The City regulator is reportedly demanding daily updates from property funds as investors pull their money amid fears over the impact of Brexit.
According to the Financial Times, the Financial Conduct Authority (FCA) stepped up its monitoring of property fund flows to a daily basis late last year.
Retail investors pulled a net £336 million from funds in the Investment Association's UK Direct Property sector in the last three months of 2018, figures from the fund manager trade body show.
Outflows accelerated in December, when £228 million was withdrawn amid falling stock markets and uncertainty over Brexit, as the government was forced to abandon a parliamentary vote on its EU deal.
'The memories of the property fund shutdowns amid mass outflows just after the Brexit referendum are still fresh in investors' minds, and the outflows have already sparked worries about just how liquid some property funds are,' said Laura Suter, personal finance analyst at AJ Bell.
Investors shouldered a 6% hit as both groups moved the funds' pricing from an 'offer' to a 'bid' basis to deal with mounting withdrawals.
Moving fund pricing to a 'bid' basis is a common tactic employed by funds experiencing redemptions, particularly those investing in illiquid assets like property.
It lowers the price paid by new investors, and received by those leaving, as the fund value is calculated based on the assets less the estimated costs of selling them. This contrasts with fund valuation on an 'offer basis', calculated as the assets plus the estimated costs of buying more assets.
Repricing in this way is a less severe tactic than the suspensions, prohibiting investors from leaving the fund, that can be employed at times of severe stress, such as following the Brexit vote in the summer of 2016.
Then, outflows from UK property funds totalled £1.5 billion in June alone, although an exact comparison with the latest figures is not possible as the Investment Association UK Direct Property sector was only launched in September.
The FCA is planning to toughen its rules for property funds following the fallout from the Brexit vote, which provided the latest example of the limitations of investing in property using open-ended funds.
Their structure means they have to cancel shares and sell assets when they suffer redemptions, which can prove problematic where a fund is invested in a relatively illiquid asset like property.
Closed-ended funds like investment trusts, which have a fixed number of shares, do not suffer from this issue. However, they are not immune from selling pressure as many UK commercial property trusts have seen their shares fall further below their underlying net asset value (NAV).
For example, the average discount in the sector has widened to 4% from zero in the past year. That masks a wide range though with some trusts, such as Real Estate Investors (RLE), trading as much as 25% below NAV, but with the most highly rated, Custodian (CREI), standing at a 6% premium above NAV.