Valuations improve but all sectors still overvalued

A sharp increase in property yields in Q4 helped European property valuations improve for the first time in two years. That said, spreads over alternative assets remained very narrow by past standards and all markets besides Istanbul were still overvalued at the end of 2022. As a result, we think property yields have further to climb which, coupled with our view that bond yields will end the year lower, should ensure valuations continue to improve over 2023.