For the data behind the commentary, download our latest UK Investment Report.
RE-ESCALATION
Elevated bond yields are still weighing on investment. Volumes were provisionally £10.3bn in Q3, 1.5% above Q2 but 8% below the same quarter last year, and the fifth-lowest third quarter since 2006. That would take the year to date to just over £32bn, 25% below the same period in 2025, with almost all sectors seeing reduced volumes. Just Hotels and Residential, both lifted by large portfolio trades, are the exceptions.
While there continues to be significant headwinds with regard to the pricing of bonds, recent weeks have seen the shape of the risk curve change. While the short end has kept rising, with a November rate hike now close to fully priced, the long end has come off the boil. The 30-year gilt has now eased from just over 6% to in the region of 5.85%, as the Bank paused sales, and market attention shifted to France. Next Wednesday’s Budget is the big test. We cover this in more detail in our Economy and Housing Marketbeat, and we will respond on the day accordingly.
Liquidity exists, but it is not indiscriminate. There is substantial capital looking to deploy. UK pooled pension money, overseas investors, US REITs, French SCPIs, private capital and institutional funds are all active but there is a mismatch between product in demand and that available. Furthermore, the hurdle an asset has to clear has risen.
At the strongest end, core London offices, prime logistics, indexed healthcare income, institutional single-family housing, prime retail parks and London luxury hotels continue to draw competitive bidding, in places at aggressive pricing. At the weaker end, capital is available but requires materially more yield or a clearly executable repositioning story.
In terms of performance, the MSCI UK Monthly Property Index delivered an all-property total return of 0.28% in September 2026, down from 0.37% in August and the softest monthly return since October 2025. This equates to 1.0% over three months and 4.8% over 12 months. Positive returns remain entirely an income story. Income contributed 0.45% in the month against a capital value decline of 0.17%. Over the year, income of 5.5% has been partly offset by capital growth of -0.6%, with rental value growth of 3.2% not enough to offset the yield impact.
