The preliminary data for Q3 were sobering, with euro-zone prime yields moving up significantly more than expected. This confirms the 2022-23 real estate contraction as the worst on record and, with offices the key driver, it now looks like the value falls …
27th October 2023
Global goods trade rose slightly in August and timelier data point to further gains in September. But we expect global trade to fall again in due course as economic downturns in several advanced economies weigh on their demand for traded goods. According …
In line with our upwardly revised forecasts for the 10-year US Treasury yield, we’ve raised our projections for 10-year government bond yields in most other developed market economies. But we still expect those yields to fall, in general, by the end of …
The Q3 RICS survey indicated occupier and investment sentiment fell further in Q3, with the latter reflected in weak investment volumes throughout the summer months. But tight credit conditions and a slowing economy mean the trough in confidence is …
26th October 2023
Weak demand and investment, but capital values nearing the trough Having started the year on a somewhat promising footing, all-property occupier demand has weakened since and fell further in Q3. The demand balances for offices and retail remained …
Norges Bank is almost certain to leave its policy rate unchanged at 4.25% next week. And we suspect that, given September’s weak inflation data, it will also soften its language about implementing one final rate hike in December. Next year, we think the …
We think the Chilean peso is poised for a rebound in 2024 as the headwinds from the narrowing interest rate differential and the terms of trade deterioration reverse. The Chilean peso has underperformed nearly all other major emerging market currencies …
Although US high-yield (HY) corporate bonds are more attractively valued than at any time since the Global Financial Crisis (GFC), we doubt they will outperform US equities over the next couple of years. The yield of ICE BofA’s index of US HY corporate …
Following today’s decision to leave interest rates on hold, the ECB’s tightening cycle appears to be over. We think that rates will stay at their current levels well into next year. The Governing Council did not discuss accelerating the pace of QT today, …
Our new higher forecasts for US Treasury yields mean that mortgage rates won’t fall as quickly as we previously predicted. While we still expect mortgage rates to decline they are unlikely to fall below 6.0% before end-2025, muting any recovery in house …
We think the cautious oil market reaction to the outbreak of conflict in Israel probably reflects the huge uncertainty about the eventual outcome, but also a somewhat lower “Middle East” risk premium. For context, the Brent crude oil price has risen by …
The -1.4% quarterly return in Q3 meant that there have now been four consecutive negative quarters for all-property total returns. That figure was dragged down by a 5% q/q fall in office values as all-property values fell by 2.4% q/q. That took the …
Higher bond yields will add to fiscal pressures in those EMs with particularly large public debt burdens and weak debt dynamics. Brazil, South Africa as well as Colombia and Mexico are the EMs from our analysis whose fiscal positions are the most …
Continued strong growth in unsecured lending is putting India’s banks at risk of rising defaults, a concern that is exacerbated by their relatively low loan loss absorption capacity. This raises the possibility of the sector entering a slow-burning crisis …
Although the Bank of Canada maintained its tightening bias today, the rest of its communications suggest that the Bank is growing more confident it has done enough to eventually get inflation back to 2%. We continue to expect the Bank to cut interest …
25th October 2023
EU natural gas prices have risen in recent weeks highlighting that a reliance on LNG imports is not without risk. That said, prices should fall back next year as a significant amount of LNG export capacity comes online, first in the US and then in Qatar. …
Argentina’s oil and gas production growth has slowed sharply recently due to pipeline capacity constraints. New projects should ease these bottlenecks, and production should rise from 2024. Admittedly, the expected increases in output are not large enough …
The large falls in Nigeria’s currency will push inflation up even further and is one reason behind our below consensus near-term GDP growth forecasts. But the good news is that the banking sector looks relatively well placed to weather this devaluation …
The proposed extension to the Mortgage Guarantee Scheme could prove a good counter-cyclical policy in areas where house prices are relatively low. But the scheme has far less impact in London and the South where a much bigger deposit than 5% is needed to …
We suspect that more weakness in the housing market will weigh on real GDP by further reducing residential investment and consumer spending. This is one reason why we think the economy is close to a mild recession, if it isn’t already in one. Higher …
The euro-zone money and credit data have been very weak all year and September’s data, released this morning, were more of the same. The activity surveys are now turning downwards too, supporting our below-consensus forecasts that the economy contracted …
The October flash PMI surveys suggest that economic activity got off to a weak start in Q4, especially in Europe. And with weak activity taking some of the steam out of labour markets and inflation, we are growing more confident in our view that the Fed, …
24th October 2023
Active demand for London office space hit a four year high in Q3, but we doubt that will drive a decline in vacancy rates. Most of the rise will reflect churn as firms make moves that had been delayed by the pandemic, including those looking to reduce …
Reforms introduced by President Joko Widodo (commonly known as Jokowi) should enable the economy to continue growing rapidly once he steps down next year. The key question as the election approaches is whether his successor will build on the progress he …
This page has been updated with additional analysis from the post-meeting press statement and press conference. MNB slows the pace of easing, but only slightly The Hungarian central bank’s (MNB’s) larger-than-expected 75bp cut to its base rate, from …
The additional fiscal support approved today is the intervention we had been expecting and that was needed to prevent an abrupt fiscal tightening in China in the closing weeks of the year. Fiscal policy has been a prop to growth in China over the last few …
We expect euro-zone export growth to remain weak in the coming months against a backdrop of slow economic growth in key export markets and a stronger euro. Euro-zone exports recovered well from the pandemic, outperforming the wider economy since late …
The Bank of Israel (BoI) left its policy rate on hold at 4.75% today and, while its communications provided little firm policy guidance, policymakers clearly have one eye on the currency and will probably keep rates unchanged while inflation risks remain …
23rd October 2023
The strong showing for Peronist candidate and current Economy Minister Sergio Massa in Sunday’s presidential election in Argentina means that the run-up to the second round vote in November is likely to see further pre-election fiscal giveaways. But these …
Tunisia is stuck in a deep economic and political crisis, and with the IMF’s staff-level agreement yet to be approved, and it is only likely to get worse. We have long held the view that Tunisia is heading toward a messy balance of payments crisis and …
The diffusion of AI technologies should be a fillip for the global economy over the coming years. That will bring benefits for real estate performance in developed economies, particularly in those office markets with concentrations of knowledge …
20th October 2023
Although we have revised up our forecasts for the 10-year Treasury yield between now and the end of 2025, we aren’t inclined to change our upbeat projection for the S&P 500 over this period . This is because the big increase in equity prices that we are …
Japan’s trade unions are demanding an even larger pay hike in the upcoming spring wage negotiations and we believe that the talks will result in a base pay hike of around 2.5%. While the Bank of Japan may wait until the first round of results of the talks …
We think both the recent outperformance of China’s sovereign bonds relative to those in the US and the underperformance of its equities will end – and may even reverse somewhat – in the near future. Chinese government bonds (CGBs) have largely been spared …
While the global backdrop continues to favour the US dollar, its rally has stalled in recent weeks and we think that, absent a major deterioration in risk sentiment, the greenback will struggle to make significant further gains. So far this month, there …
19th October 2023
Anticipation of legislation requiring minimum standards of energy efficiency is already impacting CRE values as investors price in transition risk and this pressure is likely to ramp up in the coming years as compliance deadlines harden. This note …
We still expect the 10-year Treasury yield to fall in the coming quarters. But we’ve revised up our projections for that yield from now to end of 2025, and now think it will reach its cyclical low in 2024. There are two key reasons why we have pushed up …
There are mounting signs that labour market conditions in many parts of Latin America are starting to loosen, but wages are still rising at a rapid pace and it will take time for wage growth to return to levels that are consistent with central banks’ …
House prices are rising according to the Office for National Statistics (ONS) but falling according to Halifax and Nationwide. Consistent downward revisions to the ONS House Price Index mean that we think the Nationwide and Halifax indices are a more …
After several years in a post-Fukushima wilderness, nuclear power’s ability to provide low-emission and reliable electricity generation has slowly brought it back into favour around the world. Several countries, particularly in Asia, are likely to bring …
In a surprise move, Bank Indonesia (BI) today hiked its main policy rate by 25bps (to 6.0%) in an attempt to support the currency. But there is a good chance this will be a case of “one and done”. Our forecast is that US bond yields will drop back over …
We'll be discussing the implications of the end of the ultra-low interest rates era and the rise in r* in an online Drop-In at 12:30 GMT on Tuesday 31st October. (Register here .) As our new higher estimate of the real neutral interest rate, or r*, for …
The Bank of Korea today left its policy rate unchanged (at 3.5%), and while Governor Rhee left open the possibility of further interest rate hikes, there are signs that some members of the central bank are becoming more dovish. With growth struggling but …
Aggregate EM goods exports have struggled for momentum in recent months and, while there were more positive signs from some of the timely September trade data, we think that exports are likely to struggle as demand in advanced economies weakens. That …
18th October 2023
The ongoing outflow of funds from the Fed’s reverse repo facility has completely offset the downward pressure on bank reserves from quantitative tightening (QT), suggesting that the Fed could continue to let its asset holdings run down for longer than …
The weakness of GDP growth in the second and third quarters means that the Bank of Canada is likely to make a marked re-assessment of its output gap estimates in its October Monetary Policy Report (MPR). Some indicators suggest that output has already …
There is a growing body of evidence that suggests wage pressures are past their peak, but it’s not clear how quickly wage growth will slow. The gradual loosening in the labour market and the experience in the US suggests that UK wage growth may ease only …
The surge in mortgage rates to a 23-year high has caused both buyers and sellers to withdraw from the market, and total home sales to drop to their lowest level since 2011. While we’ve revised down our near-term sales volumes forecasts, our view that the …
We have recently published detailed analysis arguing that equilibrium interest rates in advanced economies are now higher than they were before the pandemic, and that they will continue to rise over the rest of this decade. (See here .) The key …
17th October 2023
Switzerland’s government looks set to remain largely unchanged after the federal elections this Sunday, and we do not expect a significant change in economic policy. But voters’ grievances about the failure of Credit Suisse will keep the pressure on …
