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There’s still more than two months to go before the new 2026 Stocks and Shares ISA allowance kicks in. So there’s plenty of time, and no need to even think about it yet, right?
No, that’s not my approach at all. When I have the opportunity to invest up to £20,000 tax-free in the stock market, I want to plan as soon as I can. And for the coming year, I have my eyes on some property-related investments.
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Investors just starting out this year should really look for diversification in their first picks and probably not concentrate on any specific sector. But I’m happy with my current selection, so I think I’m fine to focus a bit.
Why property? Inflation has just blipped up. But the general trend is down, and I can see mortgages getting cheaper in the next year or two. And when inflation falls, retail and other purchasing stands a good chance of getting a boost too. So, commercial real estate investment trusts (REITs), those are what I’m turning my eye towards.
Buy the biggest?
I like the look of the UK’s biggest, Segro (LSE: SGRO), which invests in shopping centres, warehouses, and other industrial and logistics properties. By REIT rules, it has to distribute at least 90% of its taxable income as dividends. And I like that, with a forecast 4.1% dividend yield on the cards.
Segro is also involved in partnerships and joint ventures with others. And that helps rake in extra management fees on top of its own rental incomes. And speaking of rents, in October’s Q3 update the trust reported a 94.3% occupancy rate with “continuing strong like-for-like net rental income growth“.
Segro is moving into data centres too, to capitalise on growing AI demand. I fear that might turn out to be a bit double-edged though, and any slowdown in the AI bandwagon could hurt the stock. But I’m still hoping for some share price growth on top of the dividends.
Buy them all?
To provide a boost to the much-needed Stocks and Shares ISA diversification, I’m also checking out the iShares UK Property UCITS ETF (LSE: IUKP). It’s about the closest thing we have to a REIT index tracker, spreading its shareholders’ cash across a range of individual REITs.
It actually includes some Segro. But Land Securities, LondonMetric Property, and Primary Health Properties are among the 30 or so individual trusts it holds. I like the look of all three of those. They all made my first-pass shortlist for these current ISA considerations.
The expected dividend yield is lower at 3.4% — and dividends are never guaranteed. It’s also open to sharing the risk of any one of its holdings having a bad year.
But as a way to get into real estate investing, especially for Stocks and Shares ISA newcomers, I definitely think it’s a strong one to consider. The broad diversification alone makes iShares UK Property attractive to me.
