The U.K. budget this year is prompting interest in longer term property securitizations (see ASR 12/0902) and sources at the Royal Institution of Chartered Surveyors (RICS) said the government is rekindling its once-abandoned inquiry into developing regulations conducive to U.K.-based real estate investment trust vehicles (REITS).
"Within the bigger picture, it means that the smaller investors will now have an opportunity to directly invest in real estate assets," said one source at RICS. REITS function as securitized vehicles that group together a number of properties typically in the industrial, residential, retail and office areas and allow investors that might not have the equity to outright invest in any singular property an opportunity to cash in on several segments of the real estate market.
Presently the U.K. is counted among one of the last G7 countries that do not incorporate this vehicle. A legislative bill is currently being passed in France that would allow for this vehicle. "It's ideal for institutional investors who sometimes might have as little as 1% investment in properties and are looking at the figures where the return on property over the last 10 years has been better than any other form of investment," said the source at RICS.
But before anything solidifies, the government must still address tax transparency issues. The treasury is concerned that the development of a tax transparent vehicle might result in a loss in revenue. The source at RICS, however, argued that the creation of a mass-appealing vehicle would mean greater opportunity to initiate stamp duty tax - neutralizing losses occurring in other areas.