Autumn Statement: The funds set to benefit

Following last week's Autumn Statement I was asked by The Times newspaper for a comment on the implications for investors of the autumn statement property market measures, and the government's recent announcement on housebuilding. In particular what funds can investors buy to benefit if at all?

As an 80-20 Investor subscriber you have access to my full response below:

My response

The Government announcing £100 million to build thousands of new homes in the likes of Bicester is a great headline grabber but it could be 5 years before we even see a spade hit the ground. We still don’t know who will win the contracts to build these homes, so profiting from investing in them would be difficult.

But those looking to invest via funds will face the age old problem - property funds are just not comparable. Some invest in bricks and mortar others invest in shares of companies with exposure to the housing market (i.e. housebuilders).

Bricks and mortar property funds tend to invest in commercial property such as offices and even then most of those invest in central London. So they are unlikely to benefit.

At least in the short term property shares (such as housebuilders) are going to get a boost, but only some. Share prices of housebuilders of top end housing stock have already been hit because of the new tough stamp duty regime. While share prices of housebuilders of lower priced houses have jumped (think Persimmon or Bovis Homes) as the new stamp duty rules are more favourable for low to mid priced houses.

But if you are looking for a property fund with meaningful exposure to the latter group you are out of luck with only a couple of funds having holdings and even then at less than 1% of the fund’s assets. The problem with property funds is that they are focussed on commercial property with limited exposure to the retail market.

One way to get some exposure is through a broad fund - look at UK all companies funds with a mid cap focus. A number of house builders are FTSE 250 stocks. Schroder UK Mid 250 has Bovis Homes and Redrow as two of it’s top 5 holdings totalling over 8% of the fund’s assets.

But the new favourable stamp duty regime could give a boost to the buy-to-let market. A risky strategy but how can investors benefit other than buying properties themselves? Interestingly Property firm Mill Group are launching a residential property REIT this month which will invest in a portfolio of buy-to-lets. It may be worth a look but it’s not cheap.

 

(image by xedos4, freedigitalphotos.net)

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