Real Estate Investment Trusts will not provide a substitute for investing in property, according to F&C Investments.

Writing in their News in Brief, fund manager Ian McBryde said: “Reits are an important development the UK property market and will widen the investor base for property.”

"However, Reit status is not a panacea - it does not itself create value, however it does have significant tax advantages."

McBryde argues that Reits are typically more volatile than direct property investment and are affected by changes in the equity market as well as the property market.

"This means that although Reits are a good way to gain exposure to property, pricing will not always fully reflect trends in the value of the underlying assets; only investment in direct property can provide this. There is no doubt, however, that many UK investors will respond to some of the positive features of Reits,” he said.

“The industry has been lobbying for many years for a tax efficient on-shore property vehicle as has existed in other countries, such as the US and Australia for some time,” said McBryde. “There is however still work to be done. Offshore registered real estate companies, such as the market leading F&C Commercial Property Trust and the ISIS Property Trusts, have more flexibility than is now allowed under the new Reits legislation in Britain.”

“Hopefully, the UK will follow these examples in due course," concluded McBryde.