Despite the expected global slowdown, the ongoing Brexit agenda and the uncertainty created dominating the headlines, the UK economy has returned moderate growth after some mid-point volatility last year. Looking forward, whilst the IMF’s 2019 forecast of 1.5% GDP growth is steady at best and nothing to be excited about we are expected to perform better than much of the EU this year and stepping up to 1.6% in 2020.
In terms of other indicators, inflation (CPI) has continued to ease down and reduced to 2.1% in December, the lowest it has been in the past 2 years and much closer to the Bank of England Monetary Policy Committee target rate of 2%.
The immediate likelihood of a further increase in interest rates is therefore reduced for now, and certainly until there is a Brexit outcome. The squeeze in incomes continues to soften with wages increasing, tight conditions in the labour market, high levels of employment and fuel prices falling, all of which has had a positive effect. In general terms the UK economy is in reasonable shape.
The markets however remain cautious for two reasons, firstly there is the possibility of a change in government (although this appears less likely as Labour appear to be unable to provide a viable alternative) and secondly there is concern over the possible outcome for Brexit as it is clear that with 29th March approaching there is not an obvious way forward.
The real estate markets have been active in Q4, but, the Brexit brake is on, the markets are thinner in terms of participants, and whilst transactions are occurring at a level, there is a degree of caution being exercised and pricing as always is key. The residential markets remain stable overall but there are varying conditions in the sub markets and a tough environment in Prime Central London, but it remains the case that going forward supply is not matching demand.
There are of course opportunities being created and it is encouraging how well in many areas, driven by the underlying economy, that the occupational markets are faring.The retail sector continues to change but it is not all bad news and we expect more focus and perhaps some more clarity in how this sector will develop.