Investors in UK commercial property funds have lost almost 12 per cent over the last five years, according to housing investment and equity mortgage provider Castle Trust.

Castle Trust’s research analysed the returns received from 42 funds in the IMA Property Sector which found that the best return from the 14 funds focused on the UK over five years is +1 per cent while the worst is -26.6 per cent, with the sector averaging losses of 11.4 per cent.

The research also showed that 34 per cent of financial advisers expect increased activity in the UK residential property market during 2013 as the sector begins to recover.

Castle Trust is offering investors an alternative to these underperforming funds through its Income and Growth HouSAs, which provides access to the UK residential property market from £1,000.

The Income and Growth HouSAs outperforms the Halifax House Price Index for terms of three, five or ten years and pays an annual income of between 2 per cent and 3 per cent depending on the investment term.

The Castle Trust Growth HouSA offers a multiple of between 1.25 times and 1.7 times any increase on the Halifax House Price Index, and limits the loss to between 0.75 times and 0.3 times any decline.

Commenting on the news, Sean Oldfield, Chief Executive Officer, Castle Trust said: “Residential property has historically been a notoriously inaccessible asset class for investors, principally only for buy-to-let investors. Property investment for most people means investing in commercial property funds although many investors think they are gaining exposure to residential property through them.

“Property funds are not as liquid as they may seem. The reality is that investors try to sell when prices turn down, at which point they are locked in and then get the prices that can be achieved for the properties when allowed out. The idea that an open-ended fund can make illiquid assets liquid is misleading, as anyone who tried to sell a holding in a commercial property fund in 2008 will be aware.”