Investing in property has become an increasingly popular method of wealth management - but is buying an actual property the best way to do it?
As interest rates rise, the cost of servicing borrowings for investment property is also rising and rental incomes from residential properties in particular are not keeping pace. When you factor in the other potential downsides of property ownership including voids, where you have no tenants, the anticipated slowdown in house prices, as well as maintenance costs and the total illiquidity of property ownership, you may conclude that property is no longer the investment vehicle it once was.
However, according to Paul Rosson, Director of Financial Services at Cassons chartered accountants and business advisers, property is still a good asset class to hold within a portfolio. “There are alternative, indirect methods of investing in property, including ‘Collective Property Investment’ funds, where you can simply invest a lump sum and leave the aforementioned worries to the fund’s professional manager.”
Many of these funds, says Paul, are valued at millions of pounds and they generally contain a diverse portfolio of properties including UK commercial properties such as warehouses, industrial sites, retail premises and office blocks. These funds can also purchase shares in property companies, at home or abroad, such as house builders, allowing the fund manager to focus on property sectors which he feels can give the highest investment returns. Because of the size of many of these funds and the diverse range of assets within them, including cash, they can also prove quite a liquid investment if you need to get your hands on your money quickly. The returns on some of these funds can be spectacular. Were you to have invested £10,000 in the Aberdeen Property Share Unit Trust five years ago then by April 2007 your investment would have grown to £27,167, a return of just over 22% per annum (Source: Standard & Poors).
Date:1 September 2007
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