Real estate
Turning towards the next best period of performance for real estate?
1 min read 9 Jan 23
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Repricing will emphasise variation in performance of portfolios, depending on quality of assets. But it could also create the next period of best performance for new investments, since history shows it is often in the years post-recession that real estate delivers.
Economic headwinds and interest rate rises are putting pressure on property yields globally, with low yields in some subsectors harder to justify when comparable bond yields have gone up significantly.
“As yields reach stabilisation, we believe repriced assets are likely to reflect an attractive long-term value opportunity, with improved performance prospects.”
The illiquid nature of real estate means revaluations will take time to play out. But as yields reach stabilisation, we believe repriced assets are likely to reflect an attractive long-term value opportunity, with improved performance prospects.
While capital value growth is challenged in parts of the logistics sector, for example, higher income returns as a product of higher yields could potentially boost total returns on a more sustainable basis. Cyclical trends may also signal the possibility of some yield compression, following price discovery in real estate markets. Return potential is further bolstered by income growth prospects, linked to higher general inflation, robust labour market dynamics, and long-term structural trends.
The value of investments will fluctuate, which will cause prices to fall as well as rise and investors may not get back the original amount they invested. Past performance is not a guide to future performance. The views expressed in this document should not be taken as a recommendation, advice or forecast.