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Budget 2011: Boon for Reits investors

Kim North

Chancellor George Osborne presented his “march of the makers” neutral Budget, which I believe makes a reasonable effort to kickstart small businesses and, in a micro measure, to reduce unemployment.

When a country emerges from recession there follows a rise in unemployment and small companies tend to lead the corporate rally. Look at the recent performance of small company funds and the unemployment figure, which stands at 8 per cent of the economically active population, acc- ording to the Office of National Statistics.

Only steady and strong growth will avoid a repeat of the 2008-09 recessions.

One of the announcements that will help stimulate growth is the incentive that UK real estate investment trusts have been given to compete with other Reits across the world.

Reits can be the most tax-efficient way for UK investors to access property investments and have already demonstrated an ability to raise equity, including from overseas, and to access debt markets.

This Budget has removed the 2 per cent entry charge or conversion charge of gross assets and the requirement for listing on a recognised stock exchange, excluding Aim.

Reits will be able to hold onto their cash if market conditions dictate and will have wider investment opportunities in residential property.

This will result in many new property funds being set up in the UK as Reits and those that are based offshore will consider moving onshore.

It is not just property companies that will consider launching Reits. Any business that owns property, such as retailers, may look to benefit from holding their property as a Reit.

This Budget may be the march of the makers but property owners need to make time to take a serious look at the new Reit rules, especially as the latest Investment Property Forum survey of IFAs shows the average recommended allocation to property should be 8 per cent.


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