20 September 2018

How will real estate market evolve in 2018?

22 December 17 - RE+D Magazine
How will real estate market evolve in 2018?


IBI Group

Consultant - GREECE


Consultant - GREECE


Public entity - GREECE

Solum Property Solutions

Consultant - GREECE


Antulio Richetta

Director IBI Group
Will 2018 be the year the world turned flat? For real estate investors, it looks a foregone conclusion. As reported in the latest edition of IPE Real Assets, the decline in cap rates – most apparent in high-quality, core markets – has slowed, putting the brakes on increases in prices and capital returns.


But it has not deterred investors from real estate. They are no longer reaping the rewards of yield compression, but they remain loyal fans of its income at a time of stubbornly low bond yields.

Investors expect US real estate total returns to fall from 6.9% to 5.6% next year and 5% in 2019. The capital appreciation portion of these returns are just 2.1%, 1% and 0.3%, respectively.

The picture in the UK is that total returns next year are expected to hit 4%, with robust income returns of 4.8% offsetting capital value declines of 0.7%.

A survey cited by suggests expect a four-year stagnation after a better-than-expected 2017, despite uncertainty surrounding Brexit. Germany, which aside from the UK is the biggest core market in Europe, has also attracted significant investment inflows.

Consultants at Capital Economics believe Germany is set to see some of the lowest average total returns between 2018 and 2021.

“With tighter monetary policy on the horizon, property yields are at threat from rising risk-free rates,” the company said. The question for 2018 will be whether this synchronised growth can be continued and consolidated. The OECD is predicting global growth of 3.6% in 2017 and 3.7% next year.


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