Higher interest rates and a weaker outlook for economic activity led to a more significant rise in property yields in Q3. While quarterly rental rises remained solid, particularly for offices and industrial, this meant that all-property capital values fell by about 4.5% q/q – the sharpest drop since 2009 Q1. (See Chart 1.) Further falls are likely in the coming quarters, with stretched valuations meaning yields need to rise more and the upcoming recession set to weigh on rental growth. Overall, we have pencilled in a 15% peak-to-trough fall in euro-zone all-property capital values, though some markets and sectors will see more significant declines.
Become a client to read more
This is premium content that requires an active Capital Economics subscription to view.
Already have an account?
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