UK investors withdrew £19.6m from property funds in February, the sector's smallest outflow since last August, according to the latest Fund Flow Index from global funds network Calastone.

UK investors withdrew £19.6m from property funds in February, with outflows slowed by as a sharp decline in sell orders slowed, which were two fifths lower than the two-year monthly average, while buying activity held relatively firm.

In the month prior, investors withdrew £51m, below the £60m average outflows for the past 12 months.

Edward Glyn, head of global markets at Calastone, said conditions for commercial property funds are stabilising as interest rate expectations settle and valuation adjustments work through the system.

He added: “REITs, the listed fund cousin of the open-ended ones we track, have seen share prices rebound 15% in the last six months, narrowing discounts to NAV [net asset value]. Yields now look more compelling relative to bonds, while transaction activity is picking up.

“That combination is restoring confidence and though the structural issues that face open-ended property funds persist, this reduced outflow shows that investors are more prepared to leave their holdings alone than reach for the sell button.”