Property consultant Simon Morris took some time this month to look at what’s in store for property investment in 2015. What did he have to say?
A Profitable 2015
As a London-based property specialist, Simon Morris uses his industry knowledge to advise UK property investment funds how to ensure their property investment portfolios prove profitable.
Simon’s experience has led him to believe that investors who enjoyed a lucrative 2014 can look forward to further growth throughout the next 12 months. Yet they should remember that placing money into commercial property funds is an investment. All investments come with risks.
Diversification is Vital
Simon went on to reveal that despite their current popularity, commercial property funds have a colourful history. The economic crisis saw values in this market decrease 44%; the steepest fall since records began.
This led the property specialist to argue that this means that the less experienced an investor is, the more carefully they need to tread when they choose to invest in property. Simon’s experience has shown him that it’s not wise to focus one just one sector of commercial property or one specific location. Diversification is vital.
Looking at the Risks
According to Business Wire, Morris went on to explain: “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.”
The Problem with Searching for Quick Returns in a Short Length of Time
Morris went on to suggest that one way to negate these risks is open ended funds, but only as long as investors approach this investment with an eye for diversification. Every investor, no matter their level of experience, needs to understand the variety of funds and choose one which matches their specifications.
The property specialise proceeded to explain that even the most sophisticated of investors can trip themselves up by trying to register quick returns in a short length of time. “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?”
Opt for a Regulated Fund
The commercial property investment consultant concluded by arguing that if a less experienced investor wants to earn profit in property throughout 2015, they should seek independent financial advice and choose a regulated fund.