Looser-than-expected fiscal policy following the mini-Budget means we now expect Bank Rate and gilt yields to be higher. All else equal, that would push the spread between the 10-year yield and all-property equivalent yields to its lowest since the GFC. With rental growth constrained by a slowing economy that spread would be unsustainable, and as a result we now expect all-property yields to rise to 5.9% by end-2023 and capital values to see a peak-to-trough fall of almost 15%.
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