For some time the industry has been talking abut the boom in bricks and mortar funds. This has certa...
For some time the industry has been talking abut the boom in bricks and mortar funds. This has certainly been the case in 2006, with a raft of property fund launches already seen by well-known, and sometimes not so well-known, fund managers.
It appears that there is still much hype surrounding property in central and Eastern Europe. Last month, fund manager Collins Stewart launched a close-ended property fund investing in major urban centres in Turkey, Romania, Ukraine and Bulgaria.
It said it would focus on these areas because higher yields could be generated on property compared to more developed areas in Central and Western Europe, where prices have already risen substantially.
However, this is not the view held by all. There are many who still believe there are property bargains to be had in countries such as the Czech Republic, if investors looked further a field then its capital, Prague.
Although the thrust of pooled property investment in the UK has mostly been through the commercial sector, there has been a growing focus on residential property in the UK, as house prices in London and the South East begin to bounce-back after several years of stagnation.
Landlords' appetite for investment is also reaching new highs, according to a recent survey by specialist buy-to-let lender Mortgage Trust. It says confidence in the market and stable interest rates have led to an increasing number of landlords expanding their portfolios.
So, what is driving this continued demand for growth, whether it is in retail residential or commercial property funds, or bought independently by property investors?
With regards to property funds, more than £100bn has been invested in the past 10 years, reflecting the strong performance of property as an asset class. It is this strong performance, which has made property attractive to consumers, who also want to be on the receiving end of high yields and strong capital growth.
And with new countries set to enter the EU over the next six years, and the infrastructure and regeneration that will go into urban centres of these countries in preparation for this, the spotlight has been firmly placed on international property.
The offshore jurisdictions have also played a key part in the increasing popularity of property funds. Depending on where funds are domiciled, they are usually not subject to capital gains tax, corporation tax, stamp duty, VAT or inheritance tax. This ultimately increases the distributions to investors as the tax burden is lighter and profits are accordingly higher.
Meanwhile, a spate of global property funds that invest in the securities markets, including Real Estate Investment Trusts (Reits) have come to the fore. Skandia, Standard Life Investments, Sarasin and Fidelity have entered this market recently while First State and Gartmore have signaled intentions to do so within the year. Furthermore, the Chancellor is to allow Reits to be established in the UK from early 2007.
For independent property investment, the range of television programmes and dedicated magazines have also helped bring international property investment into the mainstream. Suddenly, investing in Sofia, the capital of Bulgaria, is no longer as risky as it once might have seemed.
Taking all this into consideration, it would appear bricks and mortar are where more and more capital is headed, whether it be in a property fund or an independent landlord's portfolio.
Tanya Bird, editor
No preferred charging model
To 1,552 families and businesses
HL and Liberty SIPP slowest
Lifetime and annual allowances