Property funds attracted £99m from investors in September, the second consecutive month of inflows and the strongest inflow since June 2022, according to the latest Fund Flow Index from Calastone.
The improvement, which follows years of persistent selling out of the sector, was driven by rising purchases and falling redemptions. Over the past six years, property funds have only seen inflows in nine individual months.
Edward Glyn, head of global markets at Calastone, said: “Two months of inflows do not undo years of selling, but there are increasingly clear signs that investors are taking another look at property. It’s also a healthy sign that the net inflows came from both less selling and more buying. Commercial property has been through a painful repricing as higher rates pushed up financing costs and forced values lower. After several years of adjustment, the picture looks different. Yields are higher, valuations have reset and rental income remains relatively resilient.
“Capital is also starting to return to real estate more broadly. Transaction volumes remain subdued, but improving activity is helping establish clearer market prices and giving investors greater confidence that values may be stabilising. That is notable because the interest-rate backdrop remains challenging. Government bond yields and borrowing costs are still high, so property faces much tougher competition for capital. Even so, renewed inflows suggest some investors believe much of the bad news is now reflected in prices.
“It’s too soon to declare a lasting reversal after just two months. Property remains rate-sensitive and the economic and financing backdrop is uncertain. But September is the clearest indication for some time that the relentless exodus from the sector may finally be losing momentum.”
