27 SEPTEMBER 2007 REDEFINING PROPERTY INVESTMENT Intelligent property decisions AN INDEPENDENT SUPPLEMENT FROM MEDIAPLANET ABOUT REDEFINING PROPERTY INVESTMENT, DISTRIBUTED IN THE TIMES 2 AN INDEPENDENT SUPPLEMENT FROM MEDIAPLANET ABOUT REDEFINING PROPERTY INVESTMENT, DISTRIBUTED IN THE TIMES REDEFINING PROPERTY INVESTMENT Introduction Property developments Property is all around us, in the form and foreign property markets. Several In the UK we have seen the intro- of the buildings in which we live, factors have combined to make global duction of tax-efficient UK REITs and work, shop and socialise. Property is a property investment more common, should shortly see the open-ended major factor of production for almost including the widespread pension cri- equivalent introduced in 2008 – as all sectors of the economy. sis and the fact that real estate is in- well as many other positive develop- But developments over recent years creasingly seen as an important ments that are improving access to have also confirmed property’s emer- solution to the ever-growing retire- property investment and the effi- gence as a mainstream global asset ment/savings needs of an ageing ciency and transparency of the mar- class from an investment perspective. global population. ket. Despite the (unconnected) gloom CONTENTS In 2006 capital flows totaled an esti- From my perspective, the most in- overshadowing the wider markets mated $860bn globally, resulting in a teresting aspect of recent years has that we have seen in recent months, it ̆ Gareth Lewis, Director of Finance and global property market of $9.6 trillion. been the significant developments in should not be forgotten that these Investment, British Property Federation Fifty years of Rome In recent years, there has been a the structural framework of the invest- structural developments will bring Treaties 4 huge growth in the number of inter- ment markets. This has been driven by long lasting benefits. range of different routes available for Who has converted national property funds, global prop- both the level of demand for property One thing is certain; we are in the investing in property. This Redefining erty funds of funds, and diverse and also an element of healthy com- middle of very interesting times for Property Investment supplement pro- to REITs? 4 opportunities in the private and pub- petition between different govern- the property industry. But for individ- vides an excellent starting point for Why REITs? 5 lic capital markets for domestic in- ments eager to secure a place on this ual investors, these developments can getting to grips with some of these re- vestors to participate in both local increasingly important global stage. result in added confusion given the cent developments. Public awareness 5 Property derivatives 7 take out a mortgage, nor be burdened Case study 9 with legal fees and other transaction Beijing Olympics 10 costs associated with direct purchase Welcome – not to mention the responsibilities Investing abroad 12 of being a landlord. And many of the On the face of it, investing in property at the mo- The arrival of REITs 14 alternatives offer private investors ac- ment seems like a really bad idea. Headlines cess to both residential and commer- screaming “credit crunch continues” and “mort- cial property. There are also attractive opportunities in emerging overseas gage woes widespread” certainly do not inspire property markets, which, while spec- confidence and lead investors to suppose that real ulative, could reward savvy investors. estate is not the attractive asset class it once was, A glance at the companies listed on the London Stock Exchange reveals a REDEFINING PROPERTY writes Sally Giles. cornucopia of property funds and INVESTMENT A TITLE FROM MEDIAPLANET trusts in which you can purchase Until recently, UK property values they lend money to, and are charging Yet, historically, bricks and mortar shares and, at a stroke, invest in the Project manager: Shola Adeniran were increasing year-on-year, credit more interest, leading to a reduction have proven to be a sound long-term range of properties in their portfolios. Editors: Sally Giles, Kelly Crummie Production Editor: was cheap and mortgages easy to in affordable credit for companies and investment, and that’s likely to re- Alternatively, if you’re a private in- Katherine Woodley come by. The subsequent property individuals. Sharp interest rate rises main the case. Many investors view vestor or institution with significant Design: Sophie Westerberg boom saw many Britons take on mul- have caused home repossessions in direct property ownership as a viable real estate assets it’s increasingly pos- Prepress: Jez MacBean tiple mortgages and build a portfolio the UK to surge, as mortgage pay- alternative to pension schemes, since sible to swap your exposure in spe- Print: News International of properties designed to bring capital ments become less affordable. capital gains and rental income pro- cific sectors using derivatives, thereby Mediaplanet is the leading European publisher in providing high quality gains and rental income. A survey by the Royal Institution vide a healthy nest egg for retirement. hedging your risk. Making gains from and in-depth analysis on topical However, the outlook for property of Chartered Surveyors has even in- At the moment, mainstream borrow- property investment will always de- industry and market issues, in print, investment has shifted as a result of a dicated that falling demand has ers with good credit ratings are even pend on where you put your money online and broadcast. combination of market factors. The seen British house prices drop last finding some new fixed rate mortgage and how well you manage it. That’s For more information about current credit crisis began with record month for the first time in nearly deals a bit cheaper, and a short-lived why wise investors consider the supplements in the daily press, please levels of property owners in the US two years. This has whipped up drop in house prices can present a wealth of opportunities available be- contact Carl-Philip Thunström, 020 7563 8877 defaulting on their mortgage pay- fears over the outlook for global good time for those people to buy. fore betting their hard-earned money, [email protected] ments, which affected the wider economic growth, with some ana- However, there are plenty of routes and hard-won financial security, on www.mediaplanet.com global loans market. Banks have be- lysts predicting this is just the tip of to reaping a return from property in- the future profit potential of a prop- come far more cautious about whom the iceberg. vestment that do not require you to erty investment. The Business of Excellence 2 distributed within The Times (excl Scotland) on 8th November Contact: 0207 563 8896 [email protected] Take off in style with Lufthansa Private Jet. Enjoy a unique, exclusive service. And the luxury of your own flight schedule. All for this one moment. 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USD 4,037 bn or that there will be further harmoniza- age or even above-average growth approx. 2/3 of the European real es- tion of the cyclical trends in these again. The trend in Germany in the Community (EEC) was signed on 25 March 1957 tate portfolio (inc. Turkey and Russia) markets? In a few of years, will we past few years as well as the current in Rome by Belgium, West Germany, France, Italy, suitable for investment purposes of just be speaking of a European real situation in Portugal are examples of Luxembourg and the Netherlands. institutional investors. The Eurozone estate cycle instead of German, these kinds of assimilation processes therefore represents the second largest French or Spanish real estate cycles? real estate market with a unitary cur- Will the diversification effect of Eu- Diversification BY DR. MARCUS CIELEBACK, HEAD OF RESEARCH EUROHYPO rency after the USA (with USD 5,167 rope wide investment be reduced as a This remaining diversification poten- bn). For participants in real estate result of European integration? De- tial is becoming apparent within the After the last ratification document of real estate investments is essen- markets, in particular institutional in- spite the advancing European inte- Eurozone, for example, in the corre- was filed it came into force on 1 Jan- tially influenced by economic trends vestors, this means that they no gration we cannot speak of a general lation coefficients of the prime office uary 1958. The treaty to establish the and by the development of the real longer have to factor in currency harmonisation of the real estate cy- rent trends (rolling 10-year periods) in European Atomic Energy community estate market concerned, as both fac- fluctuations for their investments in cles in Europe or the Eurozone. A relation to Frankfurt. With the excep- (Euratom) was also signed by the tors determine the value of a property. the Eurozone provided that they come greater synchronisation of the Euro- tion of Munich, the correlation has countries in Rome at the same time, The Rome Treaties have triggered de- from the Eurozone themselves.