Several property investment funds have suspended trading this week in attempts to stop nervous investors from pulling money out of the sector amid uncertainty following the Brexit vote, but could this be an opportunity for residential landlords and developers to beat the institutional big boys?

Big fund names such as Aviva, M&G and Aberdeen have had to take drastic action to protect their property funds this week as an influx of withdrawal requests by investors worried about the future of the property market led to trading being suspended and some only allowing people to take money out at discounted rates..

Many of these funds predominantly invest in commercial property so will be of little interest to a buy-to-let landlord or buy-to-let investor, but some also include an option to invest in the residential market.

There is also a risk of contagion and that the lack of investor confidence spreads into the residential market.

The pressure on property funds come at a time that the Government has been courting institutional investors to help with house building through the Build to Rent fund. Housing minister Brandon Lewis has also spoken about making the buy-to-let sector more professional and to move it towards institutional ownership and away from rogue landlords.

Many lettings agents and landlords have warned this could result in the smaller guys getting shut out.

But if funds need to sell assets to meet withdrawal requests and have less money to invest, can they really help the housing crisis, and could smaller players fill the gap?

Faisal Durrani, head of research for real estate consultancy Cluttons, said: “Fear appears to be getting the better of the retail funds, with four major funds suspending redemptions due to Brexit contagion concerns. On the surface, such moves appear to be underpinned by overall nervousness and a knee jerk reaction to the unknown impacts of the June 23 results.”

“The Build to Rent sector is still in its infancy and the availability of appropriate stock in the London market remains a fundamental issue and a driver of house price growth. There is no doubt that the events of the past 10 days is likely to stall the completion of schemes yet to come out of the ground, which may well raise the prospects for smaller developers to capitalise on the depth of demand for home ownership, which remains unwavering.

“Furthermore, with the pound tumbling to unprecedented lows against the US dollar, some international buyers are likely to find London property irresistible.”

Phil Jardine, a senior partner in the real estate team at Blake Morgan, says in many ways this is history repeating itself, he said: “Uncertainty tends to give rise to indecision and that precipitates a vicious negative spiralling decline reflected in markets, deals and jobs.

“In 2008 the fiscal crisis led to market meltdown. The house builders responded quickly by paring back on investment and development. This exacerbated the existential crisis in housing from which we have never recovered.

“The same post Brexit seems to be happening again. The mood music is not good. Apart from collapsing currency and stock values anecdotal evidence is seeping through that buyers are reluctant to commit, investors and developers are at best stepping back and institutional funds are withdrawing. Professionals are nervous.

“Worst of all however we are in political turmoil and nobody likes instability and the vacuum of leadership needs desperately to be filled.”

He says now is the time to be brave and to promote more building projects adding: “The Government should declare unequivocally their commitment to major stimulating projects that will cut across the negativity and revive optimism. As ever the market will respond and the private sector will step back in with confidence. HS2, Heathrow, city deals, mainline electrification, tidal lagoons.

“All projects that can be shovel-ready should be encouraged and brought forward not paralysed and put on the back burner.”

However, Jeannette Veldkamp, associate director of architects and designers Chapman Taylor, says the fund freezes could actually be good for the property market, she explains: ‘The freezes on property fund withdrawals might help to stabilise the market, and a stable market is needed for all property development.

“However with the housing need remaining unchanged, even if there is a dip in house prices, the Build to Rent market might prove a safe investment for institutional investors in years to come.”

Richard Berridge, of real estate firm Blackbird RE, says the commercial and residential markets have different drivers, and insists institutional investment in build to rent will grow, adding: “I don’t see that the commercial property fund ‘gating’ will have a direct impact on the institutional investment into the build to rent private rental sector.

“Clearly, any form of instability is not good for the market and if this negative momentum gains further impetus is will have more severe structural impact which will infect the property sector as a whole.

“Build to Rent is an exciting new prospect and one that not only attracts new investment, from home and abroad, but also represents a new paradigm in the way ‘customers’ are treated.  It will transform the rental market and it’s effects will be felt in the BTL market which will force smaller private landlords to compete.

“Since the smaller landlords are more agile, this could present them with an opportunity. Interestingly, it presents management companies with the opportunity to develop much more attractive packages enabling their clients to compete with the institutions.”