With recessionary pressures around Europe, latest figures from the UK government are offering little cheer.
Gross domestic product (GDP) is estimated to have fallen by 0.3% in August 2022, after growth of 0.1% in July 2022, which was revised down from 0.2%.
Under the UK definition, the economy is in recession when it records falls in GDP in two consecutive quarters.
There has been a continued slowing in the underlying three-month on three-month growth, where GDP fell by 0.3% in the three months to August compared with the three months to May 2022.
The closest the data gets to figures on UK property is by covering the construction sector. Here, it said the sector actually grew by 0.4% in August 2022 after growth of 0.1% in July 2022 (revised up from a fall of 0.8% in a previous publication).
The increase in monthly construction output in August came solely from a 1.9% increase in new work, as repair and maintenance saw a decrease of 2.0% on the month.
Investment firms are beginning to talk about recession as being a new facet the real estate market must deal with.
For instance, Simon Wallace, global co-head of alternatives at DWS said in an interview with PropertyEU that: ‘I think we should be careful of calling this crisis. What is newer is the aspect of recession.
‘For real estate, a recessionary environment becomes (about) your ability and skill to maintain income from the portfolio and how resilient the assets are.’
Reacting to the latest UK government data, Jonathan Moyes, head of investment research at high-net-worth advisor, Wealth Club, said: ‘It was hard to find many positives in the data, although the construction sector continues to be an area of strength. With a significant tightening of financial conditions through September and October, there is certainly a chill in the air. We expect this release to be a sign of the winter to come.’
‘The market’s attention will remain firmly fixed on both the Chancellor and the Bank of England as they look to restore confidence and stabilise the government bond market. With inflation remaining high, the bank is unlikely to see weak GDP as cause for softening policy. The government on the other hand is clearly looking to stave off a severe recession with loose fiscal policy. We look forward to the detail on how this will be funded on 31 October.’
