In September, UK real estate saw the biggest single-month value drop since the immediate aftermath of the vote to leave the European Union, as the financial market volatility caused by inflation and rising interest rates started to feed through into tangible valuation falls.

UK real estate fell by 2.6% on average in September, according to the MSCI/IPD UK Monthly Property Index, which tracks the value of more than £50B of UK real estate. The average value of the index fell 5.1% in the quarter to the end of September.

The sector whose values had risen the furthest over the past decade, industrial, fell the furthest last month. The 4% decline by industrial property in London and the south east of England was the biggest single-month drop in any sector since the middle of the Global Financial Crisis, stockbroker Goodbody said in a note.

Distribution warehouses fell 3.7% in value, and industrial in the rest of the UK fell by 3%.

Industrial is still up over the long term, however: The average industrial property has risen by 15.6% in the UK over the past 12 months.

Every subsector of UK real estate saw capital values drop in September. Rented residential was the best performer with a fall of 0.2%, and rents also held up well in the sector. Average office values fell 1.8%, and average retail values declined 2.3%.

Rising inflation and the falling value of the pound have caused UK interest rates to almost treble in the last 12 months, which has in turn caused UK real estate values to drop because property looks less attractive relative to the price of bonds.