The recovery in the UK property market made further ground during the second quarter of 2014, as values rose by an additional 3.3 per cent for all property.
This represents the highest quarterly growth rate of the current cycle, in a market that has now continued to improve for five successive quarters. The strong level of value growth has contributed to a total return of 4.7 per cent for the quarter, the highest since Q1 2010, according to the IPD UK Quarterly Property Index.
The second quarter of 2014 saw capital value growth accelerating once again after a slight moderation in Q1. Rental values also improved in each market sector, but the rise in the capital value growth rate stemmed from warming investor sentiment as yield compression added more than 3 per cent to values over the quarter.
Higher return
The 12-month return for the year to the end of June rose to 16.4 per cent – which is significantly up on the return of 13.3 per cent to March-end. The return to the end of Q2 was also the highest level recorded since 2010, as the renewed recovery takes hold nationwide.
The office and industrial sectors led the UK market in Q2 2014, returning 5.3 per cent and 5.4 per cent respectively, although all sectors saw a higher return than in the first quarter of the year.
Offices delivered the strongest level of capital value growth, with 4.1 per cent. The industrial sector’s advantage is still afforded by its higher income return of 1.5 per cent for the quarter as values grew by 3.9 per cent.
It was, however, in the retail sector that total returns moved ahead most significantly, rising from 2.6 per cent in Q1 to 4.3 per cent in Q2, with value growth more than doubling to 2.9 per cent. Shopping centres played a leading role in this, with values growing by 3.7 per cent.
