Capital growth in the UK finally drew to a close as the continuing crisis in the eurozone, and doubts about its resolution, took their toll on occupier demand and investor sentiment.
Total return for November was almost entirely income driven, at 0.6%, according to the IPD UK Monthly Index.
For the first time since April, rental value levels stepped down, while yield compression slipped to negligible levels.
Phil Tily, IPD’s UK and Ireland managing director, said: “Central London retail and office values have been driving returns since the recovery began.
“However, in the past few months there have been increasing concerns over a pricing bubble in the capital, which the European economy could further exacerbate.”
Central London offices’ capital growth slowed to 0.4%, the result of cooling rental-value movements.
In October, the rest of London office values, which had over the past six months increased by 1.2% as investors looked for more competitively priced assets, reported values and rental growth slow to zero.
Outside the South-East, office values slipped further into decline.
Retail values, though flat, improved slightly on the -0.1% recorded in September. However, the growth in central London retail values fell by 80 basis points, to 0.7%.
Industrial values posted a slight decline after positive results in September.
Tily added: “Total return for first ten months of the calendar year has been 7%, with capital return of just 1.3% over that period.
“Rental levels have held steady at the all-property level, as office rental value growth of 1.8% was offset by rental falls of -0.7% and -0.8% in the retail and industrial sectors.
“If returns continue at October levels for final two months of the year, total return would amount to 8.3% and capital return would remain positive for the year, at 1.4%.”
Twenty-seven consecutive months of non-negative capital growth has resulted in a value recovery of 17.8%. On a twelve-month rolling annual basis, capital growth has slowed to just 1.7%.
bridget.oconnell@estatesgazette.com
