Property yields have been moving inexorably lower as the continued financial crisis continues to leave government bonds at all-time lows and easy money benefits real assets. This may well be explained by liquidity and risk issues, however many investors are mentioning that it is stronger growth in the trophy markets that is also attracting investors. This is a long standing argument for pricing differentials which sometimes, both now and in the past, look unusual.

This paper examines the comparative relationship between yields, yield differentials and economic growth to consider the rationale and evidence that investors buy into growing markets and are prepared to pay premiums for them. Via modelling of major global markets, it examines the significance of growth performances on historic and present pricing.

The paper also considers other factors that may also be influencing their decisions.