Yahoo Finance Aviva Suspends Dealing In UK Property Fund
Aviva Investors has suspended its £1.8bn UK property trust as the sector faces "extraordinary market circumstances" in the wake of the EU referendum result.
The move by the fund arm of insurance giant Aviva (Other OTC: AIVAF - news) comes a day after Standard Life Investments suspended its £2.9bn UK real estate fund.
That followed a rapid increase in investors trying to liquidate – cash in – their holdings. One expert said it was only a matter of time before other funds follow suit.
A spokesman for Aviva Investors said: "The extraordinary market circumstances, which are impacting the wider industry, have resulted in a lack of immediate liquidity in the Aviva Investors Property Trust.
"Consequently, we have acted to safeguard the interests of all our investors by suspending dealing in the fund with immediate effect."
The announcement came as listed real estate funds fell sharply in Tuesday trading in the wake of the Standard Life (LSE: SL.L - news) announcement.
Meanwhile, the Bank of England's Financial Stability Report pointed to the risks facing the commercial property market after the Brexit vote.
Governor Mark Carney said foreign flows of capital into the sector were down 50% in the first quarter of 2016 while transaction volumes had fallen further during the second quarter and share prices of real estate investment trusts were down sharply after the referendum.
Laith Khalaf, senior analyst at Hargreaves Lansdown (LSE: HL.L - news) stockbrokers, said: "The dominos are starting to fall in the UK commercial property market, as yet another fund locks its doors on the back of outflows precipitated by the Brexit vote.
"It's probably only a matter of time before we see other funds follow suit.
"The problem these funds face is that it takes time to sell commercial property to meet withdrawals, and the cash buffers built up by the managers have been eroded by investors heading for the door, both in the run up to the EU referendum, and in the aftermath."
In a separate part of the property market, house builders have seen sharp share price falls in the wake of the poll result.
However Jeff Fairburn, the chief executive of Charles Church owner Persimmon (Other OTC: PSMMF - news) said in a trading update that the UK housing market had steadied after some deal cancellations following the referendum.
"There is some uncertainty among people about what’s happened and that’s natural, but we’ve not seen that translate to any significant change in our trading," he said.
