£2.9billion property fund freezes savers’ cash over crash fears
A GIANT property fund has blocked investors withdrawing their cash amid fears of a crash.
In echoes of the banking crisis, the £2.9billion Standard Life real estate fund has suspended all trading for a minimum of 28 days – effectively trapping savers who want to withdraw their money.
Meanwhile, some rivals have knocked millions off their fund values to deter investors from cashing in investments.
The move by Standard Life comes as concerns grow that Britain may be heading for a sharp fall in property prices. Bleak figures showed builders have suffered their worst month for seven years amid uncertainty before the referendum.
It has also sparked fears that other property funds may follow suit.
Latest figures from the Investment Association show savers pulled £360million out of property funds in May as uncertainty around the referendum increased.
Since the Brexit vote the commercial property market has already been hit, with a major Singapore bank withdrawing loans. Many now fear a further slowdown.
A Standard Life spokesman said: ‘The decision to suspend all trading in the fund was taken following an increase in redemption requests. The suspension was requested to protect the interests of all investors in the fund and to avoid compromising investment returns. The suspension will end as soon as practicable and will be formally reviewed at least every 28 days.’
research group Markit said its index of construction sector activity – where 50 is the cut-off between growth and decline – dropped from 51.2 in May to just 46 in June. That was the weakest score since June 2009 and the first time it has been below the 50 threshold since April 2013.
Markit warned of ‘a steep decline in residential building’ as well as a reduction in commercial work before the Brexit vote.
Dr Howard Archer, chief UK economist at IHS Global Insight, said: ‘This is an absolutely dire survey that fuels serious concern over the construction sector.’
The figures sent property shares tumbling, with developers British Land and rival Land Securities down, as were builders Crest Nicholson, Bovis Homes, Persimmon, Barratt and Berkeley.
Today, City investors will look to the results of housebuilder Persimmon for further signs of what is happening in the property market. Property fund managers hold more than £10billion of savers’ money in investments.
The last time savers were locked into property funds was in the financial crisis, when thousands were unable to get to their money while the fund value plunged.
Property funds are allowed to close their doors when too many savers try to get their money out at once.
This is because they own actual property and cannot sell assets – such as office blocks and car parks – quickly enough at good enough prices to meet redemptions. The breathing space is intended to allow them to sell assets for a fair price.
Ben Yearsley, director of investment service Wealth Club, said: ‘People are nervous about the property market and whether all these expensive new buildings in the City are going to sit empty.’