OST of us want to own property, but not all of us can afford to . or can we?

For many, owning property means buying a home, but there are other ways you can own property - such as through the stock market or via unit trusts.

The attractions of investing in property are that it has been shown to grow your capital as the value of the property increases over time and provides regular rental income.

Buying a physical property means owning a home, whether to live in or rent out, or owning commercial property. Buying a home is often the largest investment you will ever make and while it offers growth potential, you need to weigh up the pros and cons.

Owning direct property means you have control over what and where you buy. Another advantage is that it tends to be less risky than shares because its value is steadier and it is regarded as an investment safe haven.

The main drawbacks of direct property are affordability as it requires a huge capital outlay and it takes time to buy and sell. There is the added risk that if interest rates rise, or there is more supply than demand, the rental income may not cover the bond repayments. A property also requires constant upkeep and maintenance.

Listed property (shares)

A more affordable way for you to own property is buying property shares. These are the shares of property companies listed on the Johannesburg Securities Exchange. These companies generally own a range of commercial properties like retail, industrial and office buildings. Shareholders receive part of the rental income earned by the properties and, if the value of the properties rises, the share price should increase and, in so doing, grow the value of your investment.

The great advantage of buying property shares is that the different property types tend to perform under different market conditions. For example, building up to the Fifa Soccer World Cup in June, there is a lot of investment in hotels. The recession, on the other hand, has resulted in higher office vacancies. Vacant offices mean no rental income.

In addition, a shareholder in listed property does not need to find tenants or maintain the buildings. It is also a lot easier to buy and sell shares than a physical building.

The drawbacks of listed property are that the investor has no influence over the rental income from the properties.

Being listed on the stock market, property share prices can move in line with broad market movements, even for events unrelated to the property market. This makes listed property more risky than direct property.

Unit Trusts

Finally, there are unit trusts. A property unit trust pools together the money of many individuals and invests in the shares of a range of different listed property companies. The investor buys units, which represent a portion of the combined value of all the different companies' shares.

The benefits of unit trusts over listed property are diversification and affordability. Because a property unit trust is diversified across a number of property types and property companies, there is less risk than investing in only one property share. Another advantage is that you can invest as little as R500 a month.

The disadvantage of unit trusts is that performance can be diluted if one company in the portfolio performs badly. Unit trusts also generally cost more than investing directly in the stock market. This is because you are paying a professional fund manager to choose the best property investments and manage them on your behalf.

So, as part of a balanced investment portfolio, property can help to reduce your overall risk through diversification and also plays a role in providing income and growing your capital as property values rise over time. It's worthwhile asking an investment adviser to show you how best to make property part of your portfolio.

l The writer is Head of Distribution, Old Mutual Investment Group (SA)