Property 

Investing in buildings

  • To get up to speed with various aspects of property investing
  • To understand the different implications of open-ended and closed-ended funds
  • To get up to speed with property investment in Sipps
CPD
60min
Investing in buildings

Introduction

Property investment is a popular diversifier for those who are wanting to spread their portfolio across a wide range of assets.

Investment into this asset class can be through various means – either directly, most commonly through buy-to-let investment and the purchase of residential property, or through the acquisition of commercial premises through a Sipp or a Ssas.

One can also invest indirectly into a pool of property assets, through property funds, either closed ended or open ended. Each of the property classes has its drawbacks and advantages: direct investment means one gets more of the upside with capital gain, but one is also exposed to more risk if the property falls in value.

Access through a property fund might appeal to the more risk averse, but these are not without risk – open-ended funds face challenges when hit with a lot of redemptions, while closed-ended real estate investment trusts (Reits) can be subject to volatility on the stock markets.

But property nonetheless holds broad appeal: equities are volatile and are meant to be a long-term game, while bond performance is subject to interest rates that may be on the move shortly.

Property is a very different asset class to other typical securities. Anyone who has built up a buy-to-let portfolio will testify to this. There was a time when, if one got into the market at the right moment, one could double an investment over five years.

In the south, where the really big gains have been made, it appears the property market is running out of steam and the previous chancellor, George Osborne, brought in tax changes to try to dampen the market after realising it was becoming increasingly unavailable to first-time buyers.

Now there has been talk in the upper echelons of the Labour Party of rent controls on landlord-owned property. Unsurprisingly, experts in the professional landlord sector are not happy about the idea, seeing it as a socialist attack on the workings of the property market.

Buying commercial property through one’s pension has traditionally been a good option for a small business, offering tax relief and other incentives. Advantages remain for property; key is how to access it.

The indicative CPD timing for this guide is 60 minutes.

Melanie Tringham is features editor of Financial Adviser

In this guide

CPD
60min
  1. According to John Cartwright, open ended property funds are particurlarly suitable for investors looking to invest a lump sum, true or false?

  2. According to Laura Thomas, what is one of the biggest risks with open-ended property funds?

  3. According to Ashley Clark, there are no tax relief available to investing in property, true or false?

  4. According to Ashley Clark, how much of the Sipp's fund value can be borrowed to purchase property?

  5. According to Matthew Yassin, which of the following has NOT led to a reduction in supply for landlords?

  6. Matthew Yassin beleives rental controls on the buy-to-let market are not a good thing, true or false?

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