Investors take £800m out of property funds in wake of Brexit vote

INVESTORS fled from Britain’s property funds in the wake of the Brexit vote, taking £792m out of the sector in July.

A series of commercial property funds closed their doors to stop inves- tors taking their cash out, in fear that it would force them to sell off buildings at fire-sale prices.

The figures from the Investment Association underline the scale of the sell-off in the weeks after the vote, which were prompted by fears that the property market could be affected by the referendum. At the same time mortgage lending levels fell as buyers hesitated after the vote. Banks and building societies lent £21.4bn in July, according to the Council of Mortgage Lenders (CML), down from £21.5bn in June and £21.6bn in July of 2015.

Economists believe it is another sign of a slowing market. “While July’s yearon-year decline in gross mortgage lending was small, it is nevertheless notable that it was the first annual decline seen in more than a year,” said economist Howard Archer at IHS Global Insight. “Prospective house buyers are facing a more uncertain environ- ment following June’s Brexit vote. We suspect that house prices could ease back by around 3pc over the latter months of 2016 and there could well be a further 5pc drop in 2017.”

Lenders believe the August interest rate cut from the Bank of England combined with a new scheme to pump more money into the banks should cut costs for borrowers and gee up the housing market again.

However, CML chief economist Bob Pannell said it was not clear “how well the Bank of England’s actions will underpin borrower demand in a more adverse economic climate”.