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Property Purchase Tax in UK Relatively Low

While Europe levies some of the highest property purchase taxes in the world, the UK has a relatively low property purchase tax.

Europe levies some of the highest taxes on the purchase of prime property, charging an average 4% in taxes on a purchase of US$1 million (equivalent £765,000), according to a new study released by UHY, an international accounting and consultancy network.

UHY says that major European economies including France (5.1%), Germany (5.0%), and Spain (8%) levy high property purchase taxes, while Belgium ranks the highest at a whopping 11.3% for real estate worth £765,000.

The United Kingdom, meanwhile, sports a relatively low property purchase tax at 3.5%. UK’s property purchase tax is lower than the European average (3.8%) and higher than the global average by only 0.2%. UK’s property purchase tax is also lower than Australia (4.8%), Pakistan (6.0%), India (5.0%) and Croatia (5.0%).

The low property purchase tax is a blessing for high-performing countries like the UK, which has an acute under supply of housing. Low property purchase tax also helps spur inward investment from foreign investors.

UHY says that although high property tax is an attractive source of revenue for governments, it could discourage labour market mobility and valuable overseas investment. Higher property purchase taxes also puts a strain on domestic buyers, who may not actually be particularly wealthy, given house price inflation in some locations over the last decade or two.

Article originally published at http://bit.ly/2a7XAyF

CSI Prop proudly promotes international investment property with high yields at low risk. Our portfolio comprises residential and purpose-built student property in cities across the United Kingdom (London, Luton, Manchester, Liverpool, Newcastle, York, Glasgow, Scotland; Sheffield, etc); Australia (Melbourne, Perth, Brisbane) and Thailand (Bangkok). Our projects are concentrated in high-growth areas with great educational, infrastructural and job growth potentials. We aspire to make a difference in the lives of our clients by helping them achieve their investment goals through strong market research backed by third party experts and due diligence. 

Disclaimer: CSI Prop does not provide tax & legal advice and accepts no liability. Readers are encouraged to consult a qualified tax or legal advisor for a thorough review.

Need advice or clarification? Call us for more information and/or to find out about our projects! Hotline: 03-2162 2260

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Brexit: UK Property Outlook

Brexit: the UK has left the building. What is the UK property outlook post-Brexit? Image credit: http://bit.ly/29vbXHr

In a surprisingly historic and shocking move, the United Kingdom (UK) voted to leave the European Union (EU) on June 23rd, throwing the global community and stock markets into a furor. But what next? How will Brexit impact the economic and political climate? As expected, plenty of conjecture has surfaced through the cracks. Our research team at Cornerstone International Properties cuts through the noise of speculation and presents an unbiased view of what the future holds for the UK economy and residential property market.

Political and financial uncertainty is affirmative, but nothing drastic as the world waits for Article 50 to kick off

As we had correctly predicted in our Brexit FAQ published before the Referendum, Brexit has caused uncertainty, resulting in a tumble in the pound. The housing market has slowed down, but not at any rate worth panicking over. With David Cameron’s resignation, Theresa May has been elected into office as new Prime Minister. Only after this can the government call for Article 50 to take effect.

Britain’s exit is not immediate

The Article 50 process, crudely put, is a divorce. It sets out the exit process for countries wanting to leave the EU, but because it is vague, member states need to enter into negotiations to thrash out the terms of any deal. A two-year window will begin immediately after Article 50 is invoked; this is when Britain will negotiate plans for its relationship with the EU, post-Brexit. The topics to be broached are wide and the terms of a deal will require the unanimous agreement of all 28 member states. This could take more than two years. In the meantime, Britain is still bound by the obligations and responsibilities of its membership with the EU.

Opportunity abounds amid risks

The immediate issues facing the UK is political rather than economic. As such, the political uncertainty could affect the economic climate. The UK government will try to mitigate disruptions and bring certainty to the financial markets as best as it can. Interest rates will likely remain lower for longer. In the short term, the uncertainty of UK’s future relationship with the EU will affect trade and consumer confidence, but this is unlikely to drag out into a blown-out recession as predicted by some naysayers. In short, the UK’s economy is in good health and will ride out the storm.

Ultimately, UK is home to 60 million wealthy consumers and a high-skilled workforce — something that will remain attractive to multinational companies across the globe. Coca-Cola and BMW will still want to access a market this big; skill-based employers such as PwC and Google will always want to access such a large pool of talent (source: Knight Frank).

Higher buying power for overseas investors as pound value falls. Pound to ringgit ratio equivalent to exchange rates after the last financial crisis in 2008.

While investment sentiment will be affected, UK will remain an attractive property investment destination. It looks increasingly likely that investment will be led by Asian and US investors.  With the fall in the pound, London – the most expensive property investment location in the UK – has become more affordable and overseas buyers now have significantly higher buying power. The media is rife with reports of shrewd investors seizing this sterling opportunity to invest in the market. Knight Frank reports that the sale of prime London real estate increased by 38% a week after Brexit!

At the time of publication, the pound to ringgit value stands at £1: RM5.18 representing a 14% drop. More significantly, the value of the pound against the US dollar has dropped to a 31-year low, at £1: US$1.28.

MYR-USD-to-GBP-ratio-csiprop.com
The devaluation of the pound is at a 31-year low against the USD and back within the 2008 rates against the MYR. Overseas investors now have a significantly increased buying power.

People looking to do business in the UK now have a more level playing field with the abolishment of EU red tape, making London an attractive place to invest again.

House prices to rise in the medium term

UK-housing-market-remain-strong-in-bad-times-csiprop
The UK housing market has performed well, rallying even in spite of the recessions over the years.

A general short-term slowdown in the housing market is expected. Developments that have not yet begun could be delayed pending more clarity. The slowdown in the residential market may be a good thing for first-time buyers as property becomes more affordable.

However, the fact remains that the inherent undersupply of housing in the UK will continue to underpin the market. The above chart demonstrates the growth in the UK housing market through the years even during the recessions. The general housing shortage means that prices should rise in the medium to long term as reticence by developers to commit to new builds, will make it harder for the government to achieve its target of building new homes by 2020. This will push house prices up and the cost of renting will rise across many parts of UK as demand from tenants increases whilst new housing supply falls.

Student property to remain resilient

UK student property proved its resilience by outperforming other assets  in weathering the past economic downturn. We are confident that it will ride the Brexit wave well as demand for higher education in the UK is unlikely to be directly affected due to (i) a more attractive exchange rate because of the drop in the pound for international students; (ii) unlikely change in domestic demand for higher education. Knight Frank anticipates that EU students may be required to pay full international rates, but noted that they only represent around 6% of the total full-time student population in the UK. The acute undersupply in purpose built student accommodation in the UK will continue to uphold market values.

UK economy to withstand the challenge

The UK has long been a global superpower with London as the world’s financial, education and cultural centre – even before it became a member of the EU. London will work towards negotiating its own treaties with the world and terms of exit with the EU. We see London’s position as the world’s financial centre wavering in the short term, but will regain its strength once the dust settles.

UK education will continue to hold its stead; we don’t foresee anyone waking up and saying, “I’m not going to study in the London School of Economics because the UK is no longer part of the EU.”

Summary

That Brexit has caused uncertainty in the housing and economic market, is undeniable. There are risks and opportunities, but the UK economy looks set to prevail. The business world will adapt and Britain’s policies and the flexible economy will help it right itself around. While there will be a slowdown in the housing market, this will only be in the short term as the lack of housing supply will not change overnight. Given the substantial shortage of housing across the UK, the residential housing market will remain a good investment in the long term even as student accommodation remains resilient.

Ultimately, Brexit has probably presented one of the best opportunities to invest in a UK property. In the long term, taking advantage of the current market will allow you to reap strong returns once the UK economy picks up again.

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CSI Prop proudly promotes international investment property with high yields at low risk. Our portfolio comprises residential and purpose-built student property in cities across the United Kingdom (London, Luton, Manchester, Liverpool, Newcastle, York, Glasgow, Scotland; Sheffield, etc); Australia (Melbourne, Perth, Brisbane) and Thailand (Bangkok). Our projects are concentrated in high-growth areas with great educational, infrastructural and job growth potentials. We aspire to make a difference in the lives of our clients by helping them achieve their investment goals through strong market research backed by third party experts and due diligence. 

Disclaimer: CSI Prop does not provide tax & legal advice and accepts no liability. Readers are encouraged to consult a qualified tax or legal advisor for a thorough review.

Need advice or clarification? Call us for more information and/or to find out about our projects! Hotline: 03-2162 2260

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RIMA – JUN 2016

We are pleased to share that the developer of RIMA apartments in Brunswick East, Melbourne has announced the appointment of their builder as well as commencement date of the development.

Located on 22 Lygon Street, RIMA is surrounded by some of the most popular retail institutions, watering holes and eateries in the city. It is in perfect proximity to two of Australia’s finest universities – the University of Melbourne and RMIT University, Brunswick. Everything is a tram or bus ride way!

Design-wise, RIMA is a polished ensemble of clean lines, steel and glass, whilst the interiors offer spectacular views, well-configured and seamless spaces and abundant natural lighting. RIMA’s rooftop club is a fabulous hideaway from the hectic Brunswick and Lygon pace, complete with a terrace lounge with open fire place, dining area with barbecue, teppanyaki grill, bar and a cosy outdoor cinema – surrounded by uninterrupted views of the city; a perfect spot for entertainment.

RIMA Investment Highlights

  • Capital growth averaging 5.06% p.a. over the last 10 years (translates to more than 70% growth over 10 years, making a $500K apartment worth $850K)
  • Vacancy rates of 2.1% (vs 2.9% in Metropolitan Melbourne)
  • 28.6% are within the 25 – 34 age group (vs 15.4% in Greater Melbourne)
  • Residents able to pay higher rental – 17.4% earn more than $1,500 per week (vs 12.9% in Greater Melbourne)
  • Only 10 mins from University of Melbourne and 12 mins from RMIT University
  • Only 3km to Melbourne CBD
  • Convenient public transportation: tram & bus

CSI Prop proudly promotes international investment property with high yields at low risk. Our portfolio comprises residential and purpose-built student property in cities across the United Kingdom (London, Luton, Manchester, Liverpool, Newcastle, York, Glasgow, Scotland; Sheffield, etc); Australia (Melbourne, Perth, Brisbane) and Thailand (Bangkok). Our projects are concentrated in high-growth areas with great educational, infrastructural and job growth potentials. We aspire to make a difference in the lives of our clients by helping them achieve their investment goals through strong market research backed by third party experts and due diligence. 

Disclaimer: CSI Prop does not provide tax & legal advice and accepts no liability. Readers are encouraged to consult a qualified tax or legal advisor for a thorough review.

Need advice or clarification? Call us for more information and/or to find out about our projects! Hotline: 03-2162 2260