Investors in property funds withdraw their money in January and February
Latest data from the Investment Association (IA) last week shows the biggest withdrawal of money from property investments since November 2008. In January property funds saw a net outflow of £28 million and in February and outflow of £119 million. This could be the biggest indication yet of a pending property crash and investors begin to remove their money.
Property funds are a way for large investors to invest across the world to protect their money and any major shift as experienced in the UK property funds shows investors believe their money is safer elsewhere.
The follow chart shows how investors have invested billions into UK property funds but for the January and February this year the money is now being taken out.
Danny Cox, chartered financial planner at Hargreaves Lansdown, brushed off the figures, telling the Financial Times that structurally open-ended property funds — funds that can issue an unlimited number of shares — don’t work.
“Managers are forced to buy and sell properties according to cash flow, not on market conditions,” he said. “The rush of money into property funds leading up to 2007 saw managers overpaying for properties they didn’t want, simply because they had to invest the wall of money hitting the sector.”
With major tax changes such as the extra 3% stamp duty on property investments, the vote to leave EU and the general worldwide economic issues property investments may have an uncertain future.