The public love of property investment has returned in force after funds in the sector outsold the nearest rival asset class by about 50 per cent at the end of last year, prompting some formerly high-profile groups to make their first acquisitions since the crash.
Property funds were the highest-selling sector for the second consecutive month in November, according to the Investment Management Association, with £417 million in net retail sales, the highest level achieved since the last days of the previous property boom in March 2007.
That is in contrast to a year ago when property ranked 28th out of the 34 IMA sectors, having lost £35 million on a net basis. Many funds were forced to sell properties cheaply to pay escaping investors.
The influx of money from high street investors has reactivated some of the best-known funds.
New Star, one of the retail investors' favourite UK property funds during the boom years, will this week reveal its first acquisition in more than two years.
The fund, which has been whittled down from more than £2 billion to just £650 million, has bought a 70,000 sq ft department store in Chichester let to House of Fraser for £10.5 million, reflecting a yield of about 7 per cent.
Aviva Investors Property Trust, the biggest rival to the New Star fund, has also made its first acquisition in more than two years, with a retail and office block in Chester bought before Christmas for £20 million, a 6.4 per cent initial yield.
But there are question marks over the sustainability of the recovery. Some investors are sceptical about the timing of the retail funds, which were among the most active buyers of property at the peak.
However, funds such as New Star, now managed by Henderson Global Investors, stress that they are targeting defensive properties.
Philip Nell, manager of the Aviva Investors Property Trust, said that his fund has seen net inflows of capital since the summer.
Most of the property funds that were forced to suspend redemptions – refunding money back to investors - have now reopened, with the exception of the New Star international fund, which is expected to open soon pending the sale of a property to restore additional liquidity.
