Responding to recent press coverage on property funds, Richard Saunders, CEO at the Investment Management Association (IMA), says that October figures for the property funds market show that the funds are manageable.
“Our statistics show that while retail investment in the UK authorised property funds market has slowed down in recent months it remained positive over the summer,” Saunders says. “Next week we will be publishing figures for October, which will show a modest outflow of 1% of total assets of property funds. Redemptions at this level are well within the liquidity capacity of these funds and are perfectly manageable.”
Recent press reports a crisis in the commercial property market. The Times today reports that the crisis could get worse, experts have warned. Commercial property is experiencing its worst downturn since the crash in 1990. Total returns fell 1.5% in October and are down 2.6% over the past three months, according to the Investment Property Databank.
Rental demand is expected to slow in the London office market as evidence emerges that many firms are opting for shorter-term leases, The Times says. Demand for the purchase of new office buildings is also waning as potential buyers are finding it harder to raise funds because of the credit crunch.
The latest figures from the Investment Management Association show that nearly as much money was pulled out of commercial property funds in October as was put in: 246m was invested, but 239m was withdrawn, The Times reports.
The IMA figures show total net sales of property fund management rising steadily in the summer, but down-turning to – 159 million in October.
This is a far cry from the situation this time last year, when money was pouring into these funds, The Times says. Retail investors hold about 16 billion in property funds and the sector took 2 billion in the six months to April alone. As yet, none of the big retail funds have introduced notice periods, although this could change.