The value of UK property fell a fraction in the first quarter of 2016, with retail investments taking the biggest hit, according to MSCI‘s IPD UK Quarterly Property Index.

Offices continued to show growth in Q1 - Source: freeimages.com

The index revealed a 0.1% fall in capital values during the quarter dragged down by a 0.7% fall in retail property values.

By contrast, office and industrial property values continued to grow, rising by 0.4% and 0.2% respectively.

The absence of capital growth proved a drag on total returns, which hit 1.1% in the quarter – sharply down in the 2.9% recorded in the same period last year.

“The stable rate of income growth rate clearly reflects the strength of the UK property market; however, the market has not been immune to the questions regarding Britain’s future,” said MSCI vice president Douglas Rowlands.

“As a rule of thumb, investors do not welcome uncertainty and prefer to wait and have a clear picture of the market. That’s what the data clearly showed in the first quarter: investment in the UK property market, at least to some degree, is on hold until we know whether this country will stay in the EU or not.”

IPD’s monthly data has also showed a deterioration as the quarter progressed. Capital growth was positive in January, but values fell by 0.6% in March.