UK property fund outflows rose to £1.16 billion in 2024, according to the latest Fund Flow Index from Calastone, the global funds network, the sixth successive year that investors have reduced their holdings.
December marked the 24th consecutive month of net selling, as £153 million left the sector, Calastone said.
The increased outflow was driven by reduced buying activity, rather than rising demand to exit the sector, with buy orders of £1.77 billion less than half their 2015-22 average. They fell 16.2% year-on-year in 2024, while sell orders fell just 6.5% in 2024 to £2.92 billion.
Weak demand for the property sector came as equity fund inflows surged to a record £27.2 billion in 2024, driven in particular by global and North American funds.
Edward Glyn, head of global markets at Calastone said the "red-hot US" stock market had dominated in 2024 as investors targeted fund sectors with the biggest exposure.
"For the UK property sector, attracting buyers has become increasingly difficult. The choice of funds available has fallen, restrictions on liquidity deter those who might want access to their cash and the macroeconomic picture is challenging – high interest rates in particular reduce the attractiveness of property. Unfortunately, 2025 offers little in the way of hope for inflows into property funds.”
In December, the UK's largest wealth manager St James's Place announced it would close all three of its property funds, effectively hoisting a for-sale sign over £1.84 billion of commercial property, the latest big name to close.
Announcing the proposed wind-down, the group blamed the downturn property markets have seen since the pandemic began, which it termed “a challenging period for the sector as a whole”, as well as the expected regulatory changes to open-ended property funds being explored by the Financial Conduct Authority and the Bank of England.
Negative sentiment towards open-ended property funds has built in recent years as various economic shocks including the Brexit vote and the COVID-19 pandemic have highlighted the so-called liquidity mismatch between real estate, which takes time to sell, particularly in difficult market conditions, and regular dealing fund investments.