UK property funds could be in for a "bumpy ride" in the months after the Brexit vote

Helen Cahill
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Hargreaves Lansdown said investors appear to have "shunned" UK growth and property funds in the run-up to the referendum (Source: Getty)

Investors took hundreds of millions of pounds out of the UK's property sector before the EU referendum, according to data released today by the Investment Association, prompting analysts to predict property funds may be in for a "bumpy ride".

In May there was a £360m net retail outflow from property funds, as UK investors looked to reduce their risks ahead of the EU referendum, turning to fixed income funds instead.

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Between 24 June and 30 June, Hargreaves Lansdown analysed flows into and out of fund sectors and concluded commercial property funds were "in the firing line because if the UK economy weakens, prices could suffer."

Hargreaves Lansdown said: "Some funds have already adjusted prices down in anticipation of price falls."

Property was the second worst performing sector in Hargreaves Lansdown's analysis, with UK companies coming in as the least popular sector.

Commercial real estate share prices were hit today after analysts warned risks in the sector have increased; housebuilders' share prices also suffered after disappointing construction figures were released.

Laith Khalaf, senior analyst at Hargreaves Lansdown, said: "Investors appear to have shunned UK growth and property funds in the run up to the referendum, and indeed beyond.

Read more: Construction output slumps to seven-year low on Brexit fears

"Property funds in particular could be in for a bumpy ride, given the price adjustments we have already seen as a result of the difficulty in valuing properties since the Brexit vote.

"If money continues to flow out of this sector, we could see more funds swinging their price down to reflect this, and possibly liquidating holdings in order to create a buffer against withdrawals."