Storm clouds have been overhanging the UK property market since June's Brexit vote, but the early indications point to fears of a hard landing being misplaced.
As a result, a handful of commercial property funds have moved to lift suspensions that had been put in place to halt the outflows and avoid firesales of assets, which would have negatively impacted investors who remained.
Investors rushed to cash in their chips amid concerns the Brexit vote would have a negative impact on both commercial and residential property prices, particularly in London.
Other funds took a different tack, marking down the value of the properties they own by 10 per cent or more. This amounted effectively to a penalty to deter investors from selling.
HAVE PROPERTY FEARS BEEN OVERSTATED?
Over the past couple of weeks some of the big property fund giants, including Legal & General, Columbia Threadneedle and Canada Life, have moved to remove exit penalties and suspensions completely. Aberdeen has also eased restrictions for sellers.
Some funds have managed to claw back some of their post-Brexit losses by changing their prices after the vote. F&C UK Property stands out, up nearly 5 per cent over the past month after the manager increased the fund price for both buyers and sellers by 5 per cent.
Aviva, meanwhile, has put investors on notice that its UK Property trust is likely to remain suspended until the first quarter of 2017.
Have property fears been overstated? Marcus Phayre-Mudge, manager of TR Property investment trust - a Money Observer Rated Fund that mainly invests in shares of property companies and has nearly 40 per cent of its money in the UK - says the anecdotal evidence suggests that since Brexit, the value of 'good quality assets' outside of London has depreciated by 'less than 10 per cent'.
However, he adds, the impact so far on central London is the 'million dollar question'.
Phayre-Mudge insists it is not 2008 all over again. He says that while Britain's economy will slow, the shortage of housing supply will support both rental growth and property prices.
'Property is pro-cyclical, so in theory slowing growth is a negative. But the difference this time around is that a construction boom has not been taking place. Therefore, property is not in a normal slowdown compounded by oversupply.'
LOWER LEVERAGE LEVELS
Rowan Dartington's Guy Stephens agrees. He adds: 'The most pessimistic forecast of the economic hit to the UK has been the possibility of a shallow technical recession of two negative quarters from Mark Carney.
'Does this really translate into businesses shutting up shop and vacating premises en masse as we navigate Brexit trade deals?'
There is another big difference compared to the crisis in 2008, in that leverage levels are much lower. Therefore in the event of a sustained downturn there won't be massive bank loans to repay.
Despite the predicted tougher times ahead, it is worth pointing out that the buildings owned by the commercial property funds - particularly the bigger players with £1 billion or more in assets - tend to have well-known tenants, such as supermarket stores including Tesco and Waitrose.
So even if the values of the buildings decline, the rent should continue to be paid.
|Fund name||Open/closed?||Max fall since Brexit (%)||Current position since Brexit (%)*||Yield (%)|
|F&C UK Property||Open||-12.3||-3.8||3.5|
|Henderson UK Property||Closed||-10.2||-9.3||3.2|
|Kames Property Income||Open||-13.9||-10.7||4.8|
|L&G UK Property||Open||-13.6||-3.8||3.9|
|M&G Property Portfolio||Closed||-14.2||-12.6||3.4|
|Source: Fundexpert.co.uk. *As at 8 September 2016.|
The income on offer, with commercial property funds yielding 3-5 per cent, has over the past couple of years drawn investors to the asset class. Many have viewed commercial property as a 'bond substitute', on the basis that fixed income as a whole arguably looks overvalued.
But David Coombs, head of multi-asset investments at Rathbones, has warned against investors rushing to buy back into commercial property. He adds that the longer-term Brexit impact on the asset class will take time to play out, so it will therefore pay to keep powder dry as opposed to taking a speculative bet.
Coombs' view is that 'optimism is being overstated'. He explains: 'We are in a period where there is nothing to analyse. Yes, the world has not stopped, but we haven't even had Article 50 yet.'
He adds that investors who buy back into the sector risk catching a falling knife and will be exposing themselves to a greater level of risk. 'To meet redemption requests, funds are effectively forced to sell their most liquid positions - which tend to be the better-quality assets that are held,' says Coombs.
'For income investors attracted to the yields I would say that it is dangerous to buy at this uncertain time. Commercial property should be viewed as as risky as high-yield bonds, due to liquidity being poor, as well as the fact that the asset class is sensitive to the performance of the economy.'
The housebuilders, whose shares were hammered in the first couple of trading sessions following the Brexit vote, insist it has so far largely been business as usual.
Persimmon, the biggest UK housebuilder, told the market last month that 'customer demand remains encouraging and we anticipate a good autumn sales season'.