Research released this week by lettings platform Bunk showed that, at £51.9bn a year, the annual value of the UK private rental market outstrips the GDP of Myanmar, Luxembourg, Uruguay and Croatia. Despite this – and exceeding the market capitalisation of FTSE 100 blue chips such as Lloyds Banking (LLOY), Barclays (BARC) and Vodafone (VOD) – residential property isn’t the asset class it was.
Buy-to-let has been stymied by removal of income tax advantages and the surcharge on stamp duty for second properties, but expensive house prices also elevate the risk of an illiquid and possibly highly geared investment. Niche areas do, however, still provide opportunities for those hunting income and capital returns. Real estate investment trusts (Reits) focusing on social housing, homes for the elderly or student accommodation benefit from the liquidity of being listed vehicles, and can help investors purchase shares in a property portfolio at below its net asset value (NAV).
Intuitively, collective investment schemes are the best way for retail investors to get real estate exposure. This is a complex asset class and there is value to investment across several projects to spread the risk of failures. Yet, thanks to progress in blockchain technology, it is now easier to buy into individual developments, too.