In response to rising expectations of a stronger recovery in economic growth and higher inflation in Q2, bond yields rose in Q1 leading to a 13.5% fall in values. This was the worst quarterly performance since 1980 with the gross redemption yields on 10 year gilts rising to 0.8%. Given the very wide gap between gilt yields and property yields, we do not envisage a negative property pricing impact. The risk premium relative to the gross redemption yield on 10-year gilts stands at over 400 basis points, a comfortable margin over the long run risk premium of 250 basis points.
To read the full article please click here