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Overview – Higher interest rates have already resulted in a sharp property repricing in 2022. And with valuations still highly stretched and rental prospects weaker given the imminent recession, we think values will fall further next year. However, as …
9th December 2022
Hungary’s fuel crisis reaches breaking point Hungary’s government was forced to abandon its cap on petrol and diesel prices earlier this week as fuel shortages intensified across the country. The cap had been introduced at the end of last year and has …
If you haven’t started your Christmas shopping, you may not be alone. Both the CBI Distributive Trades Survey and the CHAPS spending data point to a fall in retail sales volumes in November. The BRC/KPMG Retail Sales Monitor, which has a somewhat …
Wage growth peaking? Policymakers at the ECB will have taken some heart from the latest wage data published by Indeed. The data track pay offered in job adverts and they have shown a rapid acceleration over the past 18 months or so. But at least on …
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, …
The Bank is most likely to slow the pace of rate hikes to 50bp next week. But we forecast a further 100bp of hikes next year to a peak deposit rate of 3%. The key principles guiding QT will be that it is steady and slow. There is a case for the ECB to …
8th December 2022
Shift down from 75bps hike in November to 50bps hike in December MPC starting to think more about the level of rates rather than the pace of rate hikes We think rates will rise to a peak of 4.50%, before being cut sharply in 2024 A shift from the 75 …
Survey shows prices and activity continuing to fall in November The RICS survey confirmed that there were widespread house price falls in November. Surveyors expect a further drop in prices and slowdown in transactions ahead, in line with our forecasts. …
Slowing growth keeps the NBP on hold Poland’s central bank (NBP) stuck to its script today as it left interest rates on hold at 6.75% for the third consecutive meeting. With inflation nearing a peak and the economy slowing, we think the tightening cycle …
7th December 2022
Overview – 2023 will be a tough year for the economy as the effects of the previous rises in inflation and previous hikes in interest rates (as well as a future rise from 3.00% now to a peak of 4.50% in early 2023) are felt. Our view that inflation and …
German industrial output resilient but still set for contraction German industrial production once again held up better than expected in October. But this resilience was driven partly by a recovery in construction which tends to be volatile. We still …
Sharp drop confirms that house price correction has begun The largest monthly fall in the Halifax house price index since October 2008 confirms that the house price correction that we forecast has begun. While mortgage rates have fallen back somewhat in …
German industrial output resilient but still set for contraction German industrial production once again held up better than expected in October. But this resilience was driven partly by a recovery in construction which tends to be volatile. We expect …
Headline index starts to fall as recession cuts demand As expected, the headline CIPS construction index retreated in November as falling demand outweighed the benefit of easing prices and an increase in the availability of contractors. As the recession …
6th 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 …
The last big central bank decisions of 2022 resulted in another batch of hefty rate hikes – if smaller than recent – but also provided important signals about the direction of policymaking in the coming year. Group Chief Economist Neil Shearing and …
5th December 2022
Households cutting back amid high inflation The sharp drop in euro-zone retail spending in October is consistent with our view that – notwithstanding the slight uptick in some business surveys recently – the economy is entering recession. With …
This week’s data releases showed that higher interest rates are starting to influence the economy. This means that at some point the Bank of England will have to start to think more about the appropriate level of interest rates rather than the pace of …
2nd 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 …
Off the peak? The big event this week was the publication of flash inflation data which showed that, after rising for seventeen months in succession, headline inflation fell from 10.6% in October to 10.0% in November. (See here .) This was lower than we …
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 …
Hopes may be rising that price pressures may finally be easing, but investors risk missing the fact that not all inflation cycles are alike. We think core inflation in the US will fall far faster than it will in the euro-zone, and this will have big …
1st December 2022
Labour market to soften from here, but remain tight The record-low euro-zone unemployment rate of 6.5% in October is likely to be as good as it gets for the region’s labour market. But the rise in unemployment from here will probably be small. The …
Sharp drop in prices as market adjusts to higher mortgage rates The 1.4% m/m drop in house prices in November was far larger than anyone expected, raising the risk that prices fall more rapidly and further in response to high mortgage rates than we …
Further downgrades as yields rise and rental growth falls back The latest IPF Consensus Survey showed further significant downgrades for total returns in 2022 and 2023, as higher interest rates have boosted yields and a looming recession cuts rental …
30th November 2022
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 …
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
