Real Estate

Housing Watch (Aug.)

Home sales fell further below the pre-pandemic norm in July and pre-construction sales seem to have fallen through the floor, but there is no evidence yet that this is weighing on construction.

16 August 2022

Single-family housing starts fell for the fifth consecutive month in July, leaving them down by 25% from their high at the end of 2021. Leading indicators point to a much larger decline in the coming months. However, pent-up demand, tight supply and easing supply shortages will provide some support to starts, and we expect they will fall gradually to around 800,000 annualised by end-2022.

16 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

More Publications

Commercial Property Lending (Jul.)

CRE lending was again exceptionally strong in July, outpacing even the gains seen in recent months. But with investment transaction totals softening in Q2 and our expectation of a further slowdown in activity in H2, we do not expect the strength of recent months’ net lending to persist much longer.

15 August 2022

North America

Commercial

Real Estate

Dublin office rebound to run out of steam

Rents in the Dublin prime office market rose rapidly in H1 2022, supported by a continued recovery in occupier demand. However, a cooling jobs market and strong supply pipeline mean that a slowdown is likely in the second half of the year.

15 August 2022

Stretched affordability to hit sales and prices

Despite a reduction in our mortgage rate forecast, affordability is still set to be as stretched as it was during the mid-2000s housing boom. Alongside record-low homebuyer sentiment and a slowing economy, that means we have become more downbeat on housing activity this year. We now expect a 30% peak-to-trough fall in total home sales. The weaker outlook for new sales will weigh on single-family housing starts, which we think will end 2022 almost 35% below their end-2021 level. While tight markets and a lack of forced sellers will prevent a house price crash, we forecast that the annual growth rate will bottom out at -5% in mid-2023. From there, improving affordability will support a gradual recovery in activity and help price growth rise to 3% y/y by end-2024. Higher bond yields will also push apartment yields up a little this year and next. Coupled with a sharp slowdown in rental growth, that means we expect total annual returns to fall below 9% in 2022 and reach just 1.5% in 2023.

12 August 2022

North America

Commercial

Real Estate

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

Europe

Real Estate

Residential

Long Run Returns Monitor (Q3)

Our Long Run Returns Monitor provides our updated long-term projected returns for major asset classes, as well as a summary of the macroeconomic forecasts which underpin them. All projections in this publication are as of 10^th August 2022. See a more detailed explanation of our views in our Long Run Economic Outlook and Long Run Asset Allocation Outlook.

12 August 2022

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