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Britain, a Nation of Renters?

Image credit: http://bit.ly/2eThsCC

Home ownership across England was at its peak in April 2003, when 71% of households owned their homes, but the figure fell to 64% by February this year, according to a new report by the Resolution Foundation thinktank. The report also shows a big slump in home ownership in Greater Manchester and cities in Yorkshire and the West Midlands. This figure is the lowest since 1986, when home ownership levels were on the way up as a result of policies introduced by the Thatcher administration.

Today, the UK is populated by a generation of renters, with the number of UK households renting property having risen from 2.3 million in 2001 to 5.4 million in 2014 according to the Royal Institution of Chartered Surveyors (Rics).

Here are 5 reasons why buy-to-let or rental property will remain crucial in the UK for some time to come:

Savills calculated the cost of buying vs renting a home. Image credit: http://on.ft.com/2eKm5kU

Reason #1: It’s about 20% cheaper to rent a home in the UK on a monthly basis than to buy (Savills)

Renting a home used to be 25% more expensive than owning back in 1996, but in 2007, it became 79% cheaper to rent than buy your own.  When the costs of capital repayments on a mortgage in Year 1 are factored in, costs rise and renting becomes significantly cheaper than buying on a month-to-month basis. In order for a first-time buyer’s monthly costs to be lower than the costs of renting, the purchaser would require, on average, a deposit of at least 39% of the value of the property, according to Savills’ calculations.

Growth in house prices vs wages in the UK as at Jan 2016: While UK house prices increased by 7.9% last year, figures from ONS show that the UK median wage increased by just 1.8%. This suggests that house prices are growing more than four times as fast as median wages. Source: ONS. Image credit: http://bit.ly/1SjLa5f

Reason #2: House prices too high in proportion to wage growth

Despite recent figures from mortgage lenders showing an increase in the number of loans taken out for house purchases (possibly due to low interest rates), the number of homes for sale is close to a record low, and prices continue rising.

A typical home in the UK now costs six times average annual earnings despite slowing house price inflation. According to Nationwide, house prices have risen by 20% over the last three years while wages rose by just 6%.  Meanwhile, prices in the capital are 9.2 times average earnings, while the Royal Institution of Chartered Surveyors (Rics) said 22% more surveyors in London expect sales to fall over the next three months. The last time prices/earnings ratio was so high was in March 2008. A ratio of 4.5 times a borrower’s income is regarded as the maximum that banks and building societies will agree to lend.

Over in Greater Manchester, the proportion of home owners dropped from 72% in April 2003 to 58% this year. According to financial analyst Louise Cooper, the average house price in England in 1986 was £38,000 but today it is £226,000 (Rightmove’s latest report on average asking prices for a home in England and Wales in October 2016 now stands at £309,122). And that over the same period, the average salary had only gone up 2.5 times. “Everyone says it is a London problem. It is not,” said Cooper.

Renting privately is now the norm, according to a PwC report, for those who cannot afford to buy but do not qualify for social housing. By 2025, PwC predicts that 7.2m households will be in rented accommodation, compared with 5.4m today and just 2.3m in 2001. Source: PwC. Image credit: Guardian http://bit.ly/2eTdslz

Reason #3: Private rented sector – biggest provider of rented homes

The private rented sector has taken over from councils and housing associations as the biggest provider of rented homes with prices paid by tenants in Britain increasing by 2.3% in the 12 months to Sept 2016, according to latest official data. The number of households renting from a private landlords stands at 4 million while the number of those renting from a council or housing association stands at 3.7 million. Statistics peg the number of renters in the UK at 5.4 million as at 2014, but Rics predicts that at least 1.8 million more households will be looking to rent rather than buy a home by 2025. An analysis published last year by PwC suggests that 7.2 million households will be in rented accommodation by 2025 compared with 5.4 million in 2015 and 2.3 million in 2001.

According to the English Housing Survey, four in 10 renters in the growing private rented sector do not expect to ever buy a house and of those who do, 44% expect to wait more than five years before they can afford it.

House building has abysmally failed to keep pace with Britain’s population explosion, a crisis that was further exacerbated following the financial crisis that induced a slump in house building as the graph shows the UK annual population change against annual new housing build completions. Data source: ONS. Image source: Market Oracle http://bit.ly/2fBK9Wc

Reason #4: The UK has an undersupply of housing

It is an old refrain, but the UK is facing a critical undersupply of housing even up till today. In late 2015, the BBC published an incriminating article on the shortage of housing in the UK, citing the Labour government’s failure to build 240,000 homes by 2016 — a target set in 2007. The Barker Review of Housing Supply had noted in 2005 that about 250,000 homes needed to be built every year to prevent spiralling house prices and a shortage of affordable homes. The closest the UK got to hitting the target was in 2006/07 when 219,000 homes were built. During the EU Referendum campaign, Brexit-backer Iain Duncan Smith said the UK would need to build 240 houses a day for 20 years to cope with increased demand, a claim that has been substantiated by the BBC. And the consequence of undersupply and high demand? Skyrocketing prices. With house prices at unaffordable rates, the only other option would be to rent.

Trivia 1: #DidYouKnow that for decades after WWII, the UK used to build more than 300,000 new homes a year? Now it’s about half that amount.

Trivia 2: In May 2014, BoE governor Mark Carney complained that housebuilding in the UK was half that of his native Canada despite the UK’s population being twice its size.

Home ownership is clearly declining among those within the younger age group. This is caused by a number of reasons including affordability and, increasingly, preference (lifestyle).

Reason #5: Lifestyle – the increasing preference for renting vs buying

While for some it is an economic choice, more are choosing to rent their homes over buying due to lifestyle. This shift is being prompted by younger workers today, also known as the Gen-Y demographic who are setting down later in life and changing jobs and careers with more regularity than their parents. This generation are marrying and having children later in life, allowing them the freedom to move as they want and when they want.

A research conducted by AXA discovered that less than 50% of the research participants are renting because they cannot afford it compared to the 67% in a study performed in 2013. The research revealed that many enjoy the freedom and flexibility of being mortgage-free. Thus the idea of being tied down to a mortgage and a single location is preventative for a workforce that wants to remain transient.

Conclusion

Owning property for rental in the UK is a good investment. It is important, however, to be aware of the costs involved and to be prudent about where you should invest in buy-to-let in order to maximise your returns.

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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Keeping a Close Watch on Perth Property

Property in Melbourne and Sydney often hog  the limelight, but savvy and seasoned investors are keeping a close watch on the West Australian city of Perth.

West Australian property is proving its broad appeal, with new figures from the Foreign Investment Review Board (FIRB) revealing a total of 2043 approvals for foreign buyers, an increase of almost 30% from the 1572 in the previous financial year.

To recap, Victoria topped the list with 16,775 approvals, followed by NSW with 12,349 and Queensland with 5023, with a big number of approvals for overseas buyers from the Chinese.

The Numbers are Looking Good

In the not too distant past, news had circulated of the mining slump adversely affecting Perth’s economy and softening the housing market. However, sales volume data up to March 2016 show signs of a bounce in consumer confidence. It appears that the property market is close to or at the bottom of the cycle with industry experts predicting a cautiously optimistic outlook for Perth in 2016.

This chimes with official figures released by the Australian Bureau of Statistics (ABS) which show a 0.5% jump in Perth’s residential property prices in the December 2015 quarter, marking an end to the trend of sliding property prices recorded since late 2013.

“The performance of the housing market is tied to the economy, which is reflected in unemployment rates/employment opportunities,” says CSI Prop spokesman Virata Thaivasigamony.

“And, here’s the thing: all that negative predictions of a boom or bust in the WA economy that has been going around, has not been reflected in employment stats. In reality, Perth’s economy is more diversified and not solely driven by the mining industry as people make it out to be.

“ABS’ labour force figures for March 2016 show WA’s unemployment rate had fallen to 5.5% — which is below the national unemployment rate of 5.7%. Of course Australia’s economic performance in general is tied to the global economy, but from these numbers, the WA economy isn’t a lost cause and the reason why the Perth property market hasn’t tanked drastically as has been predicted,” Virata adds, citing Melbourne as yet another city that has defied years of doomsaying.

According to ABS, WA’s unemployment rate is lower than Victoria’s (5.7%), Queensland’s (6.1%), South Australia’s (7.%) and Tasmania’s (6.8%), and marginally higher than NSW’s (5.3%).

Meanwhile, Perth’s population is expected to increase by 70% to 3.5 million by 2050. ABS statistics show that Perth’s population growth is scheduled to overtake Brisbane by 2028, becoming the third largest city in Australia. Wise investors are looking to leverage on this growth by investing in strategically located property at currently affordable prices (while there is little competition among buyers) in order to achieve strong capital growth in the coming decades. Note that prices of inner city property is far more affordable than a similarly located project in Sydney.

10 Years Rental Assurance

Investors looking to also benefit both in the short term (rental income) and long term (capital growth) can apply for the National Rental Affordability Scheme (NRAS), a joint Australia and WA Government initiative to increase the supply of new affordable rental dwellings in WA.

Under the NRAS, applicants can apply for annual incentives to buy and rent their homes to low and moderate income households (tenants must be approved by Australian Government).

NRAS landlords rest assured that their property will be the first pick among the rental community as the property must be rented at a 20% discount. However, this amount is paid back by the government to the landlord as an incentive. These incentives, totalling over A$100K, is tax-free.

In fact, these incentives are worth more than the discount given, which essentially means the landlords benefit a great deal at the end of the day.

Landlords end up with a 7.2% gross rental yield vs a typical property which generates only 4% – 5%. This also means that investors are essentially assured of rental for 10 years at a higher return.

Call us at 03-2162 2260 to learn more about Perth property, discuss options or how you can be part of the NRAS programme.

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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Manchester: Best Property Investment Yields

In Part 1 of our Manchester series, we discuss the facts & figures that make Manchester THE top city for investment in the UK. The numbers don’t lie.
Photo credit: Select Property Group

The investment landscape in the UK is changing. The focus has moved from London as the go-to destination for investment and the UK’s largest economic gains, to Manchester.

With the highest yields and critical undersupply of housing in the Northern Powerhouse on the back of significant investments by the government, Manchester’s growth is just beginning. Today, Manchester is at the top of the league in annual rental increases in the UK and, with a rapidly expanding population comprising greatly of the youngest demographics in the country, Manchester is the best place for property investment.

In fact, property advisor JLL has predicted that house prices in Manchester will increase by 26.4% in the next 5 years, with 5.5% growth over the course of 2016.

Trust the facts. Here are 10 reasons why you should invest in Manchester:

Manchester has secured £8.2 billion of investment over the past decade, more than Birmingham’s £6.5 billion or Glasgow’s £5.3 billion – CBRE, Jan 2016

2  HSBC ranked Manchester as the UK’s no. 1 city for property investment yields in 2015, thanks to average annual returns of 8% – HSBC, 2015

3  Since 2010, average annual yields in Manchester have risen by 6.02%, the highest in the UK. In comparison, yields in London rose by just 4.71% during this period

4  Manchester named as UK’s top property investment hotspot in the next decade – House Simple

5  Manchester is a young community, with over 60% more 25- to 29-year-olds living there than the national average. These people need rental accommodation – Manchester Property Guide 2015

6  Manchester has a higher job growth rate than London, recording a 47% increase job advertisements in April 2015 alone compared to 42% in London. 70,000 new jobs will be created by Greater Manchester’s financial and professional services sector by 2025 – CV Library & BNY Mellon

7  Manchester was named the best UK city to live in for the second consecutive year – EIU Global Liveability Survey 2015

8  Manchester’s population expected to grow by 125,000 to 2.87 million in the next decade – ONS

9  With the redevelopment of transport systems, more than 15 million people can reach the city in less than 45 minutes by 2025 – up from 7 million currently – BNY Mellon

10  Greater Manchester to get its own directly-elected mayor, with the region receiving £1 billion worth of devolved powers from the UK government. This will enable Manchester to hold new freedoms to better control its own budgets and will be able to dictate which areas need the most investment on a regional level.

In Part 2 of our Manchester series, we explore the influx of Generation Y in the city and how it contributes to greater demand for rental housing. Stay tuned!

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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Melbourne Property: CBD or Fringe

Melbourne to overtake Sydney as largest city in 2053. Source: Australia Bureau of Statistics

MELBOURNE PROPERTY: CBD VS FRINGE

Among all the states in Australia, statistics show that Victoria will have the largest population in the future, driven by massive and rapid growth in Melbourne city (source: CBRE). The Australia Bureau of Statistics projects that Melbourne will overtake Sydney as Australia’s biggest city in 2053.

It’s easy to understand why – spurred by a highly diversified economy and world-class education and tourism, Melbourne has been named Most Liveable City five times consecutively since 2011.

Smart investors looking to net significant rental income from the growing population have been investing their money in various suburbs across this beautiful city.

The key question is, where is the best place to invest in Melbourne?

MELBOURNE CBD: SMART INVESTORS STAY AWAY

Melbourne CBD is an amazing place – organized, pretty, artistic and with amazing walkability scores – and we love it! From an investment point of view, however, property in the CBD is an absolute NO.

Here’s why:

  1. Valuation for property in the CBD has been 20%++ BELOW purchase price

In the CBD, housing projects are confined to high-rise development only, which usually takes about four to five years to complete. The team at CSI Prop has heard from many of those who had previously invested in CBD property, complaints that the banks had undervalued their property by 20% lower (or more) than purchase price. Statistics have shown that the average property price in Melbourne increases by 9.53% each year (source: Australia Property Monitors). This essentially means that the abovementioned properties in the CBD had not only been valuated BELOW its original purchase price, it had also depreciated! Speak to a licensed independent mortgage broker or lawyer for Australian property if you want verification.

  1. The last three years have seen NEGATIVE capital appreciation in CBD property (source: Australian Property Monitors).
  2. The CBD is approaching an oversupply of apartments. There is increasingly higher vacancies as more properties come to completion.

Melbourne CBD approvals for six months of 2015 was 12,516. Melbourne’s high-rise boom currently encompasses 33 towers under construction and a further 39 to be built, according to Skyscraper, Activity Monitor and UrbanMelbourne. Researcher BIS Shrapnel said, “The city is already heading for a glut of apartments. By June 2016, there will be a surplus of 15,000.”

  1. No Exit for the next 10 Years++

Last September, Australian website Domain.com published that investors should “get out as soon as possible (otherwise) it will take 10 to 15 years before you get your money back.” This is due to (i) the oversupply of apartments in the CBD and (ii) Australians generally dislike living in the CBD. In case you didn’t already know, foreigners are not allowed to purchase property in the secondary market. Which simply means that foreign investors looking to exit the market are only allowed to sell to Australians. But Australians don’t like living in the CBD…

 

CBD FRINGE PROPERTY – HIGH RETURNS, GREATER CAPITAL APPRECIATION

Research has shown that investing in property located at the CBD fringe is the most rewarding. We at CSI Prop are supporters of properties located in these locations, based on our own research which is backed by industry experts.

Property located in the CBD fringe are a top choice because:

  1. They are extremely accessible to the city by all kinds of transport including walking, yet removed enough from its hustle and bustle.
  2. Many are located close to areas with lots of green, F&B outlets, entertainment and the arts.
  3. Good appreciation value. If you invest in the right location, you should be able to own seven properties in 10 years, with an initial capital of only RM100,000. Ask us how.

We leave you with a chart of the top CBD-fringe suburbs to invest in:

Melbourne-Fringe-VS-CBD-csiprop
Comparative data of property located at Melbourne CBD-fringe

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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UK Student Property in 2016

Phase II of London Spring Place which launches in Kuala Lumpur end of February. Phase 1 sold out within the year of launch!

UK student property is the strongest investment platform today, surpassing other traditional real estate classes. In 2015, the UK student property sector saw investments to the tune of £6 billion – twice the amount invested in the sector in 2013 and 2014 combined. Experts say the sector is likely to see more investment in the years ahead.

UK Student Property

Formerly reserved for institutional investors, UK student property has become one of the most popular investment vehicles to date in the world of property investment. From a mere £500 million in 2010, direct investments in the sector reached £6 billion in 2015, surpassing the £3 billion in 2013 and 2014 combined. More significantly, this marks an increase of more than 300% over the £1.7 billion invested in 2014 alone.

Is Growth in the Sector Set to Continue?

The answer is yes.

The fact remains that there is still an acute under supply of purpose built student accommodation (PBSA) in the UK due to restrictions in building permissions, a challenging planning environment and the government’s support for housing development. Meanwhile, the number of foreign students continues to rise due to recently abolished restrictions in foreign student numbers, which comprise the traditional mix of new first year students and second- and third-year returners.

To illustrate, the number of foreign students at Britain’s top universities doubled between the 2005/2006 and 2013/2014 academic years. These students tend to come from wealthy families who are able to afford the soaring cost of tuition for non-European Union residents and demand a high-class standard of living. The Higher Education Statistics Agency reported that the number of residents living in private halls more than doubled between 2007 and 2014—from 46,000 to 102,000—a trend predicted to continue. The dramatic upswing has been fuelled by the inability of university-managed accommodation to keep pace with student numbers.

London’s full time student population alone is expected to rise by 50% in the next 10 years, whilst student cities, particularly where there is a Russell Group university, is expected to see dramatic increases in student numbers. EU and non-EU students are the fastest growing segment, bringing a net benefit of £2.3 billion per annum to London’s economy supporting 60,000 jobs in the capital.

But, beyond the fundamentally undersupplied market, one reason for the success of PBSAs is that students have become more discerning, especially in light of increased tuition fees. Unite Group reports that 85 per cent of second year undergraduates are now looking for quality, purpose-built student homes that fulfill all their needs (including peace and quiet and access to night life), and with the CBRE statistics showing that student accommodation generally has occupancy rates of some 99%, it’s easy to see why people put their money into this area of the market.

Conclusion

The structural undersupply in purpose built UK student property has caused prices to skyrocket. Student housing charity Unipol, for example, reported a rent rise of 25% in purpose-built student accommodation between 2010 and 2013 – nearly double the rise in the rental sector as a whole in that period (13%).

Experts predict that student housing will experience a continued strong demand but with significant supply side challenges in London and key student towns. With this demand from students for more luxurious space, coupled with rising student numbers and strained supply, there is certainly potential for all sorts of investors to get top marks for their shareholders and earn strong income and profits from the sector.

Global investment into UK student housing. Source & credit: Savills Research file:///C:/Users/Marketing/Downloads/spotlight–uk-student-housing-2015.pdf

Ultimately it’s not just about what you invest in; it’s also where you invest in. In a recent report in the Property Wire, several student cities were highlighted as the next investment hotspot including Manchester, Liverpool, Birmingham and Brighton. Looking ahead, it is also likely that London will continue to be an attractive city for students from across the UK and around the world. However, there is the risk that prospective students will be put off by the cost of living in the capital (house prices have risen by 46% and private sector rents by 19% over the last five years according to the ONS).

‘So long as demand outstrips supply, upward pressure on both rents and capital values will continue to make the market an attractive proposition for investors, and we don’t expect the market to come off the boil for some time,’ says CBRE head of student housing advisory Jo Winchester.

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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The Malaysian Investor & UK’s New Buy-to-Let Policies

Good news for Buy-to-let Investors

British housing prices have risen sharply in the last two years, thanks to record low interest rates, an under supply of property (vs. demand), and a strong employment market. Thus, annual rental returns are attractive, which bodes well for the buy-to-let investor.

There are nearly 2 million private landlords in Britain, owning almost 20% of homes, and the positive environment has only added to the appeal of buy-to-let property, also known as rental property.

However, the government is taking steps to cool the market in a bid to protect the interests of potential first-home buyers by introducing new tax rates on buy-to-let property. In a budget statement in November last year, Chancellor George Osborne announced that buy-to-let investors will have to pay a 3 percentage point higher rate of stamp duty than residential buyers due effective from April this year. Meanwhile, come 2017, landlords’ abilities to deduct mortgage interest from rental income before working out a tax liability, will be phased away. All this on top of a predicted rise in Bank rates.

Some doomsayers are anticipating an extreme downturn in the property market, suggesting that investors purchasing mortgaged rental properties today are set to lose money within 5 years. There are also suggestions that potential buyers could turn into sellers, flooding the market with additional supply and slamming the growth of the rental property sector into reverse.

What do these measures mean for the Malaysian Investor?

It appears that the new cooling measures will mainly affect UK residents, as the presumptions are that UK landlords fall within the 40%++ tax bracket.

Foreign investors, i.e. Malaysian investors do not earn salaries in the UK, which means they naturally fall within the lowest tax bracket to begin with, i.e 20% tax for income below £31,865 p.a. Additionally, Malaysian investors have an extra £10,000 as an annual tax-free exemption on rental income. This means that the Malaysian investor will hit the 40% tax bracket and therefore start experiencing some differences only upon earning £41,865 p.a. in rental income.

Assuming a nett yield (after deduction of all expenses) of 4% for rental properties, the Malaysian investor would need to own investment properties worth more than £1,000,000 before he/she hits the 40% bracket. Currently, as most London properties are only raking in 1% – 2% yield, the reality is that you would need to have £2,000,000 to £4,000,000 worth of properties before you hit the 40% tax bracket.

In other words, you won’t feel the pinch unless you are ultra-rich

Meanwhile, the removal of mortgage interest in tax deduction will affect investors buying rental properties in their personal names. In order to get around that, more individuals are resorting to buying rental property under a company structure.

Under the new measure, landlords will not be able to deduct mortgage interest from their rental income before it is assessed for tax but will instead get a flat-rate 20% tax credit. This means those paying higher-rate tax will lose half of their relief, while some others will be moved up into this bracket and so see their tax bill soar.

As such, using a company structure means interest, which is classed as a business expense, can still be deducted. Corporation tax would also apply which would reduce a higher-rate taxpayer’s rate from 40% to 20%.

(Remember, unless you own properties worth £2,000,000 – £4,000,000, you would be hard-pressed to hit the 40% income tax bracket. Mostly, Malaysian investors are within the 20% bracket which means the removal of mortgage interest in tax deduction will not apply, as they automatically get a 20% tax credit under the law. Again, only the ultra-rich are affected).

Student Property Investors

Student property investors are not affected as mortgages are typically not offered for that investment type.

According to CSI Prop spokesperson Virata Thaivasigamony, these latest measures are part of a populist stance as Britain gears up for the elections.

“The biggest domestic issue is the affordability of housing in the UK and how it has affected first-time house buyers. Landlords, especially foreign landlords, are blamed for the hike in house prices. These housing measures seem like a political move,” says Virata, adding that heavier restrictions would have been imposed on the investor if the market were headed for a collapse.

“In the Autumn Statement, George Osborne also announced a 40% interest-free help-to-buy loan for first-time house buyers. This shows that he isn’t really trying to cool down a market that is on the verge of a crash, rather, it gives mileage to his political cause by appealing to the interests of new British home buyers.

“If you look at the fundamentals, it is clear that the UK has a shortage of housing due to low levels of construction since the recession in 2008. This has choked housing supply, causing house prices to inflate. And while building of homes is picking up now, it takes time before that translates into sufficient homes.

“Overall, UK house prices won’t crash. The government will certainly be taking more measures like Singapore, Hong Kong and Malaysia to slow down the market to orchestrate a soft landing because if the markets crash, everyone is affected.”

What about the London property market, specifically?

“London has always been deemed as the international safe haven, which is why foreigners tend to diversify their wealth in London. Because of that, it’s hard for property in London to crash either. The prices have gone up steadily in the recent past, but I foresee a plateau (in prices) and, in the meantime, areas like East London — previously previously seen as undesirable — will experience major construction and subsequent price growth due to gentrification,” Virata adds.

“Ultimately, life goes on. Look at Australia: it got hit with 3% stamp duties last year, which hasn’t really slowed down the foreign purchaser. But it certainly has made the locals feel good that their government is doing something for them…”

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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UK Property Outlook 2016

UK property outlook 2016. London at sunset. Credit: wikipedia

Summary:

  • Overall positive outlook across the UK, but central London growth subdued.
  • Growth in the Northern cities due to governmental initiative and overall affordability amid high growth
  • Student property remains a good investment option given structural under-supply

The year started on a bleak note, no thanks to the current global economic climate. On the property front, the beginning of 2016 in the UK was headlined by policies to be imposed by the Chancellor on home-owners and landlords,such as future tax and stamp duty increases, and the abolition of mortgage income relief in 2017 – all this on top of predictions of a rise in Bank Rates, prompting doomsayers to predict an extreme downturn in the property market with projections stretching to 2021.

Read how the rates increase affects the Malaysian investor here

But, let’s not get ahead of ourselves. Forecasts are essential in helping the investor strategize, but it is crucial to take a closer look and weigh the predictions against the facts and what we already know:

Raising taxes and other rates are usually measures used by the government to protect the welfare of its house-buying citizens by preventing skyrocketing property prices and overarching speculation resulting from uncontrolled property-buying by wealthy local and foreign investors. The CGT in Singapore and Hong Kong and the RPGT in Malaysia, as well as FIRB taxes and stamp duty hike in Australia are a good example. We’re not saying you should ignore it; we’re just saying it’s not a deal-breaker.

To illustrate, a survey by the Council of Mortgage Lenders found that despite the negative outlook, landlords are confident that they will be able to absorb the impact of tax changes while over 80% are confident they won’t have to raise rents in order to cope.

As for all that talk on Bank Rate increases: the trend for pushing forward forecasts for the rate rise into the future has been going on since rates were cut in 2009; the prediction keeps getting pushed back in the end.

Currently, Bank Rates stand at 0.5%; the prediction for a rise was set for Dec 2016 or Jan 2017 following the first rate rise in the US in 9 years, last December. But with the global economic gloom of 2016 and comments of the Monetary Policy Committee (MPC) along with dramatic market movements, money markets imply that the first increase is poised for Aug 2019. Bank of England chief economist Andy Haldane said last year that the case for UK raising interest rates was “some way from being made” and that negative rates may still be needed.


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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2015 Statistics: Best Buy-to-Let Investment in the UK

The ringgit has plunged. You’ve been saving diligently but the value of your savings is a fraction of what it once was. So you’ve decided to take matters into your own hands – you are investing in rental property to hedge against the ringgit (and get something back for your investment!).

Best Buy-to-let Investments in the UK

Congratulations! A wise decision, indeed.  But, where to invest?

Back to basics: invest in property located in countries/locations with

  1. stronger currency
  2. stronger economy
  3. job growth
  4. education opportunities

This help increases the value and ‘rentability’ of a property.

For most landlords with one or two properties, the key to success is capital growth. If the property you invest in grows in value, you will increase your total profits.

One market that has remained a haven for property investors is the UK. But, as London property prices soar higher and yields go lower, property in cities outside London are now showing great yield potential. The Brits, themselves, are beginning to look outwards of London as well. These places, really, are where you should put your money.

If you haven’t done your homework yet, take a look at HSBC’s annual research on rental yields around Britain. Their data show that Manchester is leading the pack on rental yields. The report has listed several profitable locations for investment.

London-lovers, don’t worry… HSBC has done a survey on rental yields in the various pockets of London, too. Read more here: http://bit.ly/1J5P4co


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