UK property investment returns decline 11.9% in Q4

UK property investment returns decline 11.9% in Q4

UK property investment returns declined 11.9% in Q4 from a year earlier, according to MSCI‘s UK Quarterly Property Index.

The index showed a negative total return of -8.9% in 2022, said Head of EMEA Real Assets Research Tom Leahy.

The index tracks performance of 7,375 property investments, with a total capital value of GBP 140.0 billion as at December 2022.

Key points are:

  • There was a 12.8% fall in UK All Property capital values in Q4 YoY
  • The industrial sector was most affected, with capital values falling 26% in the second half of 2022, the steepest decline recorded by MSCI in such a short period
  • Industrial yields rose by more than 120 basis points in H2 2022 from a record low in June
  • Total returns for UK investment real estate (income plus capital values) were positive until Q3 last year, highlighting how quickly yields adjusted to reflect the pace and size of the Bank of England’s increase in the base interest rate
  • The substantial correction in capital values may improve price discovery and support a recovery in transaction activity
  • Hotels, offices, residential and industrial real estate all registered positive quarterly rental growth in Q4
  • The economic slowdown forecast for the UK this year will act as a headwind for rental growth prospects