It is widely expected that the Bank of England will increase the policy rate by 75 bps on Thursday, but with food price inflation increasing, an 100 bps rise cannot be ruled out.
Meanwhile, real estate market confidence has been hit hard by falling values, with investment volume falling 36% y/y in Q3.
- While wholesale gas prices are falling across Europe, food price inflation is rising. We believe this will keep core inflation, in particular, and headline inflation meaningfully above the central bank’s target rate until early 2024.
- While bond yields have since returned to pre-mini-budget levels, many investors have adopted a wait-and-see approach in anticipation of pricing settling at a new equilibrium. This has impacted deal flow.
- In London, prime West End and City office yields are trending outwards and forecast to rise to 3.75% and 4.75% respectively by year-end, up 50 and 100 bps since the start of the year.
- Even so, with core leasing markets continuing to show strong rental growth, distress will be less widespread than in previous downturns
Read the full report below.
Click to read UK Economic & Real Estate Briefing - October 2022
