The start of the year is a natural time to look forward. Despite optimism a year ago, 2014 turned out to be a mixed year for the economy. In the first few weeks of 2015, we have already seen a slump in oil prices, a soaring Swiss franc, Grexit, Brexit and promises of Eurozone QE in the news. The recovery is expected to continue over the next 12 months, but it will be bumpy.
To help navigate this uncertainty, we have identified five key economic trends that we believe will shape the outlook for real estate markets over the next 12 months.
These predictions are:
1. Interest rates will rise
European rate hikes will begin next year, but US interest rates are still predicted to rise in 2015. The global recovery should be robust enough to weather any instability from this cautious tightening.
2. The Eurozone will recover
The Eurozone has fallen well behind since the sovereign debt crisis of 2011-2. While a gap will remain with the US and UK, the Euro area will show its strongest growth since the turn of the decade during 2015.
3. Rental hotspots will lie outside core markets
Demand will remain strongest on the edges of the Continent, but supply will also shape the outlook for commercial rents. Rental hotspots for 2015 will include markets in the UK, Spain and Ireland.
4. Lower oil prices will bring upside
The dramatic fall in oil prices brings upside potential to much of the developed world. This will help boost consumer incomes and demand, while keeping inflation (and hopefully interest rates) lower.
5. Investment markets will continue to thrive
This year, investors will face new political and economic uncertainties across Europe, but direct real estate capital flows are expected to match last year’s buoyancy.
The global environment remains uneasy and it may the second half of the year, before some of the upside becomes apparent. But we are confident that Europe economy will emerge in better shape at the end of 2015 than at the start.