Valuation shifts point to risks for Italian property

Property yields ticked down only slightly again in Q2, but there were more meaningful shifts in the yields of other assets. Safe-haven markets generally saw an improvement in property valuations. However, higher bond and dividend yields in riskier markets undermined property valuations. Owing to a 90bps rise in government bond yields this quarter, the Italian cities were particularly affected. Moreover, with little rental growth expected in either city, valuations in Milan and Rome look stretched.