Outside of Japan, central banks are cautiously looking to roll back the higher interest rates they have used to counter the inflationary surge. Several have started to cut interest rates, including the Bank of Canada, the Swedish Riksbank and, most notably, the European Central Bank. By contrast, the US Federal Reserve may now only make one rate cut this year, with more expected in 2025.

In the UK, in April and May real estate capital values were stable according to MSCI data. Further falls in office values were offset by rises in the other sectors of the market. This followed declines across sectors in 1Q24, of 0.8% QoQ for the market overall. If the stabilization in values does mark the bottom of the UK market, as we expect, others look set to follow.

Falling interest rates and a levelling off in capital values should boost investor sentiment and provide a pathway to increased real estate transaction activity in the second half of the year and moving into 2025. Moreover, a levelling off in the market should present attractive opportunities for investors and give them confidence to deploy new capital into real estate.

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