Finanze publish their inaugural Annual Research Report reflecting on 2022 and making forecasts for 2023.
"This time last year many would have been expecting a period of recovery in which the economy could thrive and recover from the global pandemic. In reality 2022 has thrown everything at us, from both economic and political perspectives."
Joshua Ellard, Head of Specialist Finance & Research
The full report can be found here: https://bit.ly/finanze-report
Contents
Reflecting on 2022
- Mini Budget
- Autumn Statement
- Sterling
- Interest Rates
- Inflation
2023 Finanze Forecast
- Residential
- Commercial
- Office
- Retail
- Bank Support
- Economy
Global Insight - India
- Japan
Key Points
- The mini budget caused massive uncertainty in markets across the UK. The government’s plan to stimulate the economy through reduced taxation and increased spending did exactly the opposite.
- The autumn statement brought stability and went someway to restoring confidence in the economy. Gilt yields subsequently fell to near pre mini budget levels. However, it revealed a fiscal contraction of 2.1% of GDP, with the new Tory Government promising a period of austerity.
- A year to forget for the UK’s currency. The pound has fallen by 10.79% against the Dollar ($) and 4.97% against the Euro (€), compared to December 2021.
- The Bank of England made eight changes to the base rate over the course of 2022. Rates rose from 0.25% in December 2021 to the current year end rate of 3.5%. Finanze are expecting further increases up to 5%, until we reach a point at which the BoE has inflation firmly under control.
- Inflation has left a firm mark on 2022, hitting lower income households the hardest. Consumer Price Inflation reached a 41-year high of 11.1% in October before reducing slightly to 10.7% in November.
- Residential property prices remained stable during the first quarter of 2022. However, this soon took a U-turn as inflation drove residential property prices even higher. The second half of 2022 portrayed a very different picture as the cost-of-living crisis hit, mortgage rates increased, and uncertainty halted plans for prospective buyers. Finanze predicts a yearly price decrease of 10.98% across the UK.
- Rent rates will further hike as demand for accommodation from employees, students and young cohabiting couples with children will remain high. Higher stress test rates will mean many will need to save more for a deposit alongside battling high inflation. Finanze predicts a yearly increase in rents across the UK of 12.91% in 2023.
- The commercial market has not been spared by the global economic slowdown or the impact of Brexit. Data collated and analysed by Alliance Fund suggests transaction volumes are set to decline by 20.1% in 2022 compared to 2021.
- Office space demand will continue to fall in the coming year as office-based employment will continue its downward trend. Poorer quality stock that will suffer in 2023, creating opportunities for cheap purchases and refurbishment. The green office space is one to watch in the years leading up to 2025
- The retail sector has not fully recovered yet from the devastation brought by the pandemic as sales volumes continue to decline. Key issues include: falling consumer confidence, due to the cost-of-living crisis; the scrapping of the VAT-free international tourist scheme by the government; and, the recession. The repurposing of retail spaces into profitable apartment communities is predicted to grow in 2023.
- Although 2023 may be a year of re-equilibrium, banks are in a far better position than they were in the aftermath of the 2008 financial crisis. Affordability standards have remained high, and homeowners are better qualified than in previous economic downturns.
- Various analysts have speculated that inflation has reached its peak of 11.1% in October. Finanze anticipate the inflation figure for Q4 2023 to be around 4.5%, eventually settling at a ‘new normal’ of 3% in late 2024.
- Finanze are expecting GDP to remain relatively flat in 2023, decreasing by around 0.5% over the year, before returning to a period of economic growth in 2024.
The full report can be found here: https://bit.ly/finanze-report