The fundamental drivers of commercial property outside of the single currency region have not changed materially since our previous Analyst. However, a widespread rise in business sentiment has greatly reduced the chances of further falls in rental values to come. This means that property yields are now also less likely to drift upwards in the short term than we had previously envisaged. Overall, we think that capital values will continue to rise over the next 18 months in both Western and Emerging European property markets. But from 2015, an unwinding of the yield premium seen in markets that have benefited from safe-haven demand suggests that Western capital values may give back their short-term gains and end the forecast period more or less where they started.
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