75bp to a 50bp hike, …
25th November 2022
The most eye-catching statistic published this week was the net migration into the UK of 504,000 people in the year to June 2022. That’s a record high. It continued the recent trend of net inflows from the non-EU and net outflows to the EU. And it …
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 …
ECB account gives little away on next steps There are no significant clues in the account of the ECB’s October meeting about the pace and extent to which the Bank will raise interest rates in December and next year. A 50bp hike seems most likely next …
24th 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 …
Small improvement in business climate won’t prevent recession The increase in the Ifo Business Climate Index in November does not change the big picture that the German economy is likely to contract in Q4. November’s uptick in the Business Climate Index …
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 …
Property yield rises stepped up in Q3, causing all-property capital values to fall on a quarterly basis in the CEE markets except for Bucharest. (See Chart 1.) This was despite solid office and industrial rental growth. Looking ahead, stretched …
Contraction in Q4 very likely, inflation nearing a peak The flash PMIs for November add to the evidence that the economy will contract in Q4. The price indices suggest that inflation will soon peak, but they remain extremely high by past standards. The …
Contraction in Q4 very likely, inflation nearing a peak The flash PMIs for November add to the evidence that the economy will contract in Q4, with the downturn in the services sector intensifying. The price indices suggest that inflation will soon peak, …
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
Prime property yields rose significantly in Q3. (See Chart 1.) This caused a sharp slowdown in capital value growth, even though rental growth was solid in the Scandinavian office and industrial sectors. Stockholm and the Swiss markets fared worst, with …
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
Voters in Turkey head to the polls in 2023 and if the ruling People’s Alliance and President Erdogan cling on to power, the authorities are likely to double down on their “new economic model”, raising the threat of simultaneous currency, banking and …
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 …
We expect 75bp rate hikes from central banks in New Zealand, Sweden and South Africa We think flash PMI data for November will show that activity contracted in the UK… (Wed.) …as well as in Germany, France and in the euro-zone (Wed.) Key Market Themes …
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 …
Higher interest rates and a weaker outlook for economic activity led to a more significant rise in property yields in Q3. While quarterly rental rises remained solid, particularly for offices and industrial, this meant that all-property capital values …
Official data to fall into line with surveys We doubt that the recent strength in some of the official euro-zone activity data will last. GDP posted a small expansion in Q3, whereas both we and the consensus had expected zero growth. (See here .) And …
Japan’s headline inflation probably rose to 3.5% in October (Thu., 23.30 GMT) We think UK retail sales volumes were flat in October (07.00 GMT) We suspect Chile’s GDP contracted by 0.3% q/q in Q3 (11.30 GMT) Key Market Themes The market reaction to …
17th November 2022
Next year will be characterised by falling headline inflation, which should help to prevent interest rate expectations and bond yields from rising much further. But we also expect core inflation to remain above 2% for some time. As a result, we think …
Little sign of goods price pressures easing Final inflation data for October confirm that price pressures strengthened and became more broad-based. Unlike in the US and UK, there is little sign that goods inflation has passed its peak. While headline …
We think US housing starts fell in October on the back of rising mortgage rates (15.00 GMT) We expect the central banks of Indonesia and the Philippines to raise rates Clients can sign up here for our Drop-In on the UK Autumn Statement (16.00 GMT) Key …
16th November 2022
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 …
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 …
