Pproperty investment Essay Example | Topics and Well Written Essays - 2500 words

Pproperty investment - Essay Example In the past three years, as compared to the previous three years, Property Unit Trust (PUTs) which is a pooled property fund in UK had raised more than ? 7.7 billion of new investment, which is more than six times of the net investments received. In the year 2006 alone, property funds have received ? 3.6 billion into property funds. (Bottle & Key 2007). Thus, indirect investment in UK is gaining momentum and this research essay researches into various features of the same in detail. Analysis of indirect investments in real estates in UK â€Å"Real Estate Investment Trust (REIT)† Sampson (2010, p 50) states that â€Å"Real Estate Investment Trust â€Å"surprisingly established very late in certain markets like UK. It took nearly five decades to introduce REITs in UK after it was introduced 1960 in US market. The fundamental concept of a REIT is spotless as investors are expected to invest in an investment vehicle and then later, fund will go for shopping and invest in various top notched prime properties. Thus, a participating interest in a portfolio of tangible assets by an investor is mirrored by a share owned in REITs. Madlem & Sykes (2000, p 284) argue that REITs are trusts or publicly traded companies that coalesce the investments of many investors for the purchase, development and administration of commercial real estate. A REIT is like a mutual fund which is meant for real estate investment only. Investors are benefited from the professionally diversified, managed portfolios and REITs shares are traded on national stock exchanges. RIETs have surfaced as a significant financial intermediary and still in the developing process in the field of domestic capital markets of UK. Due to high dividend yields in RIETs sector, investors are more attracted, which is higher than those offered by government securities. Madlem & Sykes (2000, p 284) are of the opinion that REITs are always a preferred investment destination to investors as it offers higher yield s and also since real estate’s have customarily been a good performer even during inflationary phases. Real estate companies, which see this as a passionate source of low-cost capital that could be made in the capital markets and later could reap huge capital appreciation due to increase in prices of properties. Thus, this has resulted in rapid growth on the part of real estate companies, and investors enjoyed a record-breaking growth rate in the REITs. Block (2006, p 8) stresses that REITs have offered individual investors all over UK with a mean to purchase shopping malls, skyscrapers, apartment buildings, hotel and any variety of commercial real estate one can imagine of. REITs offer the predictable and steady cash flow from the leases of real estates, but with advantages of liquidity of a common stock. As part of their ongoing real estate business, REITs usually offer access to capital, which can be employed to purchase additional properties. Madlem & Sykes (2000, p284) a rgues that an investment in real estate has been always regarded as a solid investment. However, like all other assets, it travels in cycles. Due to the global economic crisis in 2007, the commercial real estate around the globe including UK witnessed serious setbacks. As a result, new construction activities have come to stand still. This