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Market commentary from Interim Report dated 30 September 2023
The Bank of England held interest rates at 5.25% per annum in September and again in October, unchanged for the first time in 15 meetings of the Monetary Policy Committee (“MPC”). The Consumer Price Index (“CPI”) increased by 4.7% on an annualised basis in October, a rate which is less than half of its peak of 11.1% in October 2022, but still above the 2% target of the Bank of England. Economic growth is close to nil.
The commercial property investment market remains generally weak, in particular for offices and shopping centres. The occupier market is also generally weak, including for industrial property, where strong demand over the last several years has stalled.
Market commentary from Interim Report dated 30 September 2023
GDP growth contracted by 0.8% per annum in the first half of 2023, resulting in forecasters downgrading their full year GDP growth estimates to 0.2% per annum, the lowest it has been in our entire time investing in that country. GDP growth is expected to rebound in 2024, to 2.8% per annum (previous forecasts were at 2.2% per annum).
Unemployment was at a historic low of 5.0% in August, which, in combination with strong nominal wage increases, is expected to drive economic activity in 2024.
The National Bank of Poland’s key policy interest rate was cut in September by 75bp and in October by 25bp and now stands at 5.75% per annum. Inflation has fallen from some 17% year on year to around 4%.
Investment demand for commercial property remains weak but occupational demand remains steady. The development of new property is at a cyclical low.
Rental values in Poland are contractually mostly linked to inflation, which offers some protection from inflation as long as the economy remains buoyant, and tenants can afford to pay their contractual increases.