Investing in UK property

I am considering buying more property on the island as I have always received very strong returns from my purchases to date. I do however feel that the market is over-heating and I would like to consider buying into property in the UK. Is there a mechanism to buy property through UK investment funds as I wish to invest a smaller amount due to the high prices in the UK also?

The local property market has remained very buoyant over the past year with another year of strong returns. Whether this will continue remains to be seen as I have no doubt that the investment repatriation schemes in 2003 encouraged people to invest in local property, which would certainly have contributed to the increase in prices.

Countless new developments are being built on the expectation that demand will exceed supply - but are we reaching saturation point? I leave that decision to you!

The facts are that buying property requires a large capital outlay. It is also very illiquid in that you must of course find a buyer to release the capital.

It can easily take six months before contracts are exchanged and you eventually receive the sale proceeds. If you need the funds in a hurry then this will cause problems. Added to this are the additional expenses of buying, such as stamp duty and fees. Such 'initial' charges are typically 6%.

As an alternative to committing large sums of money into one property, you can purchase 'shares' in property through property investment funds. The idea being that the fund pools together investors' funds (as in any collective investment scheme) and purchases properties under the umbrella of an investment fund.

Investment into such schemes can be from as little as £10,000. There are a range of UK property funds to invest in - ranging from residential property to commercial property.

The key is that you are firstly investing in a different market, i.e. the UK, and, secondly, in the case of commercial property, you are diversifying away from traditional residential property investments.

Investing in commercial property also normally requires capital of hundreds of thousands of pounds if bought directly, which is out of most investors' reach. You can therefore participate in funds for a much, much lower premium.

As they are property funds, you also do not have the expenses as if you are buying property direct, nor do you have to sell the property yourself as you are merely purchasing units in an investment fund. Your investment is therefore much more liquid.

Mark Hollingsworth is the director of Hollingsworth International Financial Services - licensed by the MFSA to provide investment services under the Investment Services Act 1994 (IS/32457). Address any financial questions to: Mark Hollingsworth, c/o The Sunday Times, PO Box 328, Valletta CMR 01. Alternatively, he can be contacted on 2131-6298/9984-2614 (office hours) or e-mail mh@hollingsworth-int.com.

Past performance is no guide to the future and, except where amounts are guaranteed, the price of your investments (and the currency in which it is denominated) may fall as well as rise. Malta exchange control regulations must be observed. Your personal tax situation will depend on residence. Always consult a professional adviser. This article does not intend to give investment advice and its contents should not be construed as such. Readers are encouraged to seek professional advice on their personal financial situation.