Speaking at TMPE at the StoneX Stadium, home of Saracens Rugby Club, in London, Siebrits said that, counter to a number of dire predictions, the UK is actually in for ‘short-lived and shallow recession’ and that house prices are unlikely to tumble in the way that many experts have forecast.
Inflation stabilises, interest rate peak below expectations
In conversation with Clare Beardmore, director at the Legal and General Mortgage Club, in front of a packed house of industry insiders, the first topic was inflation. Siebrits noted that a lot of drivers for inflation were already coming down but that it would take longer for this to filter through to retail prices.
She said: “We think inflation will peak at the end of the year at 10.5 per cent and will then start coming down. That’s good because as inflation starts coming down, we won’t need so many increases in interest rates.”
With that in mind, she expected interest rates to peak at around four per cent next year – below market predictions of 4.5 per cent. However, she noted that interest rates weren’t the only game in town.
Siebrits said: “Interest rates aren’t the only thing playing on people’s minds, the cost of living is huge, and it’s really impacting people’s decisions and that is going to help suppress growth and will take us into a recession.”
Short, sharp shock
Since the release of this morning’s falling GDP figures, the talk of recession has been ramped up with some experts forecasting that the UK is heading for a long downturn. However, Siebrits believes otherwise.
She said: “We think it’s going to be a short-lived and shallow recession because we do expect inflation to come back down and in 2024, that’s when we’ll start growing again.”
She noted that this statement appeared to contradict the Bank of England’s (BoE) forecasts, but she urged the audience to ‘read the fine print’.
Siebrits said: “People are saying: ‘In the news, the BoE says we’ll be in longest recession since World War 2, yet the CBRE are saying it will short-lived recession. How can this be?’
“But if you read the small print, the BoE aren’t saying that – what it’s saying is ‘if current market conditions continue, that is where we will be’.
“The BoE did its forecast in October and during those weeks, the market was all over the place. Market forward rates at that point were 5.5 per cent, so they put into their forecasts. The BoE was looking at what would happen if interest rates were 5.5 per cent.
“There would be a deep recession if rates were 5.5 per cent but the BoE don’t think there will be a long recession. What it’s saying is that if there is no change in fiscal policy, and if rates are 5.5 per cent, then we’ll go into a long recession – but we know that rates won’t hit that level.”
House prices fall, but no crash
Over the past few weeks, there have been forecasts of house prices falling by as much as 30 per cent in certain sections of the media. CBRE’s Siebrits is more sanguine, noting that prices are unlikely to fall anywhere that far.
She said: “In a recession, people will stop buying and selling [as much as they did]. We know that top 30 per cent of the market is speculative buyers, and they will exit in a recession. There will be more needs-based purchases. But, with that, you will have people who are more creditworthy with larger deposits.
“And while there will be a smaller sales market, because of that, a really good property for sale will have more buyers. In a strange way, this means that values will stay up. Unless we have floods of repossessions, we won’t get major falls.
“Our forecast is a five per cent fall in the next 18 months. The market should be protected from massive falls.”
