But, six years on from the financial crisis, the market and, especially sentiment around it has changed considerably.
Property prices jumped dramatically in the interim, particularly in the US and the UK, in large part driven by demand by investors for yield-producing assets.
Most recently this was demonstrated by data from Co Funds which showed that Property has leapt up the net sales leader-board from fourth to first place, the first time since 2010.
The firm said, that throughout 2014, investors’ increased appetite for bricks and mortar has seen the top selling property fund – Henderson’s UK Property – achieve over £106 million retail net sales on the platform.
Andy Coleman, Cofunds Director of Distribution added: “The rise of the Property sector in 2014 is not surprising. With the UK’s property market booming, and the constant demand for commercial property in London and other large UK cities, investors are keen to invest in property funds in order to reap some of the rewards.”
But, while the demand for yield continues unabated, so the stock of assets providing it at a reasonable level of risk has continued to fall. This is particularly evident within bond markets where, many yields are at historic lows. This has provided fertile soil for fund houses to create new products, some of which are multi-asset funds with a property element, while others seek to invest solely in the property space but, seek to offer something different from a traditional property exposure.
Tuesday saw two new property funds launch to UK investors, the first a UK OEIC version of F&C’s Guernsey-domiciled Property Growth and Income Fund that has been running since 2005, and the second, a new property equity fund from Neuberger Berman.
According to Rob Thorpe, head of UK sales for retail and wholesale at F&C, the firm’s decision to bring the fund onshore was driven by the continued “fervent” appetite for income from advisers and investors.
“We believe there is a market for the fund, which is currently yielding 4.9 per cent and gives access to the benefits of both bricks and mortar and real estate equities,” he said.
The Neuberger Berman fund provides investors access to what it calls the “growing global real estate securities market”, which it says has more than tripled since 1997 because it offers investors an appealing mix of “historically competitive total returns and low correlation to fixed income securities”.
According to Tim Cockerill, investment director at Rowan Dartington, while the market is already well into the property revaluation cycle, the asset class still has some room to run and, he says, the firm is overweight the asset class in those portfolios that are exposed to property.
“Property returns tend to come in the later parts of the economic cycle, because in the earlier parts firms and individuals are reluctant to commit to invest in expansion. It is only when they fully buy into the recovery, that they start investing in property,” he said.
Adding: “We view investment trusts as a good measure of sentiment toward the sector. The fact that most property investment trusts are now back at premiums to net asset value is a good indication of where sentiment is – people are willing to pay over the odds to invest in the asset class.”
He adds, it is not surprising that new funds are coming to market because at the moment: “property is a good story and one that can be demonstrated.”
