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UK Asset Managers Freeze Withdrawals On Sinking Property Values

Published 07/06/2016, 02:58 AM
Updated 07/09/2023, 06:31 AM

In the wake of Brexit, investor fears on the value of property, especially in London, have surfaced.

A flurry of redemptions from property funds is so great that three UK fund managers froze redemptions. And the British pound is at 100-year lows.

British Pound

100-Year British Pound Chart

Three Funds Freeze Withdrawals

Bloomberg reports Brexit Erodes U.K. Economic Pillars as Property Investors Flee:

Three asset managers froze withdrawals from real-estate funds following a flurry of selling and the pound plunged to a 31-year low less than two weeks since the nation backed quitting the European Union. Rushing to fill the political vacuum, Bank of England Governor Mark Carney signaled easier monetary policy and urged prudence on households.

“I am expecting quite a sharp reduction in investment spending, a sharp hit to the commercial property market, probably a check to consumer spending, all of which could push us towards zero or below growth,” John Gieve, a former deputy governor of the Bank of England and veteran of the last crisis, told Bloomberg Television.

Reacting to a rush by investors to redeem their money, M&G Investments and Aviva Investors (LON:AV) followed Standard Life Investments (LON:SL) in suspending trading in commercial-property funds that together total 9.1 billion pounds ($11.9 billion dollars). Industry analysts have warned that London office values could fall by as much as 20 percent within three years of the U.K. leaving the EU.

20% Correction a Bad Thing?

Property values in London are so ridiculous, one has to ask: Are falling real estate prices a bad thing or a good thing?

Is 20% just a start of what’s to come? Is Brexit to blame or simply a catalyst for an eventuality already baked into the cake?

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