Subject: Re: UTG - wow, the buybacks are getting interesting!
> The UK RE price trend is not good these days in a broad sense
Hello Jim,
I'm not sure what you have in mind when you say the words 'UK RE price trend', for several reasons.
I'm also not sure what you mean by 'not good in a broad sense'. That claim contradicts basically every piece of data I have read on the topic in 2026. What was the source for this claim?
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Firstly, to talk about trend is to talk about "a matter of where the puck is now" (and has been). Which you suggest yourself is not the issue. It would be wonderful to know the property trends of the future before they happen, but I am not sure that anyone actually does know this more than 1 year out. (My instinct says that if anyone *does* know the trend of the next 6-12 months, it's more likely to be the REITs themselves - who have been furiously buying up other REITs).
Secondly, re: 'UK RE'. As you probably know, commercial and residential property in the UK have different cycles that are only partially synchronised by interest rates. Within regional/London, you see different cycles (property bubbles and crashes usually ripple out from London). Within different subsectors of commercial lending you sometimes see different outlooks and trends (oddly enough, not so much at the moment - see below). Offices vs datacenters vs healthcare, regional high street retail vs London high street retail, etc.
So I would suggest there is not really a 'UK RE' concept except when you get big or sudden moves in interest rates, or national recessions, that synchronise things a bit across these diverse classes of property, with various time delays.
For example, if someone spoke of the Canadian, Mexican and US economy as one thing, when they behave quite differently and are only partly synchronised by global rates and global recessions, that would not make it 'a thing'. IMHO.
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Regarding 'where the puck is going', I would point to three factors that are shaping the medium-term future.
Firstly, the collapse of new construction in the UK (and particularly in London) is broadly acknowledged and is very supportive of pricing and yields.
Secondly, the trend of UK rates down (until this Iran war came along!) seemed well established and is supportive of future prices. (e.g. investing.com, view the 2Y/5Y UK gilt up till 'Operation: Epic Fail' began).
Thirdly, across almost *all* the different sectors and subsectors of UK commercial property, yields are basically steady for the last year and this has continued into March.
I accept the points you are making as 'general musings about the world, property and investing', but I am unsure that they actually relate to the situation in the UK right now, or particularly to Unite Group.
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> "one should probably conservatively assume that the cracks are spreading"
> "Assume there are more cockroaches, or that the liquidity situation might suddenly deteriorate a lot."
What cracks? What cockroaches? (I'll come back to this).
In an earlier post, I noted (for Unite at least), the combination of buybacks, 0.5 price/book, and low LTV mean that you can write off 10, 20, 30% from the entire portfolio and still get an outstanding result.
Now personally, I can't imagine why the market would write down all Unite's properties by 30%, given 99-100% occupancy in most of them and ongoing widespread inflation & rent inflation.
Sure, if a liquidity crunch like 2008 shows up suddenly, banks go pop, credit window goes 'bye' suddenly, that could definitely do it.
But I don't think it's a good idea to price that in at high probability.
Also, I acknowledge, everyone could decide tomorrow that they don't want to go to Oxford, Cambridge, etc any more, but that's the opposite of the current data about 2026 applications, reported by Unite, UCAS etc.
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Returning to "UK commercial RE". Take a quick look at this. (Link on the right side of the page, URL below). I think you may find it surprising and interesting.
Prime Yield Guide – March 2026: (https://www.knightfrank.com/re...)
This gets updated every month. You can go back in their archives and review older ones to see how accurate they were.
It breaks down all the commercial property subsectors of the UK and the trend in property yields that are being measured. They also poll for sentiment.
The overwhelming picture is that across the different subsectors of UK commercial property, life is more boringly predictable than it has been in a long time.
It's not growing, it's not shrinking, there's some positivity. Mediocrity can be a wonderful thing if it pays a good dividend and grows predictably with inflation.
If there are cracks, or cockroaches, I think you will find them in places like the table I've linked - yields will suddenly dip a little, then later, a lot.
Or, there will be stories in the news. e.g. if the FT starts reporting that UK banks are going bust (as we saw in 2008), slowly then suddenly.
So, browsing the data - where are the cockroaches? Where are the spreading cracks?
The actual data, versus the narratives I see put forward on this forum, could hardly be further apart.
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Regarding residential (non-commercial) property in London and the UK.
I would note that the UK press and estate agents do a very poor job of communicating that UK prices vary seasonally, sometimes dramatically, and this time of year is often the 'low' before spring (it's a bit warm this year, so who knows). Here's a paper that suggests the effect averages around 6.5%. (https://personal.lse.ac.uk/ten...). Elsewhere though this effect is claimed at +/- 1%. The point is, the time of year you observe the UK market has a big impact.
As of Q1 2026:
Halifax notes +1% residential year on year across the UK, but -1% yoy in London. (https://www.halifax.co.uk/asse...)
Rightmove reported that largest January rise in house prices in 25 years, +2.8% Dec->Jan, and 0.5% yoy. (https://www.rightmove.co.uk/pr...)
Savills of London suggests London at +0.4% yoy, as of March 2026. (https://pdf.savills.com/Housin...)
Savills also reports rental growth basically everywhere in the UK except Glasgow. Take a look at the map in the report.
Again - where are the cockroaches? Where are the spreading cracks?
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Regarding your previous post talking about central London flat prices being affected by price drops. -16% etc.
It's a microclimate there of leasehold rather than freehold. A lot of flats with service charges that start 'cheap' but very rapidly escalate as part of the ownership lease. e.g. article below suggests leashold service fees are up +41% in 5 years.
It reminds me of a story about Norway, during one economic crisis, flats were selling for 1 kroner each (10 US cents), because no one was willing to take on the outrageous service charge contract (& annual escalation) associated with the flat.
So I would be wary about calling the situation in Chelsea / Kensington, 'cockroaches' or 'spreading cracks', rather than a strange microclimate and odd conjunction of service charges, higher interest rates, the end of government Help to Buy etc. See:(https://hoa.org.uk/news/house-...)
Hope you find something interesting among all the data above (particularly the Knight Frank link), and best wishes.
TRS