"If the housing market recovers by the end of 2005 and PIFs are seen as adding fuel to demand, then enthusiasm from the Treasury will wane," Brown told a British Property Federation conference. The financial industry is keen on the development of a British REIT market. The total investment return from UK commercial property was 19% in 2004, the highest in 10 years, easily surpassing that of UK equities and gilts, research firm Investment Property Databank reported recently. The total investment return from the FTSE All Share index was 12.8% last year and for gilts 6.6%, it said.

Commercial property's performance has now surpassed the two other main investment asset classes over one, three, five and 10 years. The market capitalization of the US market was $305 billion by end-December last year, according to data from US firm Sentinel Real Estate Corp. UK officials are currently drawing up the details of a working REIT, such as whether they can invest in new developments and enhance returns by borrowing. The government has already said it would not legislate for these trusts in 2005, but would produce a discussion paper later this year.

William de Broe's Brown said a relative shortage of property in Britain meant REITs could push up house prices. The Bank of England has already warned about lending to what may be an overheated sector. Private housing prices are also strong, having risen sharply over the past 10 years. Prices reached a record average high of £163,748, according to mortgage lender Halifax.

Strong gains in house prices have prompted many homeowners to look at unlocking the value of brick and mortar to provide for old age, David Miles, chief UK economist for Morgan Stanley, told the same conference. "The scope to tap housing wealth as a supplement to insufficient savings is extremely large," he said, adding that unlocking housing wealth was not a panacea.