Key Takeaway:
The recent CBRE multifamily index shows a robust growth in the UK’s multifamily property market underscores the importance of rental value growth and occupancy rates in driving capital value growth. Property professionals should leverage these trends by focusing on multifamily properties, particularly outside of London, to maximize their returns.
Introduction:
The UK multifamily property market has been a beacon of resilience and growth, even in the face of economic uncertainties. In the year leading up to March 2023, multifamily properties have delivered capital growth of 1.2% and an impressive rental growth of 8.2%. This article will delve into the key factors driving this growth and how property professionals can leverage these trends for maximum returns.
Capital Value Growth:
The inaugural CBRE UK Multifamily Index 2023 reported a capital value growth of 1.2% in the year to March 2023. This growth is particularly noteworthy when compared to a fall of 16.8% in the CBRE UK Monthly Index over the same period. The capital value growth for multifamily assets was primarily underpinned by rental value growth, which stood at 8.2% in the year to March 2023. However, the impact of yield movements on capital growth was negative in this period, with capitalisation rates moving out by 25bps.
Rental Value Growth:
The rental value growth of 8.2% in the year to March 2023 is a testament to the robust demand for multifamily properties. This demand is reflected in the occupancy rate of 98% as at March 2023, an increase of 0.8% over the year. The strong rental growth also contributed to a positive gross income growth of 6.5% over the year to March 2023.
Regional Differences:
The capital value growth was weaker in London (-0.7%) than in the Rest of the UK (2.5%) in the year to March 2023. This reflects larger outward yield movements in London. However, rental value growth in London in the same period was 10.1%, compared to 7.0% for the Rest of the UK, indicating a strong demand for rental properties in the capital.
Conclusion:
The UK multifamily property market has shown remarkable resilience and growth in the year to March 2023. With strong rental value growth and high occupancy rates, multifamily properties offer a promising investment opportunity for property professionals. However, it’s crucial to consider regional differences and yield movements when making investment decisions.
Sources: