Property investors lost 11.4% over five years
UK commercial property fund investors have lost an average of 11.4 per cent over the past five years, analysis by Castle Trust has shown.
Sean Oldfield, chief executive of the housing investment and shared equity mortgage provider, claimed analysis of returns from 42 funds in the IMA Property Sector showed the best return from the 14 funds focused on the UK over five years was a meagre 1 per cent, while the worst performance was a loss of 26.6 per cent.
Mr Oldfield claimed advisers were instead turning to UK residential property, after a survey of advisers found 34 per cent expect increased interest in 2013 as the sector recovers.
He said: “Residential property has been a notoriously inaccessible asset class for investors, principally only for buy-to-let investors.
“Property investment for most people means investing in commercial property funds, although many investors think they are gaining exposure to residential property through them.”
He said that property funds are not as liquid as they may seem, claiming that investors often try to sell when prices turn down, at which point they are locked in and then get the prices that can be achieved for the properties when allowed out.
Mr Oldfield added: “The idea that an open-ended fund can make illiquid assets liquid is misleading, as anyone who tried to sell a holding in a commercial property fund in 2008 will be aware.”
John Moon, managing director of Bath-based Edison Ford, said: “There are always exceptions but I would not put a lot of my money in commercial property at the moment.
“Residential investments depend on the area you live. It is still a good investment as long as you look at it on a long-term basis and have assets with a sustainable yield.”