Property development companies issue property bonds as a way of raising money from investors to help fund the build of either residential or commercial projects, or a combination of both. Residential housing is one of the most popular types and they can often be exclusive, high-quality properties in high-demand locations. But many companies offer other types of projects, such as student accommodation, hotels, and shopping centres, so there’s plenty of choice depending on your investment goals, and means to diversify your property portfolio.
Property investment bonds are designed for high net worth and sophisticated investors and offer exposure to the property market. Getting involved in property projects also helps smaller building companies provide homes and crucial housing in a market which is always in high demand.
The advantages of property investment bonds
1. Potential for attractive returns
Property bonds can provide higher returns than other investment products such as government bonds or savings as funding from investors is more cost effective than borrowing from banks, and therefore returns offered to investors can be greater. Rates are also often fixed, meaning that your returns won’t change even if the financial climate does. There’s also opportunity to save money in various areas with this type of investment. For example, property bonds mean that you’re an investor and not a landlord, so there’s no need to cover the cost of redecorating or replacing furniture.
2. Your money is asset-backed
Investing in property bonds such as those offered by Propiteer Capital PLC means that your investment comes with asset-backed security. Bond issuers in this field normally combine assets into one group, boosting the security offered and giving investors multiple revenue streams to repay their bonds. By using asset-backed securities, it allows bond issuers direct access to exclusive developments, such as those offered by Propiteer Capital PLC, including the Dublin town centre redevelopment.
3. Time-efficient
This is something that will appeal to all types of investors. While it’s important to know the stakes of your investment and do your homework, investing in property bonds means there’s no time wasted on trying to pick winning stocks or being buried in company reports. Property bonds make is easy to grow your money with very little effort. Once they’re set up, returns are normally fixed and paid in regular intervals.
The disadvantages of property bonds
Property bonds benefits do come with their downfalls. While property bonds offer the security of being asset-backed, that doesn’t mean returns are guaranteed, and despite the security of a fixed rate, don’t forget that your money is locked away and can typically only be accessed once the bond matures. Also, while the potential returns may be higher than other products, they are not protected by the Financial Services Compensation Scheme (FSCS), meaning that investors are not covered if the property developer fails for whatever reason.
Every investor has different goals and priorities, so it’s important to weigh up the pros and cons based on your investment goals.
When to invest in property bonds
Knowing the right time to make any kind of investment can be tricky and not always very straight-forward, and the changes to the property market over the last two years have been unpredictable as the pandemic impacted the world in many ways. For the property market in particular, national statistics show that house prices in the UK have seen a 10% growth year-on-year to November 2021. The below chart shows the trend in property prices over the last 15 years.
It seems that Covid-19 is here to stay and the global pandemic continues to present new challenges as well as opportunities in different markets. Based on the above chart, house prices in the UK are on the rise, so this may be a good time to consider property bonds.
Key takeaways
· There’s potential to earn higher rates of returns
· Your money is secured by assets
· Good returns for minimal effort
If you’d like to learn more about bonds and see Propiteer Capital’s range of projects, get started here.
Recommended Read: A Quick Guide to One-Year Bonds