Residential remains the most resilient of all property types in Europe and is forecast to deliver a 5.1 percent average prime total return over the next five years.

In a report on the sector, AEW says that continued lack of supply and strong demand from new household formations is driving prime rental growth in most of the 24 European markets tracked by the manager. And despite an increasing number of regulations aimed at  capping rent in certain regions, prime residential rental growth is projected to be 2.6 percent over the next five years, on average, in Europe.

Yield forecasts in AEW’s best-case scenario are based on the outlook for swap-implied government-bond yields. In this scenario, the risk premium over government-bond yields is expected to remain high, at an average of 284 basis points from 2022 to 2026, compared to 160 basis points during the past 15 years. During the next five years, prime total returns for the residential sector are forecast to reach an