Aberdeen warns rising bond yields put real estate valuations under pressure
XLRE•Aberdeen Investments shifted to a neutral real estate outlook as higher bond yields pressure valuations. It forecasts annualized returns of 6.6% in Europe and 5.8% in the UK over the next three years.
1. Outlook turns neutral
Aberdeen Investments shifted to a neutral real estate outlook in its Q4 2026 Houseview as higher bond yields put pressure on valuations. European property yield spreads over German Bunds narrowed to 160 basis points from around 220 in the three months to September 30, 2026. Aberdeen forecasts annualized real estate returns of 6.6% in Europe and 5.8% in the UK over the next three years.
2. Market differences
European real estate debt costs exceed 5%, above their 2023 peak, while financing remains readily available for high-quality assets. Retail and selected regional industrial markets offer greater protection, while tightly priced offices, residential properties and London industrial assets face further repricing.
