Commercial property post-Brexit vote has taken a battering in terms of outflows and investor confidence, as people seek alternative ways to get exposure to property yield.
UK commercial property funds with daily dealing hit the headlines in July and August over measures put in place to prevent investors from redeeming their investments en masse.
For example, Aviva issued a temporary suspension on trading in its funds - which may last a further six to eight months, according to a statement from the fund house earlier this month.
Other firms, such as Legal & General Investment Management, imposed a financial penalty on investors seeking to withdraw their money, which has gradually been reducing in severity as liquidity is restored within the portfolios.
However, while UK commercial has taken a hit, other property markets have proved to be more robust.
According to Tom Dorey, head of global real estate product for Schroders, investors going global have been able to get a wider range of property investments while diversifying the risk.
He says: “Data suggests by blending direct domestic and global real estate securities, investors could achieve good risk adjusted returns.
The property market was sluggish in the final weeks before the Brexit vote, and then in the days after it, it was punchdrunk. Jonathan Hopper“In addition, global exposure avoids the macro risk associated with investments in a single country – the EU referendum being the latest example of this.”
Advisers have also been putting clients into UK property investment trusts.
Although many of these suffered a short-term share price drop immediately post-Brexit vote, the nature of a closed-ended fund means there has been no gating or liquidity issues to cause concern for investors.
According to data from the Association of Investment Companies, the average yield on a property investment trust is 4 per cent to 5 per cent currently.
In a poll conducted among advisers by FTA_Talking Point, 18 per cent of advisers claimed they were considering putting clients into a global commercial property portfolio.
A further 36 per cent said they would consider putting clients into a UK investment trust, while 28 per cent of advisers said they might recommend the UK residential property market.
Figure 1: Talking Point Poll on Property
The residential property market in the UK also took a hit post-vote to Brexit. According to the latest Office for National Statistic’s house price index, the volume of lending approvals for house purchases continued to fall in June 2016 - by 2.9 per cent, compared with the previous month.
It revealed monthly approvals are still below levels seen in the 10 months before the stamp duty changes in April 2016.
Jonathan Hopper, managing director of the buying agents Garrington Property Finders, commented: “The market was sluggish in the final weeks before the Brexit vote. In the days after it, it was punchdrunk.
“The pre-referendum market portrayed by this anachronistic data – in which steady price rises were underpinned by strong demand and limited supply – is gone.
“The vote for Brexit plunged the market into a ‘hard reset’ in which both buyers and sellers took a step back and considered their positions.
“With demand and supply softening simultaneously, the market has entered unknown territory. There’s intent but precious little clarity.”
He said it was “early days” but warned there were “all the signs that we are heading for a soft landing rather than a crash.
“Nearly two months on from the referendum result, it remains a case of Apocalypse Averted rather than Apocalypse Now.”
simoney.kyriakou@ft.com
Find out more
Read FTAdviser’s Guide to Property Investing Post-Brexit, which qualifies for 60 minutes’ worth of structured CPD
For more Talking Point news and analysis on the property market, follow @FTATalkingPoint
