Government rules out residential REITs - but why?

Chancellor Alastair Darling said in his pre-Budget Report and Comprehensive Spending Review noted that the UK Real Estate Investment Trust or REIT regime, launched in January had 'been a marked success'.

He said: 'To date 16 companies have become UK-REITs with a total market capitalisation of around £30bn. The Government has recently reviewed the viability of residential REITs and the REITs listing requirements – but has concluded that there is not at present a compelling case for change. However, the REITs regime will continue to be kept under review.’

I would ask why exclude residential property? Given the resilience of residential property values compared to the commercial sector it seems strange not to allow people to be able to benefit from an investment in a company investing in residential property which then has to pay out 90% of their income in dividends.

This to me would be an attractive alternative to landlords and investors not wanting the responsibility of direct property ownership. Residential REITs are available to US investors where the system has been established for many years so why not over here Darling?

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