Aviva Investors has put a six-month freeze on redemptions from its £2.9bn Norwich Union Unit-Linked Property Fund to halt investor withdrawals as the UK property market continues to decline.

The insurer said it has taken the measure to prevent large amounts of investors withdrawing cash from its biggest fund which could lead to forced sales of property assets at firesale prices to create liquidity.

Commercial property prices have fallen more than 30% in the past year and there is little available debt to finance buyers which has led to a dearth of investment activity.

A freeze on redemptions will allow the fund manager more time to generate cash and manage any ongoing and planned sales processes in a more orderly fashion.

The fund has 225,000 investors and is only available to Norwich Union life and pensions customers. It has declined in value from a peak of nearly £5bn.

David Barral, marketing director at Norwich Union said: ‘We recognise that this will be disappointing for some investors who may want immediate access to their capital.

'However this action is in the best interest of investors…protecting the long-term value of their investment and avoiding having to sell properties below their market value. Despite the current short-term difficulties, we are confident of the long-term prospects for commercial property.

'It remains and important part of a balanced, long-term investment portfolio.’

It is not the first fund where Aviva has had to suspend redemptions. In November 20007 Aviva deferred redemptions for up to a year from the £1bn Morley Pooled Property Pension Fund.

There have been the redemption issues in the private investor funds and in the institutional sector, the Mall and Junction retail funds, managed by Morley in conjunction with Capital & Regional, experience.

Other fund managers have also frozen and deferred redemptions including UBS Global Real Estate, Friends Provident and Scottish Equitable.