For the data behind the commentary, download our latest UK Investment Report.
RE-ESCALATION
Further escalation in the Middle East, and a sharp increase in bonds has had an impact on confidence in the market, with volumes constrained across almost all sectors. To highlight the point, there is just 157 basis points between the ten-year gilt at 5.29% and the all-property equivalent yield at 6.86%. On a year to date basis, the residential sector is the only market which has seen an increase in 2026 compared to 2025.
Nevertheless, there are segments of the market where we are seeing strong activity – namely with in the owner-occupier market in central London, in addition to strong demand for value-add opportunities in the same market. Elsewhere, we have seen an uptick in activity from UK institutions and competitive bidding in the Shopping Centre market.
In terms of performance, the MSCI UK Monthly Property Index delivered an all-property total return of 0.37% in August 2026, edging up from 0.35% in both June and July and marking the third consecutive month of marginal improvement. This equates to 1.1% over the 3 months and 5.1% over the 12 month period. Positive returns are currently entirely made up of income growth, with capital growth and yield impact still negative – a story that is unchanged in shape this year.
The positive income story should still ring true for investors during the course of the year, with vacancy continuing to tighten during across the majority of sectors, and rental growth robust – particularly in the Industrial sector, having seen 4.3% growth for the year.
Retail remains the standout performer, delivering 0.63% in the month and 8.4% over 12 months, and was the only sector to record positive capital growth in August. Hotels have been the other bright spot, returning 2.4% over the last three months and 7.2% over the year.
The MPC, as expected, held interest rates at 3.75%, albeit it was an outlier against hikes from the Bank of Japan, the Fed and ECB who all raised against a backdrop of increased inflationary pressure.
For more information, including on the interest rate decision see our Economy and Housing Marketbeat.
