The sharp rise in Treasury yields this year has finally begun to feed through to the property data. Q3 investment activity fell by more than 20% on both a q/q and y/y basis, with loan originations also falling back notably. And valuers have begun to push yields higher on the back of recent market evidence. However, so far those valuation-based yield shifts have been muted and there is still some way to go to catch up to the kinds of re-pricing reported at a deal level. What’s more, with the economic outlook for 2023 looking weak, we expect rent growth to slow across the board, turning negative in the apartment sector. This means that the small falls in capital values reported in Q3 are set to become more widespread and, at an all-property level, those falls will accelerate in the next couple of quarters.
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