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Published on: Investment

Property Investors should invest in property not funds

A couple of weeks ago the property market was heading south faster than a Russian sprinter (improbably quickly). Open-ended property funds devalued their commercial assets by up to 17% to meet investor’s calls for redemption. The media reported the horrors with gusto. On one day the Times had four separate articles analysing the “crisis”.

Today the RICS reported a sharp drop in confidence and investor demand for commercial real estate following the Brexit vote.  40% of surveyors believed that a downturn in the market had begun. Really??

Investors in open-ended property funds probably know very little about property.  Their exposure is more than likely driven by “balancing” managed portfolios without any appreciation of the asset class in which they are investing. Property is expensive to buy and sell. It is valued at long intervals and it is a completely inappropriate basis for open-ended trading. These funds were hammered in the last recession and it is difficult to believe that people still put their money in them.

However they do. At least one fund has sold prize assets at discounts of up to 15% to meet the cash call. The buyers were generally from overseas exploiting sterling’s devaluation. They have made a killing.

Fortunately our clients know property and they are enjoying the sudden availability of high quality investments.  They understand that the “crisis” is the result of those  finance guru’s in the Square Mile up to their old tricks again rather than any shift in property fundamentals.

They are buying

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