"After a very challenging 18 months for our markets, it finally looks like the macroeconomic outlook is looking favourable for real estate again. Inflation is forecast to reach 2% within months, business confidence has been steadfast, while consumer confidence and real-terms incomes are on the rise again. GDP growth, while still anaemic, is poised to recover.
"However, for me this year will of course be defined by interest rates. Sharper-than-expected falls in inflation have meant Bank Rate forecasts have shifted rapidly downwards and swap rates are trending lower, bringing down finance costs. I therefore expect to see the end of asset value declines across the board this year, and the ensuing restoration of real estate’s fundamental premium over fixed income will translate into improved liquidity for our markets. Indeed, recent investor surveys suggest latent appetite for UK real estate is the highest it’s been in over five years. Combined with a continuing supply-demand imbalance for core product that shows little sign of abating in the face of acute headwinds for developers, the upside for investors this year could be sizable.
Overall, 2024 feels like a pivotal year that could usher in the beginning of the next cycle."
Etienne Pronguė, CEO BNP Paribas Real Estate UK
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