The red light may be sounding for residential property owners but the change in trends has not yet affected the retail sector. It has stayed clear of the insecurities that shares and bonds posed during the past decade. Their track record over the past half-decade is notable staring from 10.5 percent and reaching 18.3 percent. The present year seems to be raring with predictions of appreciation between fifteen and sixteen per cent. Commercial property is the present most sought after opportunity because its financial gain is high and guaranteed compared to other business opportunities.

Investment companies are putting more of the money that they are making with increase in customers into real estate. In the ‘70s, the average investment company had up to a quarter their monetary value put into real estate but that has now come down to a mere seven percent. This has been improving and has been on the rise but this rise has not been as easy as it seems. Even now it is restricted to only companies with the capital and big money buy entire properties. This expenditure often tends to be “millionswise”.

This phenomenon has taken away from small time private investors the privilege to invest in a stable opportunity and forces them to put their money into the more unstable residential market where their business mantra is to buy and then let. In response to this trend the UK Government has introduced REIT’s. It is a tax efficient investment programme. The UK is the last of the worlds larger economies to introduce this system in their countries. It has been moving at a snails pace and about two years have gone by since the government took a look at this field of investment. The dependants on the industry are hoping to confirm this in the coming Pre Budget Report.

An REIT’s a collective property investment by which one can own shares or units in a company that has intrest commercial or residential properties. Its specialty is that it mimics ownership of underlying assets. A present tax affects the individuals or companies investing twice. Once by way of capital gains and corporation tax followed by tax on dividend income. To exempt themselves from this tax investors and investing companies have moved away from this area of investment taking away a decent portion of the governments income with them. Under present tax rules only seventy percent of the rents go to the investor. The thirty percent cannot be reclaimed even if it taxes cannot be applied in that particular case. If the REIT is put into action, it pays no tax. The tax which otherwise is paid goes to the investor who pays the subsidized rate of interest. Before it comes into action there will have to be certain restrictions like the paying of a particular percentage of the rental income to the investor and holding back from developments that wont generate any further income.

The industry has been pushing for the introduction of such a programme for a long time. They have advantages, which are bound to turn things around. They can invest in a range of things, which are not profitable now. These options, which will arise, will give them a good combination of income and capital appreciation. These options, which would now be profitable to make use of, would perform with their performance rate in proportion with the market rating than with shares of the company that owns it. The United States of America, which was operating under this system in the 60's, saw a rise in the market value over the past decade in the property market. The USA boasts of 200 companies in the property business with a gross investment of 300 billion(dollars) or a hundred and seventy five billion pounds.

All the big time property investors said that if the change was made they would go with it. The main reason for this acceptance is the narrowing of discount to net assets that are harmful to this sector of business. The recent change in trend though points out that gains can be got from this aspect of the real estate market. The only deterring factor that experts predict is the compensation that will be put on companies transferring status which could be too heavy for them to pay. To avoid this tax payment they might not change their status. Change or no change the success of the new plan depends on the performance of these markets by themselves. If they fail to perform the plan will not work as much, despite the hype about it.

The big question will still lie over whether the property market is booming as we say it is. That will determine the success of the change to REIT’s. the figures of property rise are a hundred and twenty per cent for a gain of ten percent and thirty five percent against gold and cash. A top real estate magazine said that the industries returns will fall by half to around seven percent against its start at fifteen per cent. It could fall but not by a fraction that would affect overall business.

During the year ’05-’06 the rates will sustain themselves or so it is predicted. A change for the good in equity markets will put cash out of its vault in the property market. This would trigger a rise in the interest rates which will “de-attract” business in the sector. REIT’s will help investors invest.