Stubbornly high inflation pushed risk-free rates, and yields, somewhat higher than we had anticipated by the end of 2023. By contrast, rental growth proved surprisingly resilient even as the economy slowed to a crawl. But with economic growth set to be anaemic once again this year, we think rental growth will finally slow. And while risk-free rates are set to fall, we doubt that will trigger any property yield compression. Accordingly, total returns will improve in 2024 but, at just over 6%, will be nothing to write home about.
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