Property fund prices have not become a bad investment and investors should be cautious before abandoning their property investments, according to Dennehy Weller & Co.
The firm has said that recent changes in fund prices, such a Standard Life’s 6.7% reduction in its property fund, are simply the result of more of the fund being redeemed than is being purchased.
There has been no change in the underlying asset values.
Dennehy Weller’s managing director, Brian Dennehy, says when fund cashflows are negative, they are valued on a bid basis, so unit prices are based on the underlying asset price less the cost of selling.
Dennehy says: “This sort of adjustment is fairly common, but it hardly gets noticed on equity funds as the costs of buying and selling the underlying assets are not great.
“This is not a penalty, simply a prudent way to run the fund. Underlying asset prices have not gone down, and the experts in the field remain positive on the outlook”.
Recent reports from market experts Jones Lang Lasalle and Colliers have shown that the key London market has a positive outlook.
The reports claim that demand is at its highest level since September 2006, with supply at the lowest level since September 2001.
Over the last ten years, property rental incomes have grown above the rate of inflation and City vacancy levels have dropped to 6.7%, according to the report.
Dennehy says that recent press reports have suggested that investors are worried about the property market but claims that there is little evidence of this and fund redemptions have been on a limited scale.
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