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What is the general climate of real estate investment in your jurisdiction?
Data from Savills shows that the UK investment volume for 2016 was £51.4 billion, which represented a 28% annual fall. However, this level was 12% above the 10-year (2006–2015) average of £45.9 billion.
The UK property sector has stabilised after the Brexit vote and although it is still too early to say that the market has fully recovered, it appears that investor sentiment and the immediate outlook have improved.
London continues to benefit from capital flows from the Asia-Pacific region, led by Hong Kong and Chinese investors looking to increase their overseas exposure. The alternatives sector received a higher-than-average proportion of investment over the past year, including in student and senior living assets, as investors seek to diversify their portfolios.
The industrial and logistics sectors have delivered the highest investment returns of the commercial sector and investor appetite for both should remain high.
International capital flows will continue to be swayed by global political events (including the upcoming elections in Europe); but while some activity and investment may be displaced to other global markets, the United Kingdom appears to have maintained its safe haven status ‒ at least for now.
Who are the most common investors in real estate?
Institutional investors include pension funds, insurers and private investors (eg, high-net worth individuals, sovereign wealth funds, private equity funds and publicly listed companies).
Are there any restrictions on foreign investment in real estate?
What structures are typically used to invest in real estate and what are the advantages and disadvantages of each (including tax implications)?
Common investment structures include:
- limited partnerships and limited liability partnerships (LLPs);
- contractual joint ventures;
- land trusts;
- real estate investment trusts;
- unit trusts;
- limited companies; and
- public listed companies.
Due to the lack of tax transparency, it is more common to use a limited partnership or LLP than a limited company.
Members of an LLP enjoy limited liability.
LLPs enjoy tax transparency, which means the following:
- The activities of the partnership are deemed to be carried on by the members;
- The income and gains of the partnership are deemed to arise to the members in proportion to their economic interest at the time that such income and gains arise to the partnership; and
- Tax is assessed on the members, not on the partnership.
Limited partnerships enjoy tax transparency in a similar manner to LLPs. They must have at least one general partner which manages the partnership and which benefits from no limited liability (although this general partner can be a limited company). The limited partners may not participate in management of the partnership.
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