Part I: Navigating Rising Yields - Identifying relative value across Asia-pacific Real Estate

Recent geopolitical developments following the start of the Iran conflict beginning February 28th, 2026, have led to a notable repricing in global bond markets, with 10-year government yields moving higher across most major economies. The higher yields are pricing in expectation of higher inflation from elevated energy prices, supply chains input costs to finished products.

For real estate investors, this shift is significant - but not necessarily negative. Rather, it marks the beginning of a new phase of relative value discovery across Asia-Pacific real estate markets as the impact of the war on each country's bond yields varies significantly.

This first article in a three-part series explores how recent movements in bond yields are influencing the relative spreads between country yields and sector cap rates. More importantly, these data identifies where the most compelling opportunities may be emerging across countries and sectors from a valuation perspective. After all, the 10-year bond yields serve as an important benchmark for real estate valuations.

As of May 13, 2026

Divergence of rise in bond yields

Since the onset of the conflict, the rise in the 10-year bond yields varies significantly across the developed markets. The following are some key observations:

• US & UK (+51-78bps): Despite Asian countries having the largest reliance on imported crude oil from the Strait of Hormuz, interestingly the U.S. and U.K have seen a much higher surge in bond yields rising 51 bps and 78 bps respectively.

  
  

• Japan/South Korea/Australia (+42-48 bps): Japan and South Korea saw the largest spike in bond yields (+48bps) amongst the Asia developed markets due to rising domestic inflation and the prolonged weakness in Yen. Australia saw increases in the 10-year bond yield by 42bps.

  
  

• Singapore/Hong Kong (+12-29bps): These markets remain resilient and experienced the smallest bond yield impact as liquidity continues to flow into the banking systems of these markets.

  
  

• China (-9bps): China remains an exception, with yields largely stable to slightly lower, reflecting a different macroeconomic cycle.

While rising yields are often viewed as headwind, they also serve an important function: They re-anchor return expectations and create clearer differentiation between markets and sectors based on existing cap rates.

Based on the latest movement in bond yields above, it is likely the property valuations in Japan, South Korea and Australia will be relatively more impacted than markets like Singapore and Hong Kong. Bond yields alone certainly are not the lone factor in determining valuations of a market, as other factors such as level of existing cap rates, rental growth and market liquidity are all important. However, the 10-year bond yield vs. cap rate spread typically do have a larger impact on property valuations than these other factors.

Yield spread over bond yields examined

Based on the latest market cap rate data and the latest 10-year bond yields, there has been a slight reshuffle in terms of relative ranking of cap rate yield spreads amongst the various real estate sectors in Asia. While there may be sector specific forces at play causing yield spreads to be relatively wide or tight, some high-level conclusions can be drawn from this latest analysis:

• Valuations for Hong Kong and Singapore both look increasingly attractive from a yield spread perspective. Amongst the first quartile sectors (in green), 4 real estate sectors from Hong Kong and Singapore are represented along with Osaka student housing and Melbourne office.

• The biggest reshuffle in ranking due to the bond yield increase differential between the countries are some of the Japan and South Korea sectors slipping into the second quartile (in blue). Examples include Osaka logistics and hotels as well as Seoul retail.

• The country with most sectors in negative yield spread is Australia, where Multifamily and student housing sectors in both Sydney and Melbourne ranked as the most unfavorable from a cap rate vs. bond yield perspective.

Looking ahead: Completing the Investment Picture

This analysis is the first step in a broader framework to assess real estate attractiveness across Asia-Pacific property sectors.

• Part 2 will examine the latest relationship between cap rates and cost of borrowing, providing insight into leverage returns

• Part 3 will analyze and compare the latest rental growth across sectors and markets

Layering in these perspectives to our current bond yield vs. cap rate analysis will help identify which country and sector combinations offer the most compelling risk-adjusted opportunities in the current cycle.