While quarterly rental rises surprised on the upside in Q2, property yields also rose sooner than expected. This meant all-property capital values barely grew on the quarter and slowed to around 5% y/y, from almost 7% y/y in Q1. Given Q2 is likely to have been the peak in economic activity in the region, we expect rental gains will wane. With little sign that investor sentiment will improve and with interest rates set to rise further, a sharp slowdown in capital value growth by year-end is on the cards.
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