Multifamily properties in the UK saw rental values grow by 7.7% in the year to March 2024, while capital values fell by 3.2%.
CBRE’s UK Multifamily Index found that gross rental income grew by 5.3% over the same period.
The report said that despite strong performance in terms of income, UK multifamily properties saw capitalisation rates move out by 38 basis points in the last twelve months.
CBRE said that one of the factors of the fall in capital values is the abolition of multiple dwelling relief announced in the Spring Budget.
Rental value growth for the year to March 2024 was strong both for multifamily assets in London, at 7.7%, and for multifamily assets located elsewhere in the UK, at 7.8%.
However, capital value growth diverged as London assets saw a larger upward movement in capitalisation rates. Capital values declined by 6.3% for London assets in the year to March 2024, compared to a decline of only 0.7% per cent for assets in the rest of the UK.
Office, retail and living
The fall of capital value in multifamily was smaller than that seen in the office and retail sectors over the same period.
According to the CBRE’s UK Monthly Index, retail capital values fell by 4.5% in the year to March 2024 while office capital values fell by 11.6%.
Jason Hardman, executive director, valuation and advisory services at CBRE said: “The decline in capital values for multifamily assets reflects how capital market conditions have been challenging for real estate investment across the board.
“The index results demonstrate how the sector’s strong fundamentals continue to support income growth, so it’s not surprising that the living sectors received the most investment over the last 12 months, which we saw in our latest UK real estate investment figures.
“The results also illustrate the impact, as we have previously reported, of the abolition of MDR. The market took this into account immediately, wiping up to 4% from investment values and significantly reducing the capacity for those impacted to deliver much-needed, good-quality homes.”
Jennet Siebrits, CBRE’s head of UK research, said: “The third edition of our UK Multifamily Index will help investors to compare the performance of this maturing sector with other investment property types. What stands out is that multifamily offers strong rental growth for assets in London and across the UK’s key regional centres, particularly when compared to the traditional sectors like industrial, office and retail.”
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