Good news for property sector, but landlords must be cautious
The property world has received some good news after learning the residential sector will benefit from the UK's first regulated residential property fund, which has been approved by the Financial Services Authority (FSA).
The TM Hearthstone UK Residential Property fund is due to be fully launched in September 2012, and will give people the opportunity to invest in the property market without having to directly own a property.
Ajay Jagota, managing director of North East based KIS Lettings, commented on the fund: "The fund is good news for the industry amidst all the negative news it has received, and it's encouraging that people feel confident enough to invest in the market."
The fund will be available to those with ISAs and SIPPs (self-invested personal pensions), as well as corporate investors, such pension schemes. It plans to raise £250m in the first 24 months with the potential of rising to £1billion in the longer term.
Minimum investment is £1,000, and the fund will acquire existing property, working with developers to support future acquisitions from new residential schemes.
The new scheme is good news for tenants, who will be receiving high quality service from corporate companies and opens new avenues that move away from profiting solely from direct ownership of property.
Whilst the fund will benefit both landlords and tenants, Ajay recommends that single landlords still need to maintain high standards.
"The landlord needs to make sure they are providing a fair service to tenants, encouraging them to stay at the property for as long as possible.
"If the big institutions are managing properties from a higher level, this could sideline the single landlord if tenants begin to use these institutions to source tenancy.
"I would advise landlords to put full effort against making sure their properties are presentable and kept up to date with all current legislation and regulation."
Despite the ups and downs in the property sector, rating agency Moody's reported that performance in the UK buy-to-let industry had been stable for the past year, helped by low interest rates and relatively low job losses.
Ajay adds: "These developments are good for the property sector, but we still need to tread carefully whilst encouraging growth."
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