Retail investors withdrew €10.2 billion ($11.1 billion) from euro-denominated real estate funds in the year through April, reflecting concerns over falling valuations and potential liquidity pressures, according to data compiled by Morningstar.
This shift contrasts sharply with the previous 12 months, when these funds saw inflows of nearly €2 billion. As of last month, total net assets held by open-ended and exchange-traded property products dropped below €163 billion, the lowest since August 2019.
The data was released shortly after the European Central Bank (ECB) warned that declining commercial property values could challenge real estate investment funds. The ECB’s financial stability review indicated that valuation losses might not be fully reflected yet, which could strain the funds’ liquidity if redemption requests increase.
Such a situation could compel funds to sell assets to meet withdrawal demands, reminiscent of the post-Brexit vote period when many UK property funds suspended trading and sold assets quickly due to a surge in investor redemptions.
Currently, property fund managers often require significantly longer notice periods before investors can redeem their money.
The ECB also highlighted that commercial property prices might decline further due to reduced demand for office spaces, potentially affecting the asset quality of some lenders as sector losses rise.
Sterling real estate funds experienced renewed withdrawals in April, following a brief inflow in March. Investors pulled nearly £55 million from these funds last month, bringing total redemptions for the year to over £927 million.
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By Proptechbuzz
By Ravi Kumar