Millions of British investors are piling into property to try to shield their money from unsteady markets, despite it being little more than a year since a string of property funds had to suspend trading after the Brexit vote.
According to research from peer-to-peer lending platform Kuflink, conducted in the first week of May, nearly a third of UK investors are planning to direct their attention to traditional asset classes such as property over the course of the financial year.
The peer-to-peer provider estimated around nine million investors turn to property investments because of its perceived strength in times of uncertainty.
This comes after some of the largest property funds in the UK temporarily stopped investors from cashing-in their money last summer when thousands of people panicked after the European Union referendum and pulled out of the asset class.
The Financial Conduct Authority is in the process of establishing whether it could impose more red tape around illiquid open-ended funds to try to prevent this issue from reoccurring.
But with the general election on the horizon, British investors have been increasingly buying into property, which they see as a safe asset class.
Unfortunately the average private investor never seems to learn from history.Philip MiltonTarlochan Garcha, chief executive of Kuflink, said: “The EU referendum has set in motion a number of political and economic shifts that are inevitably impacting the way the UK’s investors think and act."
This research, he said, demonstrates the faith people place in property as an investment vehicle, with a huge number of investors gravitating towards this asset amid the uncertainty caused by Brexit and the approaching general election.
Mr Garcha said he had “great faith” in the resilience and strength of the UK property market.
This also comes despite figures showing house price growth in the UK had slowed, with one expert saying the snap election had injected an "unwelcome dose of uncertainty into an already fragile market".
Last year, an economist told FTAdviser that investors should be wary of the UK property market, warning the real estate bubble could burst as early as this year.
The Kuflink survey, which questioned 1,100 investors across the UK, also found that Brexit and the snap election have impacted UK investment decisions more than any other political event in their lifetime.
Almost 40 per cent of investors are taking a more cautious approach by favouring ‘safe-haven’ asset classes, while 38 per cent are waiting until after the 8 June election to make any further investment decisions.
However, investment experts have questioned whether investing hefty amounts of money in property is wise in the current climate.
Darius McDermott, managing director of Chelsea Financial Services, said one of the benefits of investing in property is it is not correlated to equities and bonds, meaning it is good from a diversification perspective.
However, he said there is a "substantial cloud" over the UK in the shape of Brexit, and predicted the economy will slow as the UK unwinds from the European Union.
The Chelsea boss also said many investors are still scarred by the impact of the property fund crisis last year.
"I think commercial property is a good long-term asset class if you haven't already sold out of it, but it had a very good run in the years before Brexit; we watch property very closely and we are personally not investing at high levels."
Commenting on the residential market, Philip Milton, managing director of advice firm Philip J Milton & Company, said he has taken a bearish position on residential property prices for "quite some time".
"My fears have not abated and indeed the higher prices go, the more concerned I am," he said, adding there could be an "almighty collapse" around the corner, while investors perceive there is no risk.
He warned this could be the most destabilising thing the UK faces, and would be far worse than any uncertainty form the Brexit negotiations.
"Unfortunately the average private investor never seems to learn from history – the asset class is a great investment but not when the prices are so inflated and the probability for implosion so high; alternative opportunities far more compelling anyway."
Mr Milton added: "The average investor thinks that borrowing to invest in houses is also without risk, which is a very disturbing conclusion and predicated sadly on the fact that no-one under the age of about fifty knows what a bear market in residential property is like."
katherine.denham@ft.com
