PROPERTY excites house-proud UK investors in a way that stocks and shares rarely manage. So Gordon Brown’s decision to give the final green light to real estate investment trusts (Reits), specialist stock market vehicles for investing in property, will be enthusiastically welcomed.

For a modest outlay of, say, £1,000, investors will be able to buy a direct stake in high-profile developments, such as Bluewater shopping centre, when Reits hit the market on January 1 next year. As with investment trusts, shares will be traded on the stock market.

Most industry experts believe that the structure for Reits outlined in the Chancellor’s Budget will be flexible enough to attract new money into commercial property. The final rules will tempt existing property companies to convert to Reits because of the favourable tax treatment they enjoy.

Tom Laidlaw, head of property at Scottish Widows Investment Partnership (SWIP), the fund manager, says: “The introduction of Reits will have a significant impact on the UK investment market. We expect most property companies to convert to Reits and London could potentially become the Reit capital of Europe.”

But should investors pile into commercial property just because Mr Brown has made it a bit easier to invest? Brian Dennehy, of Dennehy Weller & Co, the independent financial adviser, says that private investors should have a slice of commercial property (perhaps up to 20 per cent) in their portfolios because it adds diversification and has produced consistently strong returns. But Mr Dennehy points out that Reits will be quite volatile and there are other options that are available now if investors do not want to wait until January.

Britannic, Norwich Union, New Star and SWIP all have unit trusts that invest in commercial property, while investment trusts such as TR Property invest mainly in other quoted property companies. The existing funds that are most like Reits are offshore property trusts, such as F&C Commercial Property.

A further attraction of Reits is the expectation that you will be allowed to hold them within Isas, Sipps, personal equity plans or Child Trust Funds.

MARK ATHERTON and MAGNUS GRIMOND

For more on the housing market visit www.timesonline.co.uk/mortgage

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