Returns to remain soft

Regardless of the outcome of the election and Brexit, we expect all-property returns to be weak over coming years. Indeed, even if a deal is secured and economic growth picks up, we expect weakness in the retail sector to weigh on all-property rental values. In the near term, rising property yields in response to the bleak outlook for the retail sector and prolonged Brexit uncertainty are likely to weigh on capital values. If a deal is secured, we expect rising bond yields to put further upward pressure on property yields from next year. If a deal is not secured, we expect property yields to rise more quickly early next year, particularly if there is a no deal. However, lower interest rates and bond yields are likely to prevent property yields rising much higher over the following year or so.