Aberdeen Asset Management has restored normal terms on its £3billion UK property fund, allowing investors to exit at a small penalty.

The fund group has cut the dilution levy – the extra cost to investors to sell out - to 1.25per cent, the level it stood at prior to the EU referendum. At one stage Aberdeen had imposed a 19per cent dilution levy on the fund to reflect the ‘cost of liquidity’, the reduction in price for having to sell property assets quickly in order to raise cash for investors.

However a ‘fair value adjustment’ of seven per cent is still being applied to the property portfolio to reflect the valuer’s estimate of the impairment to the commercial property market stemming from the Brexit vote.

The price of the Aberdeen fund fell by 20per cent in the three weeks following the Brexit result but has since recovered by 14 per cent.

Laith Khalaf, senior analyst at Hargreaves Lansdown, commented: “This reduction in Aberdeen’s dilution levy hopefully shows things are getting back to some measure of normality in the UK property fund sector.

“However, the price movements of property funds over the past month have been quite breathtaking, particularly when you consider many investors will have chosen property as a safer alternative to the stock market.”

Mr Khalaf said the Kames, Legal & General and F&C property funds had performed almost as badly as Aberdeen’s.

“In the three weeks following the Brexit vote, some of the biggest property funds saw more dramatic price falls than any UK equity funds, which are typically deemed to be riskier. This reflects a fundamental weakness in the structure of open-ended property funds.”

Real estate investment trusts are closed-end funds and so escape selling pressure as their shares can be bought and sold at any time.

Mr Khalaf added: “While things appear to be calming down for property funds, dilution levies are entirely dependent on fund flows and can be applied without prior notice.”