Permission for UK Real Estate Investment Trusts (REITs) to launch in January 2007 was one of a series of changes to the property investment scene brought about by the UK Treasury in the last few years. It follows the change in unit trust rules in March 2004 that allowed unit trust funds to be 100% invested directly into property. In December 2005 these funds were opened up as an option for ISA purchasers.
Investors have had to wait over three years since Gordon Brown first announced that REITs were being considered in order to give savers another way of investing in commercial property. Last year the Chancellor made a last minute decision to exclude direct investment in property from the new self-invested pension plans (SIPPs) with the exception of halls of residence and property syndicates above a certain size.
When looking at alternatives to direct investment in property the field is now looking fairly full and it’s helpful to distinguish between the different species and sub-species and their different strengths and weaknesses.
Property Investment Companies
First in the list are property investment companies. Share price services such as Thomson Datastream show that there about 50 property companies listed on the LSE main market’s property sector with a further 90 quoted on the AIM market. Some of the leading UK property companies (10 of them by mid-February) had metamorphosed into REITs but, confusingly, they still appear with as property companies of the share price pages in the newspapers.