Sinking market conditions drive real estate correction globally

The cost of debt for real estate has risen steeply in recent months, as credit conditions tighten, loan margins widen and recession fears start to bite, according to an Oxford Economics report.

Consequently, the implied prime yield required for a levered acquisition has risen between 100 basis points and 200 basis points since the first quarter in key cities. As such, there may be a quick rise in near-term property NOI yields, leading to a sharp correction in commercial real estate pricing.

Globally, Oxford Economics expects capital values to decline 6 percent in 2023. This is notably more than the correction seen in 2020 (–2.2 percent) but well below the cumulative global financial crisis declines (–17.8 percent).

To read the full report, click here.