Property outflows

By DAILY MAIL REPORTER
Updated: 11:54 EST, 16 April 2008

We examine the funds that investors are turning their back on after a great five year run.

What's happened?

Investors have been pulling funds out of unit trusts set up to invest in commercial property - shops, factories, offices - after prices fell and the funds' performance worsened. Some are down 5% over a year. Trusts investing in property shares suffered losses of 10% to 20%. Thousands who poured some £2bn into these funds in early 2006.

What went wrong?

Commercial property had a great five year run. But when interest rates rose, business property values went into reverse.

Is it worse than normal?

In one respect. When savers pull money out of unit trusts, the trusts are put under pressure to sell assets. If these assets are shares, they can sell easily. But it is not so easy to unload a £100m office block quickly.

Time to rush for the exit?

Many have been doing just that.

But some funds, including Norwich Union and the Scottish Widows Property Fund, made it difficult to sell by raising exit fees, cutting the sale price. This only happens on days when more people sell than buy and you might get a better deal by waiting for prices to settle. But if selling continues, prices might fall further.

Will it upset house prices?

There is no direct link, but high interest rates eventually take their toll of all types of property.