Skip to main content

Yield compression at an end as recession looms

With inflation now set to rise to 12% by October, interest rates on the rise and the economy on the brink of recession, the 21-month streak of yield compression is at an end. Coupled with subdued rental growth, that means all-property total returns likely peaked in May. Admittedly, rental growth was strong in June, driven by a turnaround in a couple of retail sectors. But with household incomes squeezed, retail spending will continue to fall and retail rents are set to decline in 2022 and 2023. After reaching 43% y/y in April, total returns in the industrial sector have seen the largest decline in recent months to 39% y/y in June. That slowdown is set to continue across sectors with all-property total returns of 8% expected this year, falling below 4% by end-2023.

Become a member to read more

This is premium content that requires an active Capital Economics subscription to view.

Already a member?

You may already have access to this premium content as part of a paid subscription.

Sign in to read the content in full or get details of how you can access it

Register for free

Sign up for a free account to gain:

  • Unlock additional content
  • Register for Capital Economics events
  • Receive email updates and economist-curated newsletters
  • Request a free trial of our services

Get access