Capital value falls slowed in Q1 as the surge in euro-zone all-property yields cooled. But, with rent growth decelerating across all sectors, the increase in yields was still enough to drive another 4% q/q fall in capital values. Although this decline was not as severe as in the previous two quarters, it took the total peak-to-trough fall in values so far to 16%. With the weakness in rents set to persist and further yield rises anticipated, we think values are now more likely to fall around 20%.
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