The market remains in the doldrums, with the mood negative and activity weak. We think this summer could be the bottom for transactions, but we still see valuations needing to fall by another 12% from Q1 levels. That predominantly comes through in cap rates, which we don’t think have adjusted sufficiently to the higher rate environment. We expect another 80 bps of cap rate rises before they reach a peak, most of which will be this year. Importantly, when the recovery comes, it will be weak. As a result total returns will average just 3% p.a. over 2024-28, rising to 5.5% if 2024 is excluded. Retail is our top performer at 6% p.a. in 2024-28, with office and industrial trailing at just 2-2.5% p.a. Apartments split those sectors, at 4.5% p.a.
Become a client to read more
This is premium content that requires an active Capital Economics subscription to view.
Already have an account?
You may already have access to this premium content as part of a paid subscription.
Sign in to read the content in full or get details of how you can access it
Register for free
Sign up for a free account to:
- Unlock additional content
- Register for Capital Economics events
- Receive email updates and economist-curated newsletters
- Request a free trial of our services