The House View 2023
Discover the latest trends, insights, and forecasts for global property markets from our industry-leading research experts.
7 minutes to read
Below we provide a snapshot of the latest trends, predictions and forecasts for global property markets.
If you want delve deeper into the latest data and insight, click the 'read more' button at the bottom of the section.
Visit The House View page for more in-depth research into a number of sectors and markets.
UK residential market – prime property markets back on track after mini-Budget hit
The mini-Budget is fast becoming a distant memory in the prime London property market.
Demand is robust, with the number of new prospective buyers 32% above the five-year average in the first four months of this year, excluding 2020.
Supply is also picking up and the number of sales instructions was 16% higher over the same period, which helped push the number of exchanges up by 8%.
While London has moved on, prime regional markets are still experiencing a mini-Budget hangover.
An analysis of the prime regional market in the first four months of 2023 lays bare the consequence of deals that weren’t done at the backend of last year because of the economic and political uncertainty unleashed by the mini-Budget.
The number of exchanges outside of London in the first four months of 2023 are down 31% on the same period last year, and 14% down compared with 2019, before the pre-pandemic.
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Get in contact: Tom Bill, head of UK residential research
UK industrial and logistics – improving rental growth prospects in higher interest rates environment
A higher for longer interest rate environment now anticipated, though improving rental growth prospects will help boost returns and investment into the sector.
Persistent inflationary pressures make it likely that the BoE will need to make further interest rate hikes. Swap markets are now pricing in further rate hikes this year, with rates expected to peak at around 5.3% by year-end (from 4.5% currently). The increased likelihood of further interest rises will mean borrowing costs remain high and could increase over the short to medium term.
Rental growth expectations have risen. Average rental growth expectations for the UK have been revised from a CAGR of 2.6% (2023-2027) forecast in Q4 2022 to 3.1% (according to the Q1 2023 forecasts).
Rental growth expectations have been revised up across all regions except for London. The largest upward revisions have been in the North West, Yorkshire and Humber and the North East regions.
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Get in contact: Claire Williams, head of UK and European industrial research
UK Capital Markets – opportunities available despite economic headwinds
Geopolitical and economic headwinds are expected to impact global growth this year and subsequently commercial real estate (CRE) investment.
The UK will not be sheltered from these headwinds, however, the fundamentals for the UK CRE market remain.
The UK CRE market is underpinned by currency benefits, relatively attractive yields compared to core mainland European locations and its liquid, safe-haven profile.
Our Knight Frank Capital Gravity forecast expects the UK to be the top market for cross border investment within the EMEA region this year and the second most invested market globally for cross border investors, behind the US.
Globally, the UK is forecast to be the top market for office investment in 2023, the second market globally for Residential, Retail and Hotel investment and the third market globally for Industrial investment.
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Get in contact: Victoria Ormond, head of Capital Markets research
UK residential investment – Living Sectors performing and planning reforming
Current macro-economic pressures mean there is a compelling case for investing in assets that benefit from changing ways of living, and which provide strong counter-cyclical features and inflation-matching characteristics.
UK housebuilders are back in the market for land after a hiatus in the aftermath of the mini budget.
However, they are navigating more challenging circumstances as house prices are easing, while build and labour costs remain high.
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Get in contact: Oliver Knight, head of residential development research
UK retail – riding out the storm
Retail sales have held up far better than virtually anyone anticipated – and are likely to continue to do so for the rest of the year, despite the macro-economic backdrop.
As all-consuming as the cost-of-living-crisis narrative is, it fails to fully reflect a consumer market that is highly complex, with an intricate network of moving parts.
The widely-anticipated slowdown at Christmas simply did not materialise (Q4 2022 retail sales values in fact grew +3.6% y-o-y), nor was this a “last hurrah” as many economists lazily concluded (Q1 2023 retail sales value growth accelerating to +5.6%).
Retail sales volumes, on the other hand, do reflect the negative effects of inflation (Q4 2022: -6.3%, Q1 2023: -3.8%). Effectively, this means that consumers are tightening their belts in so far as they are buying less products, but are still spending more money. Although far from ideal, this is infinitely more palatable for the retail industry than the situation during COVID when we were in the unprecedented position of both values and volumes collapsing (e.g. Q2 2022 values -7.9%, volumes -12.4%).
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Get in contact: Stephen Springham, head of retail research
Global office markets – occupancy levels continue to rise
The Q4 edition of the Knight Frank Cresa Global Corporate Real Estate Sentiment Index provides a clear indication of the tone and short-term trajectory of global office markets.
Occupiers are nervous and whilst they recognise the need to upgrade or reset their offices for the post-pandemic world of work, their ability to do so over the early months of 2023 would appear constrained.
This will put global office markets back into the staccato rhythm seen over recent years, although the dearth of high-quality supply will continue to fuel transactional activity and rental growth at the top end of the market.
A central conclusion from the latest Sentiment Index is that the negativity shaping the macro-economic outlook at the back end of last year has now started to influence expectations around corporate performance.
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Get in contact: Lee Elliott, global head of occupier research
International residential property – inflation remains sticky but direction improving
In the US, CPI has slipped from 8.9% in June 2022 to 4.9% in April 2023. In the UK, the latest figure is 8.7%, down from a high of 11.1% in October 2022.
Yet despite the declines, the ECB is expected to hike rates. President Lagarde has reiterated, “we are not pausing” and “we know that we have more ground to cover.”
Price growth is slowing. Higher mortgage costs are weakening buyer sentiment and hence pricing. In the UK, roughly half of mortgage holders are yet to refinance since the Bank of England started raising rates.
The prime property segment isn’t immune.
Against an uncertain economic backdrop and with more markets seeing price corrections, 14% of UHNWI’s plan to diversify their property portfolios in 2023, according to The Wealth Report.
Investors’ horizons are also expanding. As key economies teeter on the edge of recession, investors are looking to minimise their reliance on one market’s economic fortunes to mitigate risk. Exposure to multiple tier-one markets that offer liquidity and transparency is a defensive stance many are adopting.
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Global economics – five big themes for 2023
Inflation and geopolitical tensions continue to impact global economies, we delve deeper to look at what other factors will influence markets.
In January we released our Outlook 2023, where we examine our five big themes for our 2023, as part of The Wealth Report series. Below are some of the key findings we predict to have an affect on economies this year.
1. Rate of inflation
2. Reset opportunities
3. Real estate
4. Geopolitical tensions
5. The big three
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Get in contact: Flora Harley, head of ESG research
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