ECONOMICS

Property Economics: Real Estate Investment

Property Economics: Real Estate Investment

Introduction

Although there have been fluctuations in business cycles, yet good quality real estate of UK has historically remained a smart investment for global investors, whether for personal activity or for producing an income stream (INCE & Co., 2011, p.2). There are many positive characteristics of Real Estate business of UK which an investor must consider, including an ownership certainty; almost all the properties in UK are registered under the Land Registry and the state effective guarantee the title. There are only rare cases when serious ownership doubts or disputes arise. It also involves good location in England; though they are not fully immune to downward price pressure, still in bad market situations they tend to maintain their marketability. In established areas the supply of new property is tightly controlled by shortening sites for new development and limited urban planning rules (INCE & Co., 2011, p.2).

Due to ongoing globalization process, the barriers to the flow of capital are dismantled, which has enlarged the potential pool of overseas investors. Further, the tax position is usually favourable, as for non-UK residents, not involve in trading, there are no capital gain taxes. Though income tax is applicable, but that too with proper arrangements in place rental income that is produced by property assets can be paid without subtracting income tax at source. Finally, typical leases for commercial investment properties make sure the return of rent is clean and net of operating and repair costs. For such matters, tenants become responsible by the typical UK commercial lease (INCE & Co., 2011, p.2).

Discussion

Factors to Be Considered For Successful Real Market Investment

Though the commercial real estate market of UK has remained good and sustained throughout historically, yet there are certain factors that an investor must consider for making successful real estate investments.

Risks

Classifying different products according to the level of risk incorporated in it, is not easy at all. However, some general observations can be made about risk and it is very important before investing in real estate. Firstly, an investment made or to be made in portfolio of properties is less risky than the investment made for single building. While considering the risks, one of the most important is to consider the total impact of investment on the total portfolio. Generally, the diverse portfolio possesses less risk than investing in a single property or unit. Thus, risk is a function of individual features and the characteristics of asset inconsideration as well (BPF, 2007, p.15).

Diversification

As already mentioned, investing in a mixed portfolio is much better, as it posses less risk, than investing all the capital in just one single property or business. Furthermore, an investor can diversify his portfolio or portfolios by considering wide range of properties in various sectors or locations fir the investment. As the various business sectors of the equity market do not all move ahead in same steps, similarly, different sectors perform differently. Depending on the health of local market of real ...