Apartments to top the charts with total returns of 9.5% p.a.

There are tentative signs of improvement in the investment market, but we continue to think refinancing requirements will weigh on transactions. We still think appraisal-based valuations need to adjust further and that cap rates will increase by another 50-60 bps by the end of 2025, with industrial seeing the largest rises as the most overvalued sector. As a result, industrial will only match office performance over 2025-28, with total returns of 5% p.a., below the other major sectors. We are more positive on the outlook for retail returns, at around 7.5% p.a. over the same period. But the major change to our forecasts this quarter is for apartments, where we think slowing completions from 2025 will support rent growth of nearly 4% p.a. in 2025-28. That drives our forecast of 9.5% p.a. total returns over the next four years, making it the best-performing sector.