Aberdeen latest to cut property fund valuations post-Brexit

House-Property-Ladder-Rising-Prices-640.jpgAberdeen Asset Management has become the latest manager to downgrade prices on its property fund following the UK’s vote to Brexit, following Standard Life Investments and Henderson Global Investors.

Aberdeen has imposed a 3.75 per cent fair value adjustment on the £3.4bn Aberdeen UK Property Paif and feeder fund, amid worries about lower property valuations.

The asset manager is the latest to cut the value of its property fund, with SLI imposing a 5 per cent adjustment on its £2.7bn UK Real Estate fund while Henderson has added a 4 per cent adjustment to the £4bn UK Property fund following the vote to Brexit.

Aberdeen says that it expects property valuations to fall following the UK’s decision to leave the EU.

“Following the UK referendum there has been speculation surrounding the property market and the ease with which individual properties could be bought and sold at their current valuations,” says a statement from Aberdeen.

“Whilst the management team of the fund has not experienced any difficulties so far there is evidence of buyers avoiding current market uncertainty and we believe that properties coming to market now are unlikely to achieve recent valuations in terms of sale price – at least for the time being.”

Ahead of the EU referendum the Aberdeen team sold the fund’s 5 per cent allocation in listed property companies, anticipating a fall in share prices after the vote. The fund also has more than 20 per cent in cash, in a bid to reduce volatility on the fund.

An SLI spokesperson said: “The outcome of the UK referendum has resulted in increased uncertainty in valuations for the UK commercial property market and we believe that valuations have been negatively impacted.

“In order to reflect the fluid nature of the current market environment, Standard Life Investments has also moved from normal monthly valuations to weekly valuations for all of our open-ended UK commercial real estate funds.”

Brexit is likely to hit property valuations and liquidity, says Chris Urwin, head of global research at Aviva Investors. “We expect to see prolonged illiquidity in real estate markets pending renegotiation of international agreements [and] transaction activity to be low.”

Recent data from online platform rplan shows that investors are pulling out of property funds following the referendum. Of the trades on the platform over the weekend 76 per cent of withdrawals were from property funds.

Stuart Dyer, rplan chief investment officer, says: “UK investors’ fears about the prospects for property are striking. Clearly, there are worries that property would be affected by a possible economic downturn and the withdrawal of foreign investors.

“But investors should not be too hasty in making decisions about the consequences of Brexit. Property and other asset classes have their roles to play in a balanced portfolio invested for the long term. Diversification helps to reduce both the impact of volatility and risk.”