The week ahead 02 September 2024 - Momentum builds for the Housing Market

What to watch out for in the UK economy and property market this week.

More data emerged last week pointing to a strengthening UK housing market. According to the Bank of England, mortgage approvals increased in July to nearly 62,000, up from 60,600 in June, which is encouraging given the figures pre-date August’s Base Rate cut. Also, the Nationwide House Price Index was up 2.4% in August on an annual comparison versus 2.1% in July, although the increase was less than the 2.9% rise analysts had expected. Given mortgage rates have fallen and further base rate cuts are anticipated both this year and next, there is good reason to feel optimistic on the outlook for the UK housing market. This will reawaken interest in change use for redundant commercial property stock, generating demand for secondary office and retail assets that are suited to conversion.

U.S. Q2 GDP growth was revised higher from 2.8% annualised to 3.0%, thanks to stronger than expected consumer spending figures. We do not believe this will be enough to deter the Federal Reserve from cutting its policy rate this month, as the latest US PCE inflation figures were steady at 2.5% in July. Meanwhile, the inflation data for the Eurozone slowed from 2.6% in July 2.2% in August. Consequently, we may this month see both the Fed and the ECB cut interest rates. We believe that interest rates will now trend downwards in the advanced global economies, which will help support commercial property yields, particularly for prime assets.

This week sees retail sales figures released for the UK and the Eurozone. Both are a difficult call as there are now conflicting pressures on the consumer. On the one hand, interest rates are still high by historic standards, although inflation is decelerating. There is also evidence some households are having to make replacement purchases, for instance because computers bought during the pandemic are now approaching obsolescence. There are also reports of rising sales of sports equipment and clothing following major international tournaments this summer.

Things to watch for this week

Tuesday, 3rd September

BRC Retail Sales Growth, y-on-y, August

Previous: 0.3%
Forecast: 0.9%

Through a combination of better weather, last minute pre-holiday shopping and summer sales, we are expecting a rise in retail sales growth. Also, there is talk of an ‘Olympics effect’ of increased sports goods sales in August.

Thursday, 5th September

Euro Area Retail Sales, y-on-y, July

Previous: -0.5%
Forecast: 0.5%

With inflation decelerating, which is reducing cost pressures on consumers, we believe July probably saw a modest rise in retail sales in the Eurozone.

Friday, 6th September

US Non-Farm Payrolls, August

Previous: 114k
Forecast: 115k

As high interest rates slowed the jobs market, non-farm payrolls growth decelerated in June and July. However, survey evidence pointing to a robust economy leads us to forecast payrolls growth stabilised in August.