Liz Truss Prime Minister

[Jinx]

isaldiri said:

The losses that the BoE are racking up from selling down their massive gilt inventory is a 'known' thing. the fact that the government had long ago agreed to cover said losses is also known. the DMO has already been budgeting for how much is going to be required to cover that plus the additional redemptions which the BoE is no longer re-investing.

Just what kind of autumn fiscal event do you imagine is suddenly going to be happening again?

Anything expected to be happening in the Eurozone soon?

[ChocolateFrog]

Just got round to listening to the series with her on The Rest is Money.

She didn't dispel a single thing I thought about her.

Literally has rhino hide for skin. Just absolutely, completely batst mental.

How in all of chrisendom do you get that amount of self confidence from that much ability?

Kwarteng on the other hand actually came out of The Rest is Politics interview quite well I thought, he atleast seemed to have a little more self awareness.

Edited by ChocolateFrog on Tuesday 11th June 19:39

[hidetheelephants]

Derek Smith said:

I was having a chat with a left-leaning neighbour on the subject of recent tory PMs. We both agreed that, out of them all, May did the least damage. By no means perfect, by no means adequate, but merely the best of the bunch.

It's a sobering thought.

That's only a perception caused by the fact she did bugger all other than piss away a narrow majority with the worst tory election campaign until the current one; if nothing else she deserves blame for greasing the slipway that launched the golden deceiver into No10.

[Carl_VivaEspana]

isaldiri said:

Just what kind of autumn fiscal event do you imagine is suddenly going to be happening again?

120bn a year deficit and near zero growth is probably a factor.

As the Kwateng approach has been refuted taxes will either need to increase or government spending will need to be slashed.

[isaldiri]

Carl_VivaEspana said:

isaldiri said:

Just what kind of autumn fiscal event do you imagine is suddenly going to be happening again?

120bn a year deficit and near zero growth is probably a factor.

As the Kwateng approach has been refuted taxes will either need to increase or government spending will need to be slashed.

the deficit and lack of growth long ago has been a 'known' factor. Just what, according to you, is supposed to be suddenly changing in autumn for this supposed fiscal event to happen?

[Carl_VivaEspana]

I expect the political lies to end.

The can could be kicked on the deficit but its unlikely, that is my opinion.

[Wacky Racer]

anonymoususer said:

Liz Truss is IMO one of the major political talents of recent years

[Carl_VivaEspana]

Ross Clark on Starmers speech today. Backing up the Rachel Reeves speech in the City a while back I.e. Let's copy Liz.

https://www.spectator.co.uk/article/starmer-wants-...

[tangerine_sedge]

Carl_VivaEspana said:

Ross Clark on Starmers speech today. Backing up the Rachel Reeves speech in the City a while back I.e. Let's copy Liz.

https://www.spectator.co.uk/article/starmer-wants-...

That's one way to read the article.

Everyone knows that economic growth is very poor (even 'pork markets' Liz realised that), the difference will be that a Labour government won't cause the City to st the bed with unplanned economic decisions.

[Castrol for a knave]

Carl_VivaEspana said:

Ross Clark on Starmers speech today. Backing up the Rachel Reeves speech in the City a while back I.e. Let's copy Liz.

https://www.spectator.co.uk/article/starmer-wants-...

I sit on our Risk Committee, and we are fully expecting real estate yields to broadly fall once the Labour government is in office.

That's the general view from my clientbase as well. A case of welcome stability

[isaldiri]

Castrol for a knave said:

I sit on our Risk Committee, and we are fully expecting real estate yields to broadly fall once the Labour government is in office.

That's the general view from my clientbase as well. A case of welcome stability

That's somewhat mixing cause and effect though. commercial real estate yields have (more or less) already stop widening since last year and have largely been static since the big rises in 2022/early 2023. Irrespective of government they are expected to tighten slowly simply because valuations are thought to have bottomed out.

[Digga]

isaldiri said:

Castrol for a knave said:

I sit on our Risk Committee, and we are fully expecting real estate yields to broadly fall once the Labour government is in office.

That's the general view from my clientbase as well. A case of welcome stability

That's somewhat mixing cause and effect though. commercial real estate yields have (more or less) already stop widening since last year and have largely been static since the big rises in 2022/early 2023. Irrespective of government they are expected to tighten slowly simply because valuations are thought to have bottomed out.

Anecdotally there are more vacancies in commercial and industrial property and there’s also that ‘surprise’ rise in unemployment announced this week. A surprise only to the ever-backward looking BoE and government.

[CDP]

skwdenyer said:

Net migration is an interesting one. It near-tripled under Major. Why not call him out?

The Maastrict Treaty under Major is the thing that really set much of this off but turning the EEC into the EU and all the harmful baggage that came with it.

Europe would have been much better off with a lightweight non-exclusive trading block.

[Castrol for a knave]

isaldiri said:

Castrol for a knave said:

I sit on our Risk Committee, and we are fully expecting real estate yields to broadly fall once the Labour government is in office.

That's the general view from my clientbase as well. A case of welcome stability

That's somewhat mixing cause and effect though. commercial real estate yields have (more or less) already stop widening since last year and have largely been static since the big rises in 2022/early 2023. Irrespective of government they are expected to tighten slowly simply because valuations are thought to have bottomed out.

Yields were still moving out across most asset classes well into 2024. They are broadly static now.

Transactional volumes are low, so the market can only reflect the evidence, which is limited.

Most investors are just sitting tight and don't want to crystallise a diminution in value.

[Elysium]

Castrol for a knave said:

isaldiri said:

Castrol for a knave said:

I sit on our Risk Committee, and we are fully expecting real estate yields to broadly fall once the Labour government is in office.

That's the general view from my clientbase as well. A case of welcome stability

That's somewhat mixing cause and effect though. commercial real estate yields have (more or less) already stop widening since last year and have largely been static since the big rises in 2022/early 2023. Irrespective of government they are expected to tighten slowly simply because valuations are thought to have bottomed out.

Yields were still moving out across most asset classes well into 2024. They are broadly static now.

Transactional volumes are low, so the market can only reflect the evidence, which is limited.

Most investors are just sitting tight and don't want to crystallise a diminution in value.

Yield expansion was global, not a response to UK politics. It’s led by interest rates increasing due to inflation. No point in buying an illiquid long term investment when you can get the same return by putting cash in the bank,

Analysts are expecting yields and interest rates to fall in Q3/Q4 as inflation comes back under control.

[sparkythecat]

Derek Smith said:

I was having a chat with a left-leaning neighbour on the subject of recent tory PMs. We both agreed that, out of them all, May did the least damage. By no means perfect, by no means adequate, but merely the best of the bunch.

It's a sobering thought.

I'm very surprised that you as an ex-copper have anything good to say about Theresa May.
She decimated and demoralised the police and The Police Federation were outspoken in their condemnation of her.

https://www.polfed.org/derbys/news/2019/theresa-ma...

[Castrol for a knave]

Elysium said:

Yield expansion was global, not a response to UK politics. It’s led by interest rates increasing due to inflation. No point in buying an illiquid long term investment when you can get the same return by putting cash in the bank,

Analysts are expecting yields and interest rates to fall in Q3/Q4 as inflation comes back under control.

As soon as Truss delivered her. " Budget" and gilts moved out, yields followed

For several days after that disastrous budget we formed a "war room" with colleagues in other real estate firms and our key clients.

Yes, yields were softening, but that was because they had become compressed. Ground leases and London prime had reached circa 2%. That was a natural market repricing.

A sensible correction was due. I agree with you that inflation and base rate were inevitably going to soften yields.

September 2022 however, was a very "intense" time.

[Elysium]

Castrol for a knave said:

Elysium said:

Yield expansion was global, not a response to UK politics. It’s led by interest rates increasing due to inflation. No point in buying an illiquid long term investment when you can get the same return by putting cash in the bank,

Analysts are expecting yields and interest rates to fall in Q3/Q4 as inflation comes back under control.

As soon as Truss delivered her. " Budget" and gilts moved out, yields followed

For several days after that disastrous budget we formed a "war room" with colleagues in other real estate firms and our key clients.

Yes, yields were softening, but that was because they had become compressed. Ground leases and London prime had reached circa 2%. That was a natural market repricing.

A sensible correction was due. I agree with you that inflation and base rate were inevitably going to soften yields.

September 2022 however, was a very "intense" time.

I think Truss just triggered the repricing early. We have seen the same thing happen in other countries since and there is no doubt in my mind that a correction was due. As you say we had been through an extended period of yield compression.

I do agree that real estate yields track the bond markets quite closely. Risks are similar, so it follows that returns should also end up aligned, allowing for some sort of gap depending on the asset class.

Edited by Elysium on Wednesday 19th June 09:17

[Castrol for a knave]

Elysium said:

Castrol for a knave said:

Elysium said:

Yield expansion was global, not a response to UK politics. It’s led by interest rates increasing due to inflation. No point in buying an illiquid long term investment when you can get the same return by putting cash in the bank,

Analysts are expecting yields and interest rates to fall in Q3/Q4 as inflation comes back under control.

As soon as Truss delivered her. " Budget" and gilts moved out, yields followed

For several days after that disastrous budget we formed a "war room" with colleagues in other real estate firms and our key clients.

Yes, yields were softening, but that was because they had become compressed. Ground leases and London prime had reached circa 2%. That was a natural market repricing.

A sensible correction was due. I agree with you that inflation and base rate were inevitably going to soften yields.

September 2022 however, was a very "intense" time.

I think Truss just triggered the repricing early. We have seen the same thing happen in other countries since and there is no doubt in my mind that a correction was due. As you say we had been through an extended period of yield compression.

I do agree that real estate yields track the bond markets quite closely. Risks are similar, so it follows that returns should also end up aligned.

Agree, we absolutely do follow the bond market. Real estate is in reality part of a basket of investments, the proportion of which in a typical portfolio will vary depending on the investment structure and return necessary over a given horizon.

When I (or a client) am building a yield, I will look at 10 and 30 year money as my base point, layer in risk to that market, demand and liquidity and them any particular risk (or opportunity) such as location, obsolescence and investor demand. I will also look at rental growth.

I work in operational real estate, which has performed well over recent years, especially when looking at the equivalent yield, which tracks future income and the reversion/exit. These tend to have a top slice of turnover led income, which creates rental growth in a strong consumer market.

[isaldiri]

Castrol for a knave said:

Yields were still moving out across most asset classes well into 2024. They are broadly static now.

Transactional volumes are low, so the market can only reflect the evidence, which is limited.

Most investors are just sitting tight and don't want to crystallise a diminution in value.

I'd probably debate that yields were still softening much well into 2024 as compared to (more or less) holding steady to end of 2023-ish levels. 2023 was the big catchup where RE yields were forced to partially catch up to where the markets were more or less pricing them (CMBS/REITs). While there's some can kicking still ongoing given the low transactional volumes as you say, some sectors have been (very) slightly tightening due to being over sold last year - or at least in the space I'm seeing anyway.

P.S and I guess if you think Sep 2022 was bad in the real estate space, it could always be worse if you were a pension fund....