Property is becoming increasingly attractive to investors who regard it as the most stable asset class following five years of consistently better returns than equities or gilts, according to the latest report by property consultants ATIS Real Weatheralls.
The UK commercial property market is in the midst of a resurgence following many years in which it has played second fiddle to both gilts and equities, says the report: Why invest in Property?
Charles Clark, director - UK investment for ATIS Weatheralls, says: 'Property has a unique set of advantages and disadvantages in relation to other asset classes and with the current low inflation and low interest rates it is particularly appealing to investors.
'Property is again being viewed as a hybrid investment vehicle that combines equity and debt characteristics, since it is both income-producing and its value increases when the economy is expanding.
'The high initial yields on property make it an attractive investment against gilts and also against equities in their current state of volatility. Upward-only rents also protect the nominal value of income from erosion due to inflation making property similar to equities.'
Property has other unique advantages, which make it stand out, says ATIS WeatherallsÂ' report. For instance, property owners can directly improve value on their investment by refurbishment, acquisition of extra land or rebuilding.
The report stresses that property value can be maximized by professional management, which can increase income from leases via rent reviews, while correct timing of property acquisitions and disposals can address issues such as illiquidity, especially where upcoming liabilities are clearly known.
Factors which have traditionally been regarded as weaknesses of property investment have, to a large extent, been addressed with the introduction of indirect property vehicles, such as limited partnerships and with greater use of unit trust structures, together with outsourced asset management. In this way, problems associated with direct ownership (specifically illiquidity), large lot size and high transaction and management costs have been dealt with, making it much easier to invest in property.
(source: ATIS Real Weatheralls)