Marcus Phayre-Mudge, Fund Manager, TR Property Investment Trust
Property has always loomed large in the UK’s national psyche. For decades, investing in bricks and mortar – either through a primary residence or buy-to-let – offered a route to rental income, capital growth, and a sense of tangible security that no other asset class could match. However, the landscape facing private landlords and aspirant first-time buyers today is materially different. A combination of regulatory, fiscal and supply pressures has significantly altered the economics of direct property ownership.
These developments matter, but not because this is a story about buy-to-let or the vagaries of getting onto the property ladder. Rather, they illustrate a broader point: the underlying fundamentals that have historically made property attractive have not disappeared. The question is not whether property still has a role in personal wealth building, it is how best to access its enduring appeal today.
Property returns through listed markets
For many, listed property companies – most of which are real estate investment trusts (REITs) – offer an effective alternative to owning property directly. Listed landlords and developers – of which some well-known examples are Landsec, LondonMetric and Big Yellow – typically operate large portfolios of commercial assets. They employ sub-sector specialists who manage tenant relationships, development pipelines, capital allocation and financing decisions. Investors in these listed companies gain exposure characteristics like rental income, occupancy trends, supply-demand dynamics and likely capital appreciation – while avoiding the operational demands of direct ownership.
Importantly, listed property also provides access to professional balance-sheet management, including the use of leverage. The scale and governance frameworks in place allow for more prudent, diversified and cost-effective borrowing than private investors could access on their own.
A focus on quality, diversification and liquidity
At TR Property Investment Trust, our aim is to provide shareholders with broad, diversified access to listed landlords and developers across the UK and Europe. These are sectors that offer different return, income and demand profiles – and together they provide a breadth of exposure that would be difficult to achieve through direct property ownership. Private investors now represent more than a fifth of our share register, highlighting the appeal of this approach. For many, the ability to “own the landlords, not the properties” – gaining real-asset exposure without mortgages, maintenance, tenancy management or liquidity constraints – is increasingly compelling.
Why structure matters
As a closed-ended investment trust, TR Property is never required to sell assets to meet shareholder redemptions, and we can maintain long-term positioning in cyclical sub-sectors. Today, many listed property companies trade at discounts to their net asset values. TR Property itself also trades at a modest discount, which can create a situation where investors access exposure to companies already standing at a discount to their underlying assets – a potential “double discount” that may unwind as sentiment improves.
Supply constraints, stabilising inflation and supportive corporate activity
The resilience of listed property is not underpinned solely by structural considerations. Market fundamentals across many of our core geographies remain sound.
Financing development has become more difficult, construction costs have risen, and investors now require higher returns to justify new projects. These factors have collectively constrained new supply, meaning best-in-class assets remain in demand, placing upward pressure on rents and benefiting companies with well-located, high-quality portfolios.
At the macro level, some of last year’s concerns about persistent service-sector inflation appear to be receding. Wage growth has cooled alongside slower job creation, particularly in parts of continental Europe. While economic sentiment has softened, some of this hesitation appears to be politically rather than economically driven, with hiring and investment merely deferred pending greater clarity. Importantly, inflation-linked rental uplifts remain a significant feature across much of Europe, offering a degree of income resilience in real terms.
We also see meaningful support from corporate activity, which falls into three categories:
- Capital raising for offensive growth: Several listed landlords have raised capital not to repair balance sheets, but to capitalise on market opportunities and expand their asset base.
- Consolidation: Smaller REITs have merged to improve liquidity, reduce cost bases and strengthen earnings capacity.
- Privatisations and take-privates: High-quality REITs trading at discounts have attracted private buyers, often at premiums to prevailing market prices.
These dynamics create a healthy valuation underpin. When private capital is prepared to acquire assets above public-market valuations, it signals fundamental value the listed market may not currently be pricing.
A modern route back to property
Many buy to let landlords are now looking to exit the market. A survey from HMRC found that around a quarter of UK landlords plan to sell some of their properties over the next 12 months, and around a third expect to do so over the next five years1. Further analysis from Savills has found that landlords are selling properties at a faster rate than they are buying2, with the Renters’ Rights Bill and profitability among their top concerns3.
For those who still believe in the long-term merits of real-asset investment but no longer see buy-to-let as a practical route, listed markets provide a liquid way to gain exposure. They also serve a growing cohort of investors for whom home ownership is a longer-term objective. There is evidence to suggest Gen Z is engaging with stock market investing earlier4 than previous generations. And with rising deposit requirements and higher mortgage costs extending the timeline for first-time buyers, listed real estate offers a way to access property-linked income and potential capital appreciation while working toward ownership in the future.
TR Property Investment Trust brings these elements together: diversified exposure to high-quality listed landlords and developers across the UK and Europe; the income characteristics and inflation linkage of real assets; and the liquidity and transparency of an equity investment – without the responsibilities of direct ownership.
