Investing in UK REITs
UK Real Estate Investment Trusts, or REITs, are publicly traded companies which own and manage portfolios of income generating property on behalf of their shareholders.
Since being introduced to the UK in 2007, there are now over 50 REITs listed on the London Stock Exchange. But which are the top UK REITs to watch? And why consider investing in UK Real Estate Investment Trusts in the first place? Keep reading to find out.
Table of Contents
UK Real Estate Investment Trusts Explained
UK Real Estate Investment Trusts own and manage portfolios of property on behalf of investors. The types of properties owned by UK REITs can include office buildings, apartment blocks, shopping malls, hotels or any other property which generates rental income.
Investing in UK REITs, allows investors to gain exposure to income generating property market without the high level of capital required to buy the physical real estate, or the headaches that come with managing them.
UK REITs benefit from advantageous tax status but, in order to do so, they must meet a number of conditions, one of which is to distribute at least 90% of the profit made from property income each year to their shareholders as dividends.
Therefore, REITs can be an appealing prospect for income investors, as they can often have high dividend yields.
Top UK REITs to Watch
Now we know what REITs are and why someone would want to invest in them, what are some examples of top UK Real Estate Investment Trusts to watch?
Primary Health Properties
Primary Health Properties (PHP) is a UK healthcare REIT, with a portfolio of more than 500 properties in the healthcare industry across the UK and Ireland.
There are not many industries as defensive as healthcare. Property prices may rise and fall, but there will always be demand for health services and these services need locations to treat patients. In fact, with the UK’s ageing and constantly increasing population, it’s likely that demand for health care will rise in the future.
Moreover, almost 90% of PHP’s rent roll is funded by the UK and Irish governments, meaning that the risk of tenants going bust or not honouring their contract is incredibly low.
However, many UK Real Estate Investment Trusts have come under pressure in the stock market recently due to rising interest rates. Not only do higher interest rates increase the cost of borrowing, but they can also weigh on property prices, which can negatively affect the value of a REIT's portfolio.
In the two years ending 31 December 2023, PHP’s share price fell more than 30%.
As a consequence of distributing the majority of their property income profits amongst shareholders, UK REITs are often compelled to borrow in order to fund growth, and PHP is no exception. The UK healthcare REIT has a sizeable amount of debt on its balance sheet, which equated to roughly 46% of the value of its portfolio as of 30 June 2023.
The decline in share price has resulted in a dividend yield of 7.0% at the time of writing, considerably higher than the 3.9% average of the FTSE 100. Moreover, PHP has consistently increased its annual dividend payment for more than 20 consecutive years.
Tritax Big Box REIT
Tritax Big Box REIT owns and leases a portfolio of warehouses to big-name tenants such as Amazon, Morrisons, Tesco and Ocado.
The calibre of these tenants minimises the likelihood of Tritax unexpectedly losing rental income, which is good news for its dividend distribution. Furthermore, its focus on warehouse spaces and logistics facilities means this UK Real Estate Investment Trust is well-positioned to potentially benefit from future growth in the e-commerce market.
Again, with share price, we can observe a similar scenario as before. In the two years ended 31 December 2023, Tritax’s share price fell more than 30% and this pressure could continue if interest rates remain elevated for a long period.
At the time of writing, Tritax Big Box REIT has a dividend yield of 4.4%. The UK REIT’s record of increasing dividends was hampered in 2020, when its dividend distribution dropped during the pandemic. However, in the two years since, it has increased its annual dividend.
How to Invest in REITs UK
With an Invest.MT5 account from Admiral Markets, you can buy shares in both UK Real Estate Investment Trusts examined in this article, as well as a number of other REITs from the UK and the US! Follow these steps in order to get started:
- Open an Invest.MT5 account and log in to the Dashboard
- Find your account details and click ‘Invest’ to open the web trading platform
- Search for the desired UK REIT and open the price chart
- Click ‘Create New Order’ at the bottom of the screen, enter the amount of shares you wish to purchase and click ‘Buy’ to send your order to the market!
Investing with Admiral Markets
An Invest.MT5 account allows investors to buy shares in over 4,500 companies and more than 200 Exchange-Traded Funds (ETFs) from around the world. Click the banner below to open an account:
FAQ
What is the largest REIT in the UK?
At the time of writing, Segro is the largest REIT in the UK by market capitalisation.
Are UK REITs a Good Investment?
For those looking to invest in property, UK REITs can be an effective way of gaining exposure to income generating property in the UK without needing the vast amount of capital required to purchase these types of property. However, as with any investment, there are risks involved, which must be considered before making an investing decision.
Are REITs taxed in the UK?
UK REITs are exempt from corporation tax on both rental income and any capital gains made from the sale of their UK rental properties.
Other Articles You May Find Interesting:
INFORMATION ABOUT ANALYTICAL MATERIALS:
The given data provides additional information regarding all analysis, estimates, prognosis, forecasts, market reviews, weekly outlooks or other similar assessments or information (hereinafter “Analysis”) published on the websites of Admiral Markets investment firms operating under the Admiral Markets trademark (hereinafter “Admiral Markets”) Before making any investment decisions please pay close attention to the following:
- This is a marketing communication. The content is published for informative purposes only and is in no way to be construed as investment advice or recommendation. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and that it is not subject to any prohibition on dealing ahead of the dissemination of investment research.
- Any investment decision is made by each client alone whereas Admiral Markets shall not be responsible for any loss or damage arising from any such decision, whether or not based on the content.
- With view to protecting the interests of our clients and the objectivity of the Analysis, Admiral Markets has established relevant internal procedures for prevention and management of conflicts of interest.
- The Analysis is prepared by an independent analyst Roberto Rivero, Freelance Contributor (hereinafter "Author") based on personal estimations.
- Whilst every reasonable effort is taken to ensure that all sources of the content are reliable and that all information is presented, as much as possible, in an understandable, timely, precise and complete manner, Admiral Markets does not guarantee the accuracy or completeness of any information contained within the Analysis.
- Any kind of past or modelled performance of financial instruments indicated within the content should not be construed as an express or implied promise, guarantee or implication by Admiral Markets for any future performance. The value of the financial instrument may both increase and decrease and the preservation of the asset value is not guaranteed.
- Leveraged products (including contracts for difference) are speculative in nature and may result in losses or profit. Before you start trading, please ensure that you fully understand the risks involved.
