Property funds have suffered a 12th consecutive month of outflows, according to the latest fund flow index from funds network Calastone.
Investors sold a net £66m of their holdings in July, marking the second largest outflow of the year.
Researchers at Calastone said the sector is dealing with a dearth of buyers, rather than an increasing rush for exits from sellers.
The value of sell orders was below the average for the year. However, the value of buy orders has dropped to £28m, the lowest level recorded since September 2020, when many funds were gated in the first few months of the pandemic.
Property funds have shed just over £5.5bn of capital since Calastone’s index began in 2015, roughly the same amount as money markets have gained over the same period (£5.9bn).
Edward Glyn, head of global markets at Calastone, said: “Escalating interest rates are punishing the property sector in three ways. They are squeezing capital values, creating economic uncertainty, which hits tenant demand, and they mean bond and money markets now offer viable alternatives to those who need an income on their investments.
“Property does offer the benefits of diversification, but until greater clarity emerges over the trajectory of both inflation and the wider economy, investors seem content to avoid the sector.”
Calastone said outflows are finding their way into interest-bearing funds instead. Fixed-income funds saw £347m of inflows in July.
Money market funds remained in favour too, enjoying £403m of inflows, with steady buying throughout the month.
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