Essay Securitisation in Property

744 Words Dec 13th, 2008 3 Pages
Securitization of property assets will enable property to compete with other asset classes Securitization in the context of property “is the creating of tradable securities from a property asset” Isaac (2003 p.198). Securitization “can be equity based or debt based” Wyatt (2007 p.395). Equity based property securitization “would see investors own share in a property that yields income through dividend payments and produces capital gains (or losses) through share price movement” Wyatt (2007 p.395). Isaac (1996) states equity based securitization is also known as unitisation, hence securitization being used as a general term that incorporates unitisation. Debt based securitization “is achieved by issuing bond-type securities, which can …show more content…
Securitization (indirect property investment) tries to eliminate these problems by providing, “liquidity in the market and associated with this, the need to keep values up by increasing the size of the market and speeding up the time taken for transactions; _Provides opportunity to avoid the management of property that occurs with direct ownership and to leave the task to the more skilled and experienced._ _Provides tax transparency and avoids the double taxation which exists with property company shares;_ “Until 2007 income and capital gains on indirect property investments were taxed twice; on income and capital gains at the corporate level (via corporation tax) and when the investor pays tax on dividends and on capital gains on the sale of share” Wyatt (2007 p.396). Since January 2007 the UK government has allowed property investment vehicles to have special exemptions from corporate taxes, therefore eliminating the double taxation problems. “This has been achieved by introducing Real Estate Investment Trust or REIT’s” Wyatt (2007 p.396). The REIT company must “be fully listed and resident in the UK for tax purposes.... but must distribute at least 90% of its taxable earnings to its investors each year by the way of dividend” Wyatt (2007 p.396). Wyatt (2007) suggest that REITs are particularly attractive to income seeking investors,

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