Speaking at the Octopus Real Estate ‘Grow Your Commercial Business’ event at their office in London, Ludo explained that gilt yields were a proxy for the risk-free rate, with the general view that you can't get anything safer than gilt.

As of April 2019, short-term gilt yields were 0.87%, medium-term yields were at 1.14% and long-term yields were 1.67%, according to UK Debt Management Office data.

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Octopus Real Estate's graph on the yield gap

Ludo mentioned that property yields were currently at around 5%, which has the advantage of providing a higher yield, however the property has to be managed and has different types of risks attached to it. 

He added that in 2007, the gap between gilt yields and property yields inverted.

“So, here you were getting a higher yield on risk-free gilts than you were on property, which obviously just didn't make sense, and within months the market crashed, and the yield gap re-established itself.

“Now today, that gap is almost as wide as it's ever been because gilt yields are so low.

“So, in a low interest environment, property looks very good value.

“And, we think, as long as we stay in a low interest rate environment, property will continue to be attractive to investors.

“So, while we're not macro funders, [and] we'll never try to predict the market, we don't think that we are so late [in the] cycle that we're about to see a correction.”