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Equity and property market (2) (Advantages of property company shares vs…
Equity and property market (2)
Advantages of direct property investment vs property company shares
Control
Diversification away from the stock exchange
Forced selling and the associated loss is less of an issue
Management fees to property share company advisors avoided
Not expose to high risk types of property (e.g. development sites)
Not exposed to extra volatility caused by gearing or the discount to NAV changing
Tax advantages (possibly)
Utility value
Volatility of prices lower in the short term as valuations infrequent
Advantages of property company shares vs direct property investment
Access to larger/ more unusual properties (e.g. development sites)
Discount to NAV may exist- property shares may represent a 'cheap' way of buying property assets
Diversification within the property market
Divisibility
Economies of scale in the case of large property share companies
expected return may be higher due to the extra volatility associated with gearing and the possibility of any discount to NAV narrowing
Expenses associated with direct property investment avoided
Expertise of property company managers
Marketabilty better
quoted prices making valuation easier
tax advantages (possibly)