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UK Property and the Snap Election

Prime Minister Theresa May’s surprising announcement for a snap election brings the British people to the polls again for the 3rd time in as many years. Image credit: www.themirror.co.ukThe dust has barely settled since Brexit, yet the UK is now bracing for another political turn of events, thanks to PM Theresa May’s call for a snap election this June. This will be the third time Britain will go to the polls in as many years. The surprising announcement saw shock waves reverberate across the FTSE and capital markets as an immediate reaction. Meanwhile, the IMF has revised up its forecast for UK growth this year – from 1.5% to a punchy 2%.

“Naturally, there there are pros and cons. But in a nutshell, the election will pave the way to a clean slate, for the new government to gracefully negotiate Brexit to protect the interests of Britain and its investors/stakeholders. However, the issue of housing shortage remains critical. There will be uncertainty in the market from now leading up to the election, but the impact will not be a long-drawn one, given the short time frame and the surprise element of the PM’s announcement. This is the opportunity the new government should seize to address housing supply for the sake of first-time house buyers, and policies for the sake of landlords, foreign property investors and the buy-to-let market who are crucial in housing supply,” said Virata Thaivasigamony of CSI Prop, alluding to changes in stamp duty policies announced by the UK government.

The pound strengthened significantly when the snap election was announced and has been on an upward trajectory since. Image credit: xe.com
  1. Stronger Sterling

The sterling rallied to its highest level in more than 6 months on the day of the PM’s surprise announcement, jumping 2.37% to $1.2904 against the USD — its highest surge since early October 2016. Deutsche Bank, one of the world’s biggest sterling bears, finally reversed its stance on the sterling, describing the early election as a game-changer for the currency. We accurately predicted that the value of the sterling will drop and rise again with Brexit & Article 50, which was what happened. Our sense is that the sterling will continue to strengthen over the next few months.

  1. Housing Market

The housing market in the UK has been generally resilient. However, there will be uncertainty in the housing market leading up to the election; major decision-making may be put on hold until the election results are out. Uniquely, the announcement was not leaked, which means the uncertainty will be relatively short as the element of surprise has prevented any build-up to affect the housing market. Ultimately, there is a chronic and unsustainable shortage of housing in the UK, which will continue to underpin housing market. Demand will outpace supply and keep prices up for years to come. However, the election is an opportunity for the new government to begin on a clean slate and affect change that benefits the market. It is an opportunity also for the new government to revise legislations and policies on behalf of local landlords, foreign property investors and the buy-to-let market as they play a party in the supply of housing. A clear election result could boost the housing market.

Deutsche Bank has taken a positive stance on the UK snap election and its impact on Brexit negotiations. Image Credit: Ed Conway
  1. Brexit Negotiations

Our sense is that if Theresa May consolidates her position, it will strengthen her mandate to bring more stability particularly vis-a-vis Brexit. Her domestic agenda is to build a country that works for all. A big win means she will be less answerable or beholden to groups interested in a ‘hard exit’; it gives her flexibility to make compromises and cut a more moderate deal for Brexit without worrying about support from the party or Eurosceptics. This will obviously have a positive effect on the UK economy and the pound will keep strengthening. Economists also argue that the election raises the chances of a ‘transitional deal’ after 2019 (when Brexit should have happened), as the next government won’t need to hold another election until 2022 . This is good for investors who are taking advantage of the favourable exchange rate.

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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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Why Investors Must Buy Melbourne Property NOW Before 1 July 2017

The Victoria government has made changes to the stamp duty laws, which effectively means no more off-the-plan concession for investment properties. Image credit: Win Real Estate
  • From 1 July 2017, purchasers of off-the-plan (not yet built) commercial or residential investment properties will be liable to stamp duty on the purchase price or market value of the property (whichever greater)
  • Investors will possibly pay approximately $15K – $20K* more than what they are currently paying
  • Off-the-plan concession only for purchasers who make the property their principal dwelling

Investors should get into the Melbourne property market NOW and exchange by 30 June 2017 to avoid hefty stamp duty charges, which could cost some $15K to $20K* more than current rates. From 1 July 2017, investors of Melbourne property are no longer eligible for stamp duty concessions, resulting in payment of tens of thousands of dollars more. Note: Victoria is the only state in Australia that has stamp duty concessions.

The increase in stamp duty charges are due to the Victoria government’s changes to the First Home Owner Grant and new stamp duty exemptions and reductions for first home buyers (i.e, concessions have been removed to fund these reductions and exemptions). First home buyers in this case refers to local Australians or foreigners with PR who are purchasing a property for the first time with the intent of occupation.  

Effective 1 July 2017, off-the-plan stamp duty concessions will only be available for people who intend to live in the property. First home buyers no longer need to pay stamp duty on properties valued under $600K, while discounts are available on a sliding scale for purchases between $600K – $750K.

Impact of new stamp duty on investors

The new laws will impact borrowing capacity as investors will need to include the new stamp duty into their calculations. We advise that you speak to a mortgage broker to understand its full implications.

How does stamp duty currently work?

Victoria has the highest stamp duty rates in all Australia. However, unlike other states, Victoria stamp duty is split into land and construction.

Investors/owners of completed properties pay FULL stamp duty, fulfilling both the land and construction components.

Investors/owners of off-the-plan property that has yet to commence need only pay stamp duty on the land component.

Investors/owners of off-the-plan property that has begun construction will need to pay duty on the land component plus a tiered payment for the construction component depending on how far along construction has taken place.

Example:

Your apartment is valued at $500,000 and its land is valued at $100,000

PROGRESS OFF-THE-PLAN CONSTRUCTION BEGUN COMPLETED PROPERTY
PAYMENT DUE $2,150 $2,150 + tiered amount $25,070

AVOID FULL STAMP DUTY COSTS OF $15K – $20k* – INVEST IN MELBOURNE NOW AND EXCHANGE BY 30 JUNE 2017.

*The $15K-$20K estimation is benchmarked on a 1-bedroom property priced at $400K-$500K. A 2-bedroom property priced at $1million or more will cost higher stamp duty charges

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

Source: http://bit.ly/2prHWAb or http://bit.ly/2p405Y7