Property investment – looking ahead in 2015
Investors in commercial property funds enjoyed a profitable 2014 with further growth expected in 2015, explained Simon Morris.
However, like with any investment, placing your money in commercial property funds comes with risks.
Despite currently being the flavour of the month with investors, these types of vehicles have a controversial history. Commercial property values dropped by more than 44% during the financial crisis, the steepest decline since records began.
It is the less experienced investor that needs to tread carefully when investing in property. It is important to diversify and not to simply focus on one sector of commercial property or a specific location.
Simon Morris, independent property consultant, Investment Funds and Individuals, said: “Looking at the risks to investors, history and experience shows that UK property sectors performance can be at odds with each other.
“City-based offices can thrive at a time that retail premises are struggling, so it will be important in 2015 to ensure a broad portfolio of property for those who are risk-adverse.”
Open-ended funds can be a good way of negating the aforementioned risks, as long as investors have a diverse attitude towards their investment.
Whether you are an experienced investor or new to the industry, you have to understand the variety of funds and choose something that matches your appetite.
Even the most sophisticated of investors can be caught out trying to achieve quick returns in a short period of time.
Simon, said: “Highly geared funds may pay out higher returns in the short term, but increases in interest rates alongside a reduction in rental income could cause issues.
“The investor needs to look at fund performance, volatility, liquidity and the value to see if it matches their own appetite. Does it offer a fixed return, or is it variable?”
For the less experienced investor choose a regulated fund and seek independent financial advice.