Sotiris

Quantitative easing (QE) is a monetary policy where central banks buy financial assets, like government bonds, to inject money into the economy and lower long-term interest rates. This increases liquidity, encourages borrowing and investment, and stimulates economic growth.

• interest rates will fall - borrowing gets cheaper

• more aggregate spending, more liquidity in the property market (more transactions)

• falling yields and more demand lead to price growth

• depreciation of the pound results in more foreign capital investing in the UK

1. State of the Economy:

   • A widening budget deficit often reflects economic challenges, such as a slowdown or recession, as governments increase spending to support growth or face declining tax revenues.

   • It may also signal higher borrowing needs to fund expenditures.

2. Direction of Discretionary Policy:

   • Expansionary fiscal policy: The government likely implements measures like increased spending or tax cuts to stimulate demand and economic activity.

   • This could indicate active countercyclical efforts to address weak economic conditions.

• y= rf + rp - g +d

• rf: mostly the same

• rp: different, caused by higher liquidity in one market, transparency, higher operational costs

• g: stronger or weaker rental growth

• d: higher/lower depreciation

• high transparency and data availability

• currency exchange - depreciation of the pound

• interest rates low - cheaper borrowing, higher leverage effect

• positive market outlook: rental growth

• buildings might be undervalued

• office demand is derived from business activities

• higher business activities could be reflected in employment levels, likely to require more space

• Changes in the floorspace per employee ratio. If this ratio rises the impact on demand from new working practices may not be significant.

• the level of rent (Could be considered too high by occupiers so they economies on space),

• incentives from landlords (to entice occupiers not to cut back on space they occupy or let more)

• Office rent differences with substitutes markets (Westend, midtown etc,)

• levels of shadow vacancy (high levels of which can constrain take up)

• New working practices e.g. home office will also affect take up – firms might require less space

• costs of borrowing will be cheaper

• stabilise or compress yields

• higher demand for real estate as they may offer higher returns than bonds - more liquidity

• leading to higher prices and, therefore valuations

actual output exceeds potential output, often caused by inflationary pressure

bank deposits create money through lending activites