Despite the upgrade to Q2 GDP, growth is still expected to ease in Q3.

Therefore, while markets anticipate a December rates rise, the Bank of England is unlikely to make any decision hastily and will consider the outlook for the labour market, consumer spending and inflation over the long-term. In real estate markets, competition for core investments continues to increase, and is likely to be driven future as demand for inflation-hedging and decarbonising opportunities strengthens.

• Q2 GDP growth was revised upwards from 4.8% q-o-q to 5.5%. This means the UK economy is now 3.3% below its pre-pandemic level.
• Despite a generous Budget, current labour shortages and supply bottlenecks will hold back growth and raise prices. Inflation could surpass 4% next year, the highest we have seen for ten years. The Bank of England will not raise rates hastily, but markets now anticipate a rise as early as December.
• Meanwhile, the real estate investment market continued its recovery to pre-pandemic levels; investment volume this year to end-Q3 totalled £40bn - 11% above the same period in 2019.
• As momentum builds going into Q4, we have upgraded our forecast for year-end investment volume to £55bn, representing a c. 20% and 3% uptick on 2020 and 2019 respectively.

Click to read UK Economic & Real Estate Briefing - October 2021