Treasury to launch property trusts

Treasury to launch property trusts

The Treasury is to give more details next week about a proposed new tax-friendly investment vehicle to encourage institutions and private investors to put money into property.

The property investment trusts are likely to be modelled on America's real estate investment trusts (Reits), which allow individuals, mutual funds and others to invest in everything from shopping centres to hotels. Debate is thought to be continuing over whether the British version should concentrate on residential property as part of efforts to increase the supply of rented accommodation and reduce volatility in the housing market, or follow the US model of sticking predominantly to the commercial sector.

Gordon Brown announced in the last budget that the Treasury would be exploring the idea of property investment trusts, and since then discus sions have been taking place with the industry. In next week's pre-budget report Mr Brown is expected to give an update on progress.

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At the same time, a Treasury-commissioned study looking at ways of increasing the housing supply will be published. There has been speculation that economist Kate Barker, appointed to carry this out, will come out in favour of investment trusts for the residential sector.

Reits have been in existence in the US for more than 40 years and there are now about 180 publicly traded trusts with assets of $375bn (£220bn). They own and operate real estate including shopping malls, apartments, offices and warehouses.

Most Reits distribute all of their taxable income to investors and therefore escape corporate tax. Investors pay tax on the dividends and any capital gains.

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