A global property portfolio

I am interested in gaining exposure to foreign property markets. While I could purchase a property abroad, I prefer owning a part share in several properties and preferably in more than one country. Alternatively, I would consider investing in property companies. What choices are available to invest in places as far apart as America and Australia, and what is the most cost effective way of doing so with a capital sum of, say, Lm40,000?

The global property securities market is expected to grow by 10 per cent per annum over the next five years to a total of $1 trillion. The opportunities for investors to invest abroad through investment funds are now very varied, with many advantages over buying single properties direct.

With Lm40,000 you can develop a very diversified portfolio of property funds in jurisdictions across the globe. It is always advisable to spread your risk so one could build a property portfolio along the following lines:

UK commercial property - high and inflation proofed yields with tenants on average leasing properties for 10-12-year periods.

UK Social housing and student accommodation - with a shortfall of over two million homes for those in need, demand is naturally very high for low-budget accommodation. Rental income is effectively paid from the government.

Eastern Europe city centre and coastal regions - the likes of Croatia and Bulgaria are booming with a huge shift of second properties being bought by UK residents as opposed to in places such as Portugal.

Spain - Spanish real estate returned growth of +96% in the first nine months of 2005. There has been a slight correction since then with full 2005 figures not currently available.

Asia (including Australia and New Zealand) - for the year to November 30, 2005, the Asian property market benchmark rose +27%. I believe the best opportunities exist in the stocks of companies operating in the real estate business as opposed to buying directly into the properties themselves. Asian property funds are currently investing predominantly in Japan and Hong Kong.

As you can see, you can develop a very diversified global property portfolio. Such funds can be bought directly from the various fund managers, which will involve some initial fees. An alterative is to purchase them through an umbrella approach, whereby initial fees are normally 0-0.5% with daily liquidity of buying and selling units in the funds.

Mark Hollingsworth is the director of Hollingsworth International Financial Services - licensed by the MFSA to provide investment services under the Investment Services Act 1994 (IS/32457). Address any financial questions to: Mark Hollingsworth, c/o The Sunday Times, PO Box 328, Valletta CMR 01. Alternatively, he can be contacted on 2131-6298/9984-2614 (office hours) or e-mail mh@hollingsworth-int.com

Past performance is no guide to the future and, except where amounts are guaranteed, the price of your investments (and the currency in which it is denominated) may fall as well as rise. Your personal tax situation will depend on residence. Always consult a professional adviser. This article does not intend to give investment advice and its contents should not be construed as such. Readers are encouraged to seek professional advice on their personal financial situation.