What You Need To Know About Property

What You Need To Know About Property
Underwater by Julian Cohen. Why?

In an excellent report by Money Marketing entitled Spotlight On Property, you’ll discover the current state of the property market, and how property can play a vital part of your investment strategy.

Property funds have seen stellar performance over the past few years.  Both unit trust and investment trust returns have been rising, with some seeing increases of more than 50 per cent over three years.

A Property Overview

Information from Financial Express reveals the top performer in the property sector posted a return of 56.5 per cent over the past three years. 

The last twelve months have been particularly turbulent, during which equity values briefly fell.  However, the best property performer delivered a return of almost 20 per cent.

Over the past five years, the top performing property funds have seen growth rates in excess of 100 per cent.

Despite these impressive returns, the Investment Association has reported that the property sector has experienced significant investment outflows.  A figure of £1.8 billion was quoted for 2016, but a much lower figure of £137m disappeared in 2017.

The reason cited for such large numbers was, in the main, as a result of the Brexit vote.  As a direct consequence, many property funds imposed restrictions on withdrawals, meaning that investors were unable to access their money.

In recent times, the property sector has recovered.  In the first quarter of 2018, net retail sales of £239 million were received, indicating a positive view has returned to the property market.

In general, investing in commercial property may initially appear complicated.  Property funds, however, make it much easier to access.  These include unit trusts, investment trusts and exchange-traded funds. 

Both a SIPP and a SSAS can directly hold commercial property, although it’s significantly more illiquid than trust and fund investments.  Despite this, recently reported by one SIPP operator is a doubling of its profits as clients flock to property and look to consolidate their assets.

Despite some of the downsides compared to other asset classes, the evidence suggests that gaining exposure to property in one form or another could deliver some worthwhile profits. 

Spotlight On Property

Inside the report, you’ll find more detail on each of these areas.

Introduction To Property

As global stockmarkets experience many uncertainties, it appears more people are now incorporating different types of investments into their portfolios.  Property can often provide a predictable income stream, as well as the opportunity for capital growth.  Despite bringing a new set of risks, property has the additional advantage of adding diversification at a time when bonds and equities have become increasingly correlated.

Look Beyond The London Property Market

Following the 2008 financial crash, London commercial property became a safe haven for international money.  It proved to be one of the few resilient asset classes at a time of crisis.  By contrast, regional commercial property experienced a tough time.  Rental demand slumped and property values declined by around 20 per cent.  It took until 2013 for the property market to pick up.  Opportunities now exist in a variety of areas, including regional student housing and retail warehousing sectors.

The Role Of Property In Asset Allocation

Today, investors are starved on income choices and options for diversification.  Property has the ability to deliver in both these areas.  Right now, roughly 2 per cent of the UK funds market is invested in property funds.  By contrast, money market funds and UK equity funds each hold roughly 20 per cent of the UK funds market.  There’s therefore tremendous scope for commercial property to offer you the potential to build different risk and return outcomes.

Read the report on property investment.

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AJ Bell Is Often The Best Value SIPP For Stockmarket Assets

That's our opinion.  Not just because AJ Bell was the first company to offer an online SIPP.  Nor that it's received many prestigious awards.  And not even because the wife of SIPPclub's Founder has an AJ Bell SIPP.  It's because it's one of the most competitive stockmarket SIPPs on the market. 

Over time, charges can wipe out a huge part of your fund.  We like AJ Bell because there are no set-up costs.  If you hold passive funds, which is our preference, or shares, investment trusts, EFTs, gilts or bonds, you pay one small fixed fee no matter how large your fund.  And when you come to draw your benefits either as occasional drawdown or UFPLS payments, there's a small charge for the whole year no matter how many times you access your money (many SIPP and SSAS providers charge more than this for each payment).  However, you should always compare charges in detail, because AJ Bell could be more expensive than other providers, depending on the type of stockmarket assets you hold.

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