All-property yields saw a large rise in August, as concerns around valuations increased. (See Chart 1.) And, with the energy support package set to boost interest rates and the economy probably already in a mild recession, yields will see further gains over the next year or so. Household real incomes are now set for a smaller decline, but all-property rental growth will not avoid a slowdown. Indeed, consumer-facing sectors such as leisure and shops are once again seeing month-on-month falls in rent. Not surprisingly, investors are showing increased caution and following a strong first half of the year property transactions slowed significantly in July. Total returns are still strongest in the industrial sector, but concerns over valuations are now driving up yields and the sector has seen the sharpest slowdown in returns in recent months.
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