The latest Property Snapshot from Colliers International shows that expectations of a UK recession in 2012 have moderated, but Eurozone developments remain major risk, says Dr Walter Boettcher (pictured), Director of Research & Forecasting…

Expectations of a UK recession in 2012 have moderated with a British Chamber of Commerce survey suggesting that a recession is not a foregone conclusion. Further improvement in service sector PMIs from 52.1 in November to 54.0 in December suggests that there is a strengthening in GDP trend.

Eurozone developments remain a major risk and continue to distort capital market activity and wholesale funding for banks. The latest Bank of England Credit Conditions Survey shows that only a minor improvement in corporate debt availability is expected in Q1 12; real estate debt will contract. EuroHypo and SocGen announced that they were pulling out of the UK market.

Inflation is set to fall as base effects from 2011 and the VAT increase begin to impact significantly. In December, CPI fell to 4.8% and RPI to 5.2% with core inflation also down to 3.2%. Interest rates are firmly on hold with further quantitative easing still possible.

Despite improved UK economic sentiment, eurozone financial issues continue to distort capital markets and undermine consumer confidence.