We have not made material changes to the majority of our economic forecasts since our previous Analyst. Nevertheless, we have edged up our forecasts for capital value growth in a number of non-euro-zone property markets. On the whole, the key driver of that capital value growth over the next few years is likely to be rental value growth. This seems consistent with the idea that economic growth in most non-euro-zone European economies is showing signs of picking up again, as well as the fact that yields are typically already at historically low levels, with limited room for further falls. Indeed, in Western markets, their low level suggests that over the final years of the forecast horizon, yields are more likely to be a drag rather than a spur to capital value growth.
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