THE property market's Big Bang is just over two weeks away.

From January 1, a new way of investing in property becomes available to thousands of first-time investors. Under the new rules all it will take to grab a share of the booming property market is a modest dabble on the stock exchange.

As well as encouraging novices into property, the new real estate investment trusts (REITs) will mean a big boost for old hands at property investment.

The new trusts - which allow income from property rents to be funnelled directly to shareholders, without the company paying corporation tax - could mean big changes for the Manchester property market.

Supporters say that so-called "securitisation" of the property market could prompt the biggest shake-up since the property crash of the late 1980s by encouraging more property investment by ordinary people with cash to buy into REITs.

The list of companies already planning to convert themselves into REITs includes major names like British Land, one of the largest retail landlords in the UK and owner of the Debenhams building at Market Street, and Warner Estates, which jointly owns shopping centres in Bolton and Middleton.

Experts say that REITs are sure to target Manchester's top buildings to add to their property portfolios. The city's largest modern office blocks, hotels and retail centres will all be on the REITs shopping list.

The REITs arrive, however, at a time when the property market is already awash with money. According to research by DTZ an astonishing é69.5bn flowed into property in 2005, up dramatically from é22.6bn the year before. The 2006 figure, when it comes, is likely to be even higher.

Avalanche

This avalanche of cash has already helped to push property prices up to all-time highs, whilst in response yields, which measure the return on investment, have plunged to record lows. Some commentators wonder if investors in the new REITs may well find themselves joining an over-heated, over-priced property market. Hardly the best start for a new investment vehicle, say the doubters.

Bruce Poizer, head of investment at DTZ in Manchester, says those fears can't be dismissed, but shouldn`t be exaggerated.

"There's no doubt that it is a possible scenario, and the timing for the introduction of REITs is a little unfortunate, but REITs are definitely a good thing. It shows that the property market is waking up to some innovative financial approaches," he says.

"Even so, small-time investors, or newcomers to property who buy into a REIT, still need to think about what they are doing and to select their fund manager very carefully, targeting the fund managers who make reasonable assumptions about the market and can therefore earn reasonable returns.

"After all, the last thing we want is for REITs to bring in lots of new investors whose first experience of property is both unsuccessful and unhappy."

Chris Jones, partner at Manchester-based property investment specialists Christopher Dee, also sees reasons for caution. Yet he, too, thinks REITs are a good move.

"I could not predict whether REITs will add fuel to the fire in the property market, not least because there are already signs that the market is cooling."

"For instance, there are signs that certain types of second-hand commercial property is not selling so fast.

"I think this suggests that investors are already becoming more cautious, especially if they are relying on bank debt to fund their purchases."

"If the property market was still racing like it was this time last year, I'd be worried.

"But now, with interest rate rises helping to cool the market, I'm not so worried that it'll all run out of control once the REITs start to operate."

Martin Dawson, head of tax for Baker Tilly Manchester, is even more relaxed. "There will be no flood of new money into the property market. However, the value of shares in the largest property companies has already started to increase in anticipation of REITs," he explains.

Mr Dawson says that rather than forcing up the amount of money invested in property, demand from investors interested in REITs will simply push up the share price of the REIT companies.

Quality

"Experience in other countries has shown that the REITs sector has grown and introduced high quality property management to a wider section of the property market. This has resulted in better quality property becoming available to both the residential and commercial sectors," he says.

With only a couple of weeks to go before some of the UK's biggest property companies convert themselves into REITs, specialists say it is too soon to know with whom to invest, or what the results will be.

James Boyle, managing director of Altrincham-based Braemar Wealth Management, says: "It is still too early to say exactly what will be the best offerings available but REITs look set to become one of the hottest asset classes demanded by wealthy investors in Greater Manchester. Canny investors will be eyeing opportunities as soon as they come into place."

"People shouldn't make the mistake of diving into the first opportunity that comes along. They should take independent advice from someone who will monitor the market and weigh up the downside and upside of each individual REIT."

"REITs won't create problems for the market. Instead, it will offer up more possibilities and breathe new life into the sector. More liquidity means more flexibility and more opportunities to make money."

The countdown to property's big bang is now well underway. Whether it will end in a magnificent explosion or a frustrating fizzle, remains to be seen.

Karl Jackson head of property at law firm Mace & Jones says: "We're in danger of over-stating the impact. REITs will not create a big bang, suddenly flooding the Manchester property market with cash.

"They will, however, reinforce the strong position of the property market as a good place to invest cash and buy shares."

For more details on REIT'S, please select the links below.

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