UK property funds recorded their strongest month for over a year in August, as net outflows slowed to a near standstill, according to data from Calastone.

Net outflows for the month totalled £10m, the lowest figure since May 2024, and the second-best result since late November 2022.

The improved picture in August reflected an increase in buying and a moderation in selling, Calastone reported, which suggests investors are more comfortable with valuations and the income profile offered by property funds.

Edward Glyn, head of global markets at Calastone, said: “For almost all of the past few years, UK property funds have been under heavy redemption pressure as investors reacted to higher interest rates, falling asset values, lower footfall figures and concerns over the long-term structural viability of open-ended property funds.

“August’s figures suggest sentiment may be beginning to stabilise. The past three months have been three of the least bad for the sector in a long time. Property funds still face structural challenges, but investors appear increasingly willing to hold for income and to look through near-term uncertainty. Are we seeing the start of a shift from disillusionment to determination?”

Meanwhile, equity funds suffered £1.31bn of outflows in August in the worst stint of selling since summer 2022, following outflows in July of £1.13bn, Calastone found.

Glyn highlighted that equity fund investors are wary, fearing a correction around the corner. “August was the third consecutive month of outflows, an unusually long stretch, as investors top-slice holdings to hang on to strong capital gains this year and park the proceeds in the money markets to wait out the storm they fear. Whether their caution is justified remains to be seen.”