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Property market fears as wealth fund slashes value of UK portfolio after Brexit

Published 17/08/2016

There are fresh fears over Britain's property market
There are fresh fears over Britain's property market

The world's biggest sovereign wealth fund has added to fears over Britain's property market as it slashed the value of its UK portfolio after the Brexit vote.

Norway's 7.18 trillion kroner (£669 billion) Global Government Pension Fund said it had cut the value of its UK property portfolio by 5% due to " increased volatility and uncertainty" in the sector.

Almost a quarter of its 221 billion Norwegian kroner (£21 billion) property portfolio is invested in the UK.

The fund said its external valuers could not update property valuations to take account of the Brexit vote impact due to a shortage of data.

It decided to adjust the valuation itself, but warned it was subject to "greater uncertainty than usual".

Seven property investment funds worth around £18 billion suspended trading in the wake of the EU referendum as investors headed for the exit amid concerns of a price crash in the sector.

Figures from the Investment Association earlier this month showed retail investors pulled £3.5 billion from UK managed investment funds in June.

Property funds took the brunt of the withdrawals, with £1.4 billion pulled out by worried investors.

Norway's fund, which holds the surplus wealth produced by Norwegian oil and gas income, said it returned 1.3% or 94 billion kroner (£8.8 billion) in the second quarter of 2016.

Fixed-income investments, such as bonds, performed the best, with 2.5% returns, while equity returned 0.7% and real estate returns fell 1.4%.

Trond Grande, chief executive of Norges Bank Investment Management, said: "After a period of relatively stable markets at the beginning of the quarter, the British decision to leave the EU sparked a sharp decline in Europe.

"Markets recovered relatively quickly, but with major variations between sectors."

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