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THE FOG OF WAR
With a ceasefire announced on 8th April, we were starting to see some light at the end of the tunnel on energy prices, and the associated impacts on inflation and the associated risk and cost of debt.
On announcement of the ceasefire, the 10-year gilt had fallen as low as 4.7%, its lowest since 17th March, and down from its conflict peak of 5.01% on 27th March, albeit there was still volatility on pricing due to the fragility of the ceasefire. That fragility was evidenced with the announcement that there was no peace deal to be had with Iran after talks in Pakistan. The response from the US was an announcement of a naval blockade of the Strait of Hormuz.
With renewed uncertainty in the market, this will continue to impact investor decision-making. One of the positives may be the knock-on impact on staycations, and the domestic hotel market, after some buoyant Easter trading. However, with consumer confidence weak, that will also impact demand across even those markets with tailwinds.
Across all sectors, new product being launched to the market is limited, with vendors reluctant to launch sales openly, to avoid looking distressed.
SENTIMENT SHIFTS
Across the market, the prevailing sentiment is one of uncertainty. Prior to the ceasefire announcement (and subsequent halting of peace talks), the evidence was that there continued to be activity across smaller lot sizes, with challenges across larger lot sizes as a result of the increased cost of debt.
Furthermore, investors have unsurprisingly put a greater focus on strong in-year income and tenant risk. In both instances, this impacts perceptions on pricing levels. Nevertheless, while price points have moved, capital is still mandated, and allocation pressure remains, which will drive continued investor interest.
