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5 reasons why you should use your ISA allowance to invest in property

Over the last year of change and uncertainty, one asset class has seemed to hold its own – residential property.  The property market was already experiencing solid growth via the so-called Boris boom effect at the start of 2020.  However, supported by government initiatives, including a stamp duty holiday, it continued on an upward trajectory, surprising many industry experts.  Nationwide’s House Price Index reported annual house price growth in 2020 of 7.3%, a six year high, and the number of mortgages approved for house purchase each month reached their highest level for a decade in October, nearly 50% above the monthly average recorded in 2019.

This growth continued to provide stable investment opportunities in property, although changes to the tax regime for landlords meant that many saw a reduction in overall yield.  Alternative forms of property investment such as Real Estate Investment Trusts and fractional property investing saw steady returns, although some that had over relied on one sector of the market, such as student accommodation, paid the price in 2020.

As the ISA deadline approaches, many of us are thinking about how to use up our ISA allowance.  With cash ISAs returns at an all time low, alternatives, such as Stocks and Shares ISAs and Innovative Finance ISAs (for fractional property investing) that provide opportunities to access property based investments can provide more attractive yields.  Here are five good reasons why you should consider using a portion of your ISA allowance each year on property investments:

Top 5 reasons to invest your ISA allowance in property

  1. Stocks and Shares ISAs and Innovative Finance ISAs both allow you to access property investment and benefit from a buoyant housing  market without becoming a landlord and having all the hassle of managing and maintaining a property.
  2. … and to state the obvious, using ISA wrappers to invest in property, means your returns will be tax free, unlike conventional buy to let investments.  Any capital gains you make on house price inflation will also be free from tax.
  3. With the right sort of lease and a professional approach to managing profit margins, property can be a stable long term investment with yields of 5-10% on average plus capital gains.  When investing in either property based stocks and shares or via fractional property investment, your asset could also be more liquid than a buy to let property where you will have to sell a property to release your capital.
  4. Diversification.  With most investment portfolios containing bonds, equities and possibly some commercial property, residential property investments can diversify your portfolio by providing an asset with little correlation to the others.  See our blog post ‘Diversifying your portfolio with property’ for more information.
  5. Finally, property investments are increasingly providing investors the opportunity to back social or environmental projects, whether it’s helping to close the social housing gap, investing in zero carbon housing or supporting housing charities.  These impact investment opportunities also tend to make stable, long term investment options as they are often backed by central government initiatives or other credible counterparties.

Is property investment for everyone?

Whilst investing in property via an Innovative Finance ISA or Stocks and Shares ISA has major plus points, they’re not going to be for everyone.  Money held in Innovative Finance ISAs and Stocks and Shares ISAs are not covered by the Financial Services Compensation Scheme and therefore your capital is at risk.  Unlike Cash ISAs, in both Stocks and Shares ISAs and Innovative Finance ISAs the value of your investment can go down as well as up, so you need to assess the risk you are taking.  You therefore need a certain level of understanding and interest in property investments to evaluate their risk profiles and to get the most out of them.  

However, fractional property investing and REITs are amassing a steadily growing fan base of personal investors looking for alternatives to diversify their portfolio.

The Assetz Exchange Innovative Finance ISA

The Assetz Exchange Innovative Finance ISA is accessible in three easy steps and allows you to invest in a range of property including social impact housing projects with charities such as United Response and NACRO:

  1. Register on the Assetz Exchange platform hereYou will be asked to take part in a short quiz to ensure you understand the risk profile of the investments on the exchange.
  2. Once you have been accepted onto the platform, you can transfer money into your ISA wrapper or transfer in money from an existing ISA with another provider.
  3. You are now ready to invest!  Choose from a range of properties with yields from 5% to 9%.  You can invest as much or little as you want in ‘slices’ of each property and earn income every month as tenants pay their rent and benefit from house price appreciation.


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