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Consumer Prices (Jul.)

The encouraging evidence that the upward pressure on underlying inflation from global factors has started to ease will be of little comfort to the Bank of England given the signs that this is being replaced by more persistent domestic inflationary pressures. This increases the chances that the Bank of England will opt for a 50 basis point (bps) interest rate hike on 15th September, rather than 25bps.

17 August 2022

Build to Rent will continue to thrive

The latest figures suggest that Build to Rent (BTR) investment has continued to expand rapidly. Despite this trend, which predates COVID-19, the sector remains under-developed by international standards. But with plenty of opportunities for investors, we expect that gap will close over the longer term.

16 August 2022

Labour Market (Jun/Jul.)

June’s labour market figures revealed further evidence that the weaker economy is leading to a slightly less tight labour market. That said, by any metric the labour market is still exceptionally tight. And the robust rise in employment in June together with the leap in earnings growth will heap pressure on the Bank of England to raise interest rates by 50 basis points rather than 25 basis points at the next policy meeting on 15th September.

16 August 2022
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Prices to fall and activity to slump

Tight supply has supported house prices so far, but they now appear to be stalling. Demand will only deteriorate further over the coming quarters as rising mortgage rates, high inflation, and the recession weigh on buyers’ budgets and confidence. While a more robust labour market and lower peak in interest rates than during previous corrections should help limit the damage, we expect house prices to fall by 7% over the next two years. Mortgage approvals and transactions are also set to slump to their lowest levels for over a decade.

12 August 2022

Risk of a bigger and longer-lasting squeeze on real incomes

The prospect of a bigger rise in utility prices in October and in the first half of 2023 means the risks to our forecast for CPI inflation to rise from June's 40-year high of 9.4% to a peak of 12.5% in October are skewed to the upside. This increases the risk of a bigger and longer-lasting squeeze on households' real incomes and supports our view that consumer spending will be at the epicentre of a recession in 2022/23.  

Global trends point to a more difficult decade ahead

Commercial property wasn’t initially hit by the worsening in economic conditions at the turn of the year, but there are now growing signs of anxiety. Not only that, but even if the economic gloom is short lived and any downturn is mild, we expect structural factors to make for a listless global real estate recovery. In view of the wider interest, we are also sending this UK Commercial Property Update to clients of our European and US Commercial Property Services.

12 August 2022

GDP (Jun. & Q2)

The 0.6% m/m drop in GDP in June was mostly due to the adverse effect of the extra Jubilee bank holiday. Even so, the GDP figures confirmed that the economy contracted by 0.1% q/q in Q2 as a whole and we have not altered our view that a recession is on the way later this year.

What will this recession look like?

We expect a recession in 2022/23 to be driven by high inflation, with a contraction in real consumer spending at its epicentre. But with household and corporate balance sheets still relatively healthy, we suspect the recession will be mild by historical standards.

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