Scandi & Swiss: Sharper value falls to come in 2023

Property values in Scandinavia and Switzerland have taken a hit as yields jumped in recent quarters. With valuations still stretched, we are forecasting a further 50bps and 30bps of rises at the all-property level in Scandinavia and Switzerland respectively by end-2023. Rental prospects are also poor as most of the region is expected to fall into recession next year, while structural changes continue to weigh on the office and retail sectors. This points to a sharper fall in property capital values in 2023. That said, the correction is expected to be limited, with central banks set to end their tightening cycles in 2023 and bond yields past their peaks. Overall, industrial is forecast to perform best over the 2023-27 period, though its lead will be marginal compared to recent years.