AREF: UK property fund outflows halved in Q1

Net capital outflows from British property funds slowed in the first three months of 2008 to £500mln (EUR 634mln), down 60% on the previous quarter according to new research released on Wednesday by the Association of Real Estate Funds (AREF).

The report also found that investor confidence in the sector is showing strong signs of recovery as despite deteriorating credit conditions, £330mln of new money was raised during Q1. This follows the £400mln new money raised in the final quarter of 2007. The research also noted that stabilisation of falling returns in the pooled property funds (PPF's) sector accompanied the marked slowdown in redemptions.

In spite of difficult market conditions the AREF's IQ survey shows that yields have remained stable, averaging 3.7%. The survey also highlighted the long term resilience of PPFs which, over the decade to March 2008, delivered an annualised return of 11.4%, almost double that achieved by gilts (5.9%), and well ahead of both real estate equities 7.1% and the 3.5% return produced by equities.

According to the survey of 63 funds with a combined net asset value of £35bn, almost £3.5bn pounds was withdrawn from AREF-registered British property funds since the middle of 2007.