Despite a rise in property yields, increases in alternative asset yields led to a further deterioration in European property valuations in Q2. (See Chart 1.) While industrial and office valuations still look the most stretched, retail has now joined them as overvalued. Notably, this is the first time the retail sector has been in overvalued territory since Q1 2009. Although, with bond yields in most markets expected to end the year at or below their Q2 levels, valuations could be near their trough if property yields rise further.
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