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Australia Property Outlook 2019

Australia is a diverse land that is home to a wide range of fascinating natural landmarks and iconic destinations. It is a multicultural nation that is warm and accepting of people from all over the world.

Boasting some of the world’s most beautiful natural wonders like the Great Barrier Reef (the world’s largest coral ecosystem), Australian Alps and home to special faunas such as the kangaroos and koala.

As the world’s 12th largest economy, Australia is one of the most well-developed countries in the world. Property is one of Australia’s largest assets and a strong contributing factor that influences its economic wealth.

On a global ranking, Australia has had the 6th highest rise in annual property prices over the last five decades, with house prices surging at an average increase of 8.1% per year.

Research by BIS and UBS shows 9 out of 10 properties made a profit in spite of the slowdown in the housing market. However, the market saw a moderation in 2018 with Sydney being the hardest hit, it affected investor’s appetite due to the stricter regulatory and lending measures.

A prominent factor that underpins the Australian economy is its population growth. Australia’s population grew by another 1.6% to 24.7 million in the 12 months to the end of September 2017.

Melbourne

Home to 4.9 million people. Source: ABC News

Known as Australia’s cultural capital, this city that is home to diverse landscapes and cultural history is the sanctuary for coffee lovers. From sandy beaches and historic museums to artisan cafes, Melbourne has it all.

Voted as the world’s most liveable city for seven consecutive years, Melbourne is home to a population of 4.9 million people. The city is set to beat Sydney to become Australia’s most populated capital by 2036.

After five years of steady growth, the Melbourne property market is in for a soft landing following its peak in November 2017. Though experiencing a slight fall, property prices in Melbourne are unlikely to crash as it is underpinned by a robust economy.

Being one of the 10 fastest developing cities and having owned Australia’s strongest population growth rate, Melbourne’s population is set to increase by 10% in the coming years. This has opened the gateway for higher employment rates alongside 35% influx of skilled immigrants. These factors contribute to the moderate rise in rental rates and property prices in Melbourne.

The undersupply of homes is another indicative behind the possible rise of house prices. Urban Development Institute of Australia (UDIA) predicted that if the current situation persists, housing shortage could reach an excess of 50,000 houses by 2020.

With the current population growth exceeding 2%, increasing employment rate and construction activity, Melbourne and its surrounding areas are likely to produce many Hotspots going into 2019.

Last year,  “Melbourne dominated the HIA Hotspots report with 12 of Australi’s Top 20 building growth areas located around Victoria’s capital,” said HIA’s Senior Economist, Shane Garrett.

According to the HIA Population & Residential Building Hotspots Report 2018, the Mickleham-Yuroke area of Melbourne is Australia’s most wanted hotspot, with a population growth of 35.3% during 2016/17 and $222.9 million in building approvals.

Perth

Perth is in for advancement. Source: Property Update

As Western Australia’s sun-drenched capital, Perth has established itself as one of Australia’s prominent travel and business destinations.  

Home to King’s Park and Botanic Garden, one of the largest inner city parks in the world, Perth has some of the world’s finest brands to shop at alongside a thriving city life.

Despite being a city, it is not far from picturesque oceans and beaches. This balance between nature and cosmopolitan living makes Perth an attractive site for investment.

The Perth property market has taken a plunge in the last five years since its peak in June 2014.

With the falling values, research has suggested that the housing market in Perth is in for a bottom out with median house prices set for a decline over the period of 2018/19.

Nevertheless, property prices in Perth are expected to rise in the next two years. The outlook for the state’s economy remains positive with the market beginning to retreat again.

Industry analyst, BIS Oxford Economics, in its latest report revealed that Perth is tipped to have the second-fastest price growth in Australia by 2021, rising by 10%.

In some parts of Perth, prices are on demand year-on-year (y.o.y) where it has increased by 6.6% which indicates that the property market is in for recovery. Perth’s vacancy rate was at 5.1% for March 2018 and is forecasted to increase.

For investors seeking an investment prospect with promising yields and returns, Perth might just be the answer.

Sydney

What does 2019 have in store for the Sydney property market? Source: Property Update

Sydney is known as Australia’s leading global and premier city. It is the destination of choice for entrepreneurs, tourists and students alike.

Rich with a number of tourists spots such as the Sydney Opera House and Sydney Harbour, this city continues to grow in popularity.

Sydney’s housing market recorded a 0.7% price drop as of October 2018, bringing the overall 12-month decline to 7.4% — the largest annual price fall in the city since 1990.

Comparatively, on a longer span, over the last five years, statistics show that average house prices have increased by 51%. Despite the current fall, the property market in Sydney is expected to ascend in the near future.

Rising economic and population growth alongside the increase in employment rate are aspects that would surge the Sydney property market. Foreign investors continue to channel their interests here as prices are looking to rise again in 2020-21.

First home buyers are flooding into Sydney creating a potentially stronger market considering the upcoming initiatives and infrastructure projects.

The NSW government will be directing $A15.3bn towards infrastructure in the next year in order to improve the quality of living and provide a more efficient and convenient commute in and out of the city.

With all these advancements being made, Sydney is on its way to becoming a promising investment for foreign investors.

Brisbane

Brisbane has the most promising growth in the property market. Source: Property Update

Blessed with idyllic weather, award-winning food and wine, adventurous activities and fun destinations for weekend getaways, Brisbane is the hotspot among tourists and investors.

With the second fastest population growth in Australia, Brisbane is set for a prospering year especially in terms of its property market. According to BIS’s forecast, this city will see the strongest growth over the next three years with an increase of 13%.

Buyers and investors are drawn to the state’s affordability that it attracts a larger number of inter-state migrants with an overall dwelling of 5.9% y.o.y.   

Apart from its affordability, the city also shifted its focus on improving its infrastructure to accommodate increasing population growth, alongside the growing job demand.

The influx of large scale developments coupled with major employment hubs will further enhance the liveability of the city. These developments will significantly boost Brisbane’s employment growth and increase the demand for housing and property.

The Australian property market in for a rise, which means property investors can get better returns by buying now while the market is still low. If you are looking for property in the cities of Sydney, Melbourne, Perth, Brisbane and more — give us a call at (+65) 3163 8343 (Singapore), 03-2162 2260 (Malaysia), or email us at info@csiprop.com!

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Written by: Lydia Devadas
Edited by: Jagdeep Kaur
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UK Property Outlook 2019

As we enter into 2019, Brexit remains the biggest question for UK property investors — whether there will be a deal, no deal, or no Brexit.

The option of Remain seems off the cards, and despite the recent rejection of Theresa May’s deal by Parliament, we think that the risk of a no-deal is unlikely. Few MPs want such a drastic breakaway, and many will start to get antsy as the deadline fast approaches.

It is almost certain that some form of deal will be hammered out, at the very least to allow for a transition period after March 2019. This will allow time for free trade agreements to be worked out with the rest of Europe.

 

The UK housing market giant

The UK housing market as a whole soared to record highs in the past few years. Research by property firm Savills showed the total value of UK housing stock had increased by £190bn to its highest level ever — a mind-boggling £7.29tn.

“Our analysis demonstrates the scale of the housing market and underlines the importance of housing to the economies of London and the UK as a whole, both as an asset class and store of private wealth,” said Lawrence Bowles, residential research analyst at Savills.

Growth of UK market 2008-2018 (Source: Savills)

Unlike the 2008 financial crisis, where market values remained relatively stagnant until 2013, the UK housing market continues to grow in the face of Brexit. Growth pushed up by 2.7% in 2018.

“It’s great that we’re seeing more housing delivery, but development will have to make up a much higher proportion of new housing value if we are to come anywhere near building the homes this country needs,” Mr Bowles added.

Right now England is facing its biggest housing shortfall ever, with a backlog of 4 million homes.

Total housing need in England (Source: Heriot-Watt University)

 

Compelling reasons to invest

Advisory firm Ernst and Young forecasts an upward trend for the UK’s GDP, predicting growth by 6.9% from 2019- 2022.

Predictions for future earnings and inflation in the UK (Source: Ernst & Young)

Spending power will also start to increase this year as earnings are expected to rise by as much as 3.0% while inflation is predicted to drop to 2.0%.

Once a deal has been struck, the British pound is expected to go up. Property firm Colliers International predicts a 5% to 10% appreciation in value, while global assets manager Aberdeen Standard Investments says the sterling might potentially climb by 15% from its current level within 3 months of a deal.

Recovery of the pound will slow inflation and lead to stronger income growth that will support prices. The high-end residential sector will benefit from greater certainty by foreign expats working in London and the preservation of the UK’s financial services sector.

Savills forecasts UK house prices to rise 14.8% from 2019-2023, although there will be significant regional variation.

Where in the UK should investors look to gain the most in 2019? The timeless advice is to look for cities with strong fundamentals, e.g. a thriving local economy and industry. Three UK cities in particular that we recommend investors to keep their eyes on this year are London, Manchester, and Birmingham.

 

London

Property in the capital now makes up a quarter of the total UK housing value. A decade ago, it was just a fifth of the domestic market.

The London market is now worth a stunning £1.77tn, over four times the combined value of Birmingham, Manchester, Edinburgh, Glasgow, Cardiff, Bristol, Liverpool, and Sheffield — all cities which saw higher rates of price growth than the capital in 2018.

The city may have experienced a slowdown since the Referendum, but that has not deterred overseas investors. London was the top city in 2017 globally for cross-border office investment, ahead of New York, Frankfurt, Berlin and Paris.

Last year saw nearly one in five (18%) new-build homes in London being purchased by overseas investors, 61% of which hailed from Hong Kong, Singapore, Malaysia and China.

Property firm JLL expects a bounce back after Brexit. Adam Challis, head of residential research at JLL, says that values will nudge up next year before accelerating faster with a greater sense of job security.

“Once we have confirmation of a deal and a reasonable transition period, people will start to feel more confident and this will encourage homeowners and investors to buy again.”

JLL predicts that the average price of a new-build home in Zones 1 and 2 will jump 17.6% between Brexit and 2023, making central London property a good buy for investors right now.

House price growth will be driven by the escalating supply crisis within the capital. Housing starts are expected to remain around 20,000 units a year over the next three years, and begin to rise towards 25,000 a year by 2023. This falls a long way short of the Mayor of London’s target of 66,000 new homes per year.

 

Manchester

The housing market is booming in the UK’s ‘second city’. Greater Manchester’s population has surpassed 2.7 million, and is predicted to rise to almost 3 million by 2031, with the City of Manchester alone accounting for 36% of the growth.

The Government projected that if house-building efforts do not catch up with projected growth in households, there could potentially be 1,500 more families than homes in 2026 — and 9,400 more by 2037!

Anthony Stankard, from agents Reside on Deansgate, said: “People follow jobs, and the strength of Manchester and the city region is in its continued economic strength.

“The airport, together with Airport City and MediaCity are key factors, but underpinning it all we have the universities. The newly announced Faculty of Science (of Manchester Metropolitan University) alone will provide enough jobs on its own to fill a couple of residential towers.

“And what Manchester has – and what cannot be replicated – is an energy. And the demand we are seeing just keeps on going up.”

With the the new High Speed Rail (HS2) due for completion in 2026, Manchester will be eight minutes over an hour from the capital.

Data from Hometrack showed Manchester at the number one spot among all UK cities, with a price growth of 6.6% in the 12 months to November 2018.

Houses in the city are priced at an affordable average of £168,900, just over a third of London’s £481,800.

JLL predicts house prices in the city will go up by 14.5% from 2019-2022, whilst rental growth is expected to reach 13% over the same time period.

England’s top 5 cities for price growth in the 12 months to Nov 2018 (Source: Hometrack)

 

Birmingham

Birmingham’s position at the heart of the UK plays a major part in the city’s ever-growing attraction as a hotspot for business and manufacturing.

According to a study by consulting group PwC and think tank Demos, Birmingham is the fastest improving city in the country to live and work in. Falling unemployment and a wave of regeneration projects boosted the city to its place at the top.

A torrent of regeneration started in the city after it won the bid to host the 2022 Commonwealth Games, with developments such as Birmingham Smithfield, Arena Central, Paradise, and the Midlands Metro extension currently underway.

Birmingham also has the honour of being the youngest city in Europe. Out of a population of 1.1 million, nearly 46% is estimated to be under the age of 30.

The city’s youthfulness and strategic location have made it a hotbed for start-ups. The city consistently had the highest number of start-ups in the country outside of London since 2016.

Once the HS2 is complete, Birmingham will be a mere 49 minutes away from the capital.

Data from Hometrack showed Birmingham at second place among cities in England, with a price growth of 6.3% in the 12 months to November 2018.

Houses in the city are priced at an average of £163,600, which is slightly less but on par with Manchester.

JLL predicts house prices in the city to go up by 15% from 2019-2022, with rental growth expected to reach 13.5% over the same time period.

The British pound is set to rise quickly, which means property investors can get better returns by buying now. Don’t miss out! If you are looking for property in the cities of London, Manchester, Birmingham and more — give us a call at (+65) 3163 8343 (Singapore), 03-2162 2260 (Malaysia), or email us at info@csiprop.com!

If you would like to read more on property in the UK and Australia, check out our Investment Guide here

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Article by Ian Choong 
Edits by Vivienne Pal

Sources:

  • https://www.bbc.com/news/business-39732816
  • https://www.savills.co.uk/insight-and-opinion/savills-news/273857/uk-housing-stock-gains-%C2%A3190-billion-and-hits-a-record-%C2%A37.3-trillion-valuation
  • https://www.savills.co.uk/insight-and-opinion/savills-news/170245-1/savills-forecasts-uk-residential-market-in-the-next-5-years
  • https://www.hometrack.com/uk/insight/uk-cities-house-price-index/
  • https://www.manchestereveningnews.co.uk/news/property/buying-investing-property-manchester-centre-14951935
  • http://residential.jll.co.uk/insights/research/regional-residential-forecasts-2018
  • http://residential.jll.co.uk/insights/research/residential-forecasts-west-midlands-report-2018
  • https://www.theguardian.com/uk-news/2017/nov/07/birmingham-uk-city-oxford-reading-pwc-demos
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Making a Difference Together

“Making A Difference” is a motto that has long been synonymous with CSI Prop, and one that is about positively affecting the lives of others through the opportunities we seize.

The CSI Prop Investor Club series was created with this intent in mind. Every year, we organize several Investor Club events as an exclusive platform to bring clients together to learn, network and share in the spirit of togetherness.

In keeping with the yuletide season and to end the year on a high, our final Investor Club event of the year was a relaxing and meaningful one, spent with 80 VVIP’s from two orphanages — Rumah KIDS and United Learning Centre (ULC). The objective of this day was to share a platform with our investors to make a difference in the lives of these children in the spirit of paying it forward.

Held at mmCineplexes in e-Curve, it turned out to be a day filled with fun, fellowship and good food, which culminated in a screening of Disney’s The Nutcracker and the Four Realms. It was a movie perfect for people of all ages.

Taking it a notch further, we partnered with The Picha Project, a social enterprise empowering marginalized communities in Malaysia through a sustainable food delivery and catering business. The food, lovingly prepared by refugee families from various countries, provided a mouth-watering cultural experience for all while also generating revenue for The Picha Project and their cause.

Guests purchasing gifts by way of donation for the gift exchange session.

Guests arrived bright and early with gifts in tow for the gift exchange session; some even purchased extra gifts by way of donation at the registration counter. Donations collected that day — a total of RM400 — were split evenly between the two homes.

To get our clients acquainted with the children, we played an interactive game with 5 attractive prizes up for grabs. The lounge was filled with lots of laughter as employees of CSI Prop also joined in the excitement and basked in the joy.

The adults and children excitedly trying to finish their tasks during games time.

After the fun-filled activity, the best thing to do was to regain the lost energy, hence, lunch was served. Everyone indulged in the scrumptious food, and the bonding between the adults and children continued.

Our team members having a good time with the kids.

It was truly mesmerizing to watch our investors connect with the children, and to see the faces of each child light up in return at the excitement of having met someone new.

Suzanne shared how kindness and hard work shaped The Picha Project.

Suzanne Ling, the co-founder of The Picha Project then shared her inspiring story of how The Picha Project came about, and the struggles they underwent in order to make it work. Hers was a story that portrayed the significance of kindness and hard work and that every successful journey starts with one little step.

Everyone buckled up for the movie

The day ended on a high note when everyone adjourned to the cinema to watch the movie. Each of us went home with a smile on our face, and gratitude and contentment in our heart, knowing that we added joy in the lives of these children — even if it was just for a day.

Check out our video below!

By Lydia Devadas Michael
Additions and edits by Jagdeep Kaur

Missed out on the last Investor Club event? Stay tuned for our next one and wait for your invitation via email! CSI Prop’s Investor Club is an exclusive community for our clients.

 

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What’s in store for Melbourne after the elections?

In the recent Victorian State Election, the Labor government led by Premier Daniel Andrews won a second four-year term, defeating the Liberal opposition by an increased majority of 52 seats. To be sure, Labor has grand plans for Victoria lining up to be executed, but investors will be more concerned about what’s in store for the property market. In their election manifesto, Labor had major plans for housing as well as transport and infrastructure. Let’s take a look.

Housing and Planning

Apartments in Melbourne set to reach the next level. Source: Financial Review

Labor plans to improve the housing market in Victoria generally and to also put it on par with the Victorian Renewable Energy Target (VRET), the party’s primary focus for the environment. These efforts are to advance the quality and sustainability of the residential property in Victoria and forge a better standard of living.

Labor has promised that apartment buildings will be subject to a range of tougher standards such as mandatory green space, installation of sun protection and safe cladding. This is particularly important in consideration of the property boom in Melbourne’s inner city, with its rapid growth of high rise apartments. This suggests that there may be increased costs for future developments, in order to comply with these standards.

There also will be subsidies for rooftop solar panels on 700,000 homes, including a plan to allow the government to share costs with tenants and landlords for solar panel installation on rental properties. This will make buildings more energy efficient.

Transport and Infrastructure

Transport links in Victoria are in for a huge transformation. Source: Herald Sun

Labor has a solid record for transport and infrastructure projects. Having already more than $60bn of rail and road projects in the pipeline, the party has further pledged to provide “the biggest transformation of public transport in Australian history”, which is to complete a $50bn suburban underground rail loop including 12 new underground stations.  This is set to complete in 2050.

Additionally, Labor has fulfilled their previous promise to remove 50 of the most dangerous level crossings over eight years, improving safety and efficiency. The revised promise is for 75 to be gone by 2025, and the good news is that they are ahead of schedule, having already removed a total of 29 this term.

Many of Labor’s big projects are either already underway or have start dates including the $11bn Metro Tunnel project, the North East Link and the West Gate tunnel. Work on the long-awaited rail link to the airport will begin by 2022, and $100m has been allocated for planning towards fast trains to Geelong and Ballarat. Upgrades for the arterial roads and country rail lines are also part of Labor’s manifesto.

What’s in it for Investors?

The re-election of Labor is great news for the property investment in Victoria, especially urban Melbourne. The party’s housing and planning manifesto gives good sustainability that would catalyze the housing market.

The transport and infrastructure manifesto has high potentials to increase job demand. Melbourne has overtaken Sydney as the best place to find a job in Australia according to the Commsec’s quarterly State of the States report, which would only fortify its population growth. Added to this is the increased accessibility for residents living in the suburbs to work in the city, making Melbourne a top choice for anyone looking for a home.

This gives investors promising opportunities with good potential for capital growth and good rental yields, both of which is the highlight of any investment prospect.

Interested in getting in to the Melbourne property market and benefitting from its low vacancy rate and future development plans? Give us a call at (+65) 3163 8343 (Singapore), 03-2162 2260 (Malaysia), or email us at info@csiprop.com!

Article by Lydia Devadas; Edited by Ian Choong

Sources:

  • https://www.news.com.au/national/politics/australian-politics-live-tuesday-november-27/news-story/9bd4e3ca763cb24fc3c83e0b9eaea33f
  • https://www.theguardian.com/australia-news/2018/nov/24/labor-secures-stunning-victory-in-victorian-election-as-voters-reject-fear
  • https://www.theguardian.com/australia-news/2018/nov/20/victorian-election-what-the-parties-are-promising
  • https://en.wikipedia.org/wiki/2018_Victorian_state_election
  • Image Credit: https://www.theaustralian.com.au/national-affairs/state-politics/victorian-state-election-2018-live-coverage-daniel-andrews-pleads-for-stable-majority/news-story/bd299031c2325f4401a499ff14a33c1f

 

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Victoria Smashes NSW for the Second Time in a Row

Once again, Victoria has overtaken New South Wales (NSW) as the state with the strongest overall economic performance rankings in Australia.

Margin lender CommSec’s latest quarterly (Oct 2018) State of the States report has revealed that Victoria has come out top in several key indicators, namely economic growth, employment, construction activity and population growth. This is the first time that Melbourne has beaten Sydney as the best place to find a job in Australia, with trend unemployment rate at its lowest in a decade.

Victoria has a promising employment market

The unemployment rate in Victoria stands at 4.7%, approximately 17.4% lower than the decade average. Victoria’s employment rate, however, is well above (13%) the decade average, making it the best state to secure a job across Australia.

Apart from the employment rate, Victoria was also ranked first in construction activity. This is the second time that Melbourne has beaten Sydney to the top spot in this sector.

The increasing construction activity gives a good investment prospect. Image Credit: Mail Online

Victoria retained top spot with construction work done almost 39% above its decade average.

NSW construction was next strongest at 31.4% followed by South Australia, up 25.3%. Construction work done in these states were at record highs in the June quarter.

Victoria also topped the ranking for the second consecutive time as the state with the highest economic growth. Last quarter, it knocked NSW off its perch for the first time in a decade.

Victoria leads the way in economic growth.

Economic activity in Victoria in the June quarter was 26.7% above the decade average level, ahead of NSW at 25.7%.

Victoria emerged the clear winner in CommSec’s latest quarterly economic rankings. Image Credit: CommSec State of the States Report (Oct 2018)

When looking across growth rates for the states and territories, it is clear that Victoria had exceeded the national average in all of the eight indicators measured, albeit by a narrow margin.

Last quarter, Victoria remained just ahead of NSW with strong economic strength, population growth, construction and investment activity.

Investment Prospect

The strong quarterly performance augurs well for Victoria.

Investors can look forward to leveraging upon these promising aspects of Melbourne, using it as a guide to future investments that could result in good rental yield and capital appreciation.  

By Lydia Devadas
Edited by Vivienne Pal

Source:

 

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UK Housing and the Brexit Effect

The clock is ticking to the deadline for Britain’s forthcoming exit from the European Union on March 29 next year.

Prime Minister Theresa May has been able to negotiate with European leaders a draft agreement for Brexit. But, she now faces the challenge of getting it through Parliament. Not all of Britain is happy with the terms proposed, and some are campaigning for the Prime Minister to push for better terms. However, senior figures in Brussels have expressed that it is unlikely that the UK will get a better deal than the one currently on the table.

Britain’s leaders race against time to determine whether the UK leaves the Union with or without a deal. What does a deal, or no-deal mean for the future of property investment in the UK?

 

Strong fundamentals keep the market afloat

Right after the referendum results came out, many had predicted a downturn in the market with all the uncertainty about Britain’s future. Even so, we held fast to a positive outlook for the market due to the sector’s strong fundamentals. That there will be challenges, we have no doubt, but we remain steadfast in our belief that  the UK will recover. More of that here.

The UK property market reacted adversely to the EU Referendum, but its rebound defied expectations. Data from market analyst Hometrack show that the market had experienced an overall period of growth after the referendum, with the cities of Manchester, Birmingham and Liverpool registering 9.7%, 9.6% and 8.3%, respectively, since March 2017. 

As a whole, the UK gained 5.3% during the same time period, with London’s 0.2% an unsurprising drag on average growth.

What’s worth reiterating is that the UK property market continues to grow despite concerns about Brexit. That, amid the negativity and naysaying that has been circulating around the impending Brexit, is a growing number of experts that understand that the UK housing market is not propped solely by UK’s exit from the European Union.

Real estate firm Colliers International identifies the main drivers of UK residential property as long-term demographic pressure, household formation rates and government housing policy. The firm pointed out that house demand and prices are not so much affected by Brexit as they are by stamp duty, help-to-buy and other domestic policy changes.

David Hollingworth, of brokers L&C, said that any impact from Brexit will be short-lived. “The fundamentals that have driven house price growth remain the same, namely the limited supply of property and low interest rates,” he said.

These two factors are unlikely to change anytime soon.

Industry analyst Ray Boulger, from broker Jon Charcol added that “the vast majority of people move for reasons completely unrelated to Brexit and so transactions won’t fall much.”

 

Property in the capital

London may have experienced a slowdown since the referendum, but property firm JLL expects a bounce-back after Brexit. The firm predicts that the average price of a new-build home in Zones 1 and 2 is expected to jump 17.6% between Brexit and 2023.

Adam Challis, head of residential research at JLL, says that values will nudge up next year before accelerating faster with a greater sense of job security.

“Once we have confirmation of a deal and a reasonable transition period, people will start to feel more confident and this will encourage homeowners and investors to buy again.”

House price growth will also be driven by the escalating supply crisis within the capital. Housing starts are expected remain around 20,000 units a year over the next three years, and begin to rise towards 25,000 a year by 2023. This falls a long way short of the Mayor of London’s target of 66,000 new homes per year.

 

UK’s economy to rebound

Positive economic indicators underpin the optimistic housing outlook. Advisory firm Ernst and Young forecasts an upward trend for the UK’s GDP, predicting growth by 1.4% next year, followed by 1.7% in 2020, 1.8% in 2021 and 2.0% in 2022. Next year, spending power will also start to increase as earnings are expected to rise by as much as 3.0% while inflation is predicted to drop to 2.0%.

Predictions for future earnings and inflation in the UK (Ernst & Young)

Once a deal is set in stone, we should see a partial recovery in the value of the British pound. Colliers predicts a 5% to 10% appreciation in value, affirming that now is the right time to get in to the market while the pound is still weak.

Recovery of the pound will slow inflation and lead to stronger income growth that will support prices. The high-end residential sector will benefit from greater certainty by foreign expats working in London and the preservation of the UK’s financial services sector.

 

A worst-case scenario: Hard Brexit

Even in the event that a deadlock happens and no trade deal is reached, the weakening of the pound will lead to greater interest in the high-end residential sector by overseas investors looking for safe haven investments despite less accommodating tax and regulatory relief.

Mortgage rates could stay low for longer if that happens. Previously the Bank of England cut interest rates to support the economy after the referendum. Mr Hollingworth says that this would mean “an even more prolonged period of low interest rates which should help to maintain affordability for mortgage borrowers.”

There is increasing domestic pressure for tax and regulatory reform to support the housing market given the role that housing and the ‘wealth effect’ plays in supporting household spending – a mainstay of the UK economy.

A new round of housing policies and tax adjustments would be expected after the next general election post-Brexit. In the long run, the economic weakness resulting from a hard Brexit will be compensated by new reforms targeting the housing market in general.

 

Conclusion

The strong fundamentals of the UK property market will prove its resilience to Brexit. In the long term, investors can bank on the market to continue to provide good returns. Weakness in the British pound right now confirms a window of opportunity for investors to get in before the value of sterling starts to rise again.

CSI Prop recommends investment in the regional cities, where rapid expansion and development spurs a strong growth in the property markets.

There is no time to lose — the British pound is weak, which means an amazing buying oppportunity for property investors. Give us a call at (+65) 3163 8343 (Singapore), 03-2162 2260 (Malaysia), or email us at info@csiprop.com!

By Ian Choong
Edited by Vivienne Pal

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Sources:

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What Does the UK Budget Have in Store for Property Investors?

The UK Autumn Budget proved that despite the government’s latest initiatives in addressing housing affordability for first home buyers, landlords remain pivotal to the supply of housing in the UK.

At a glance, the Autumn Budget (Oct 29) had good news for first-time house buyers in the reduction of stamp duty on jointly-owned property. The relief applies to homes of up to £500,000 and is in addition to the first-time buyer stamp duty exemption announced last year.

The Chancellor also declared that the government would allocate £500m for the Housing Infrastructure Fund to enable a further 650,000 homes to be built. This is on top of the previous pledge of 300,000 homes per year, on average, to raise housing supply by the mid-2020s.

Alongside the newly announced stamp duty relief for first home buyers, this is a laudable measure to alleviate housing unaffordability, yet there remains a lack in optimism where the issue of housing supply is concerned.

Landlords & Private Rental Sector: A Necessity to Solve UK Housing Woes

Historically, the UK has been plagued by a chronic shortage of housing. Not only had the government failed to meet its previous target of building 240,000 homes by 2016 (a target set in 2007), it had also changed Housing Ministers 16 times — more than 20 times faster than the average UK homeowner moves houses!

A research by Heriot-Watt University shows that the undersupply has become even more critical: England alone faces a backlog of 4 million houses.

UK house price and rental forecast 2018-2021 (CBRE)

More houses are needed to address homelessness as well as skyrocketing house prices and rents. And this is where the private rental sector comes in. Not only are landlords pivotal in ensuring the supply of rental housing for the growing number of young people unable to afford their own homes, they also provide flexibility for millennials who prefer to rent.

New research has shown that UK property remains a lucrative investment with 88% of landlords able to gain a profit, as the imbalance in supply and demand continue to drive rental prices.

Updated Incentives/Exemptions for Landlords

Investors and landlords can look forward to the following updates moving forward:

(a) PERSONAL ALLOWANCE

Landlords can claim an increased personal allowance amount of £12,500 off their taxes in 2019/20. The personal allowance is currently at £11,850.

(b) CGT ANNUAL EXEMPTION

The Capital Gains Tax (CGT) annual exemption will be increased from £11,700 in 2018/19 to £12,000 in 2019/20.

Potential SDLT surcharge

Some weeks ago, Prime Minister Theresa May announced the possibility of a Stamp Duty Land Tax (SDLT) surcharge of 1% – 3% to be imposed on overseas landlords/ property buyers from Jan 2019.

The government has now revealed that it will propose a surcharge amounting to only 1% during the Budget, and that a consultation on the surcharge will be published in January. Stay tuned as we continue to monitor the news and provide updates in due course.

Interested to invest in UK property and be a landlord? Invest before the foreigner SDLT surcharge kicks in in 2019! Call us and make that smart choice today at (+65) 3163 8343 (Singapore), 03-2162 2260 (Malaysia). Or, email us at info@csiprop.com!

Find out more about Arden Gate, our latest Birmingham residential investment property in the Midlands. Birmingham has been voted one of the UK’s fastest-growing city by PwC. Come meet our developer rep and learn about Birmingham’s bullish property market.

By Lydia Devadas
Edits & additions by Vivienne Pal

Source:

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Millennials Loss in Home Ownership A Landlord’s Gain?

Home ownership, especially among the young, in the UK has declined significantly compared to a decade ago. As the name suggests, Generation Rent is growing, now more than ever before.

Today, 40% of young adults are unable to afford one of the cheapest homes in their area even with a 10% deposit.

For 25- to 34-year-olds earning between £22,200 and £30,600 per year, home ownership fell to just 27% in 2016 from 65% two decades ago. This is an indication of home ownership collapse over the past 20 years especially among those from the middle-income range.

Back in 2016, data by the Office for National Statistics had highlighted that the number of homeowners in the 22- to 29-year-old age group stood at 37% in 2008 compared to just 27% over the last 10 years. This drop in homeownership among young adults has several contributing factors.

The drop in homeownership among young adults. Image credit: IFS

Disparity in House Price Growth vs Income Growth

Rising house prices relative to income growth has robbed the younger generation of the ability to buy their own home, while the increase in rental rates has made it almost impossible to save for a deposit.

House prices have risen around 7 times faster compared to wages over the last two decades. New research by the Institute for Fiscal Studies (IFS) reveals that since 1997, the average property price has risen by 173% in England after adjusting for inflation, and by 253% in London. Meanwhile, rental cost has risen from an average of £140 a week to £200 a week in England.

The expanding disproportion between income rate and ever-growing house prices is resulting in a severe unaffordability crisis among young adults.

Income versus house price growth Source: IFS, Image Credit: The Sun

According to a report by the Sun, back in 1995/96, 2 in 3 (65%) of 25- to 34-year-olds from the middle-income bracket were homeowners.

But by 2015/16, the number plummeted to just 27% where only 1 out 4 of this group owned their own home.

At the time,  average house prices were a staggering 152% higher than they were 20 years earlier after adjusting for inflation. Meanwhile,  the nett family income of those aged 25-34 increased by only 22% over the same period, causing a relentless imbalance between household incomes and house price growth.

A Preference for Experience-focused Living

Another notable factor is the youngsters’ preference for an experience-focused living.

Millennials prefer living amongst a like-minded community. For many, renting a house enables them to live close to the city centre — which also happens to be where they prefer working — and be part of a community that possesses similar lifestyle practices. This aspect seems to have taken the priority seat compared to being able to buy a house.

Purchasing a property near the city centre is close to impossible due to exorbitant prices, hence, renting becomes the next best option.

An Opportunity for Investment

This drop in home ownership and high demand for rental properties amongst the millennials signifies a huge shift for the UK’s rental and investment sector, offering opportunities for investment returns. In Manchester alone, one of the fastest-growing cities in UK, an estimated 11,000 new jobs are forecasted to increase by 2022, yet only 4,000 new properties in the city centre are expected to be built by then.

The lack of supply in residential properties alongside growing job opportunities increases the demand for rental properties which, reciprocally, opens the gateway for investment. In September 2018, the UK government and Barclays Bank announced a new £1 billion loan fund to drive construction levels in the country’s property sector, with a focus on providing greater numbers of purpose-built rental property in key markets.

The ever-growing rental market promising capital growth and rental income clearly opens an array of investment opportunities for investors looking to spend their money wisely.

By Lydia Devadas 
Edited by Vivienne Pal

  • https://www.ifs.org.uk/uploads/publications/bns/BN224.pdf
  • https://www.ons.gov.uk/peoplepopulationandcommunity/housing/articles/homeownershipdownandrentingupforfirsttimeinacentury/2015-06-19
  • https://www.bbc.com/news/business-45776289
  • https://www.theguardian.com/money/2018/apr/17/one-in-three-uk-millennials-will-never-own-a-home-report
  • csiprop.com/investors-can-look-forward-to-uk-rents-increase-of-15/
  • https://www.thesun.co.uk/money/5590859/one-in-four-middle-earners-own-home-ifs-report/
  • csiprop.com/manchester-top-10-in-the-world-for-fdi/
  • https://uk.reuters.com/article/uk-britain-housing-barclays/barclays-and-uk-government-launch-1-billion-pound-house-building-fund-idUKKCN1LR2P1
  • Image Source: https://www.huffingtonpost.co.uk/2014/05/01/shocking-uk-renting-facts_n_5246159.html

 

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UK Landlords Still Making a Profit, Survey Finds

The UK rental sector is buoyant with demand for rental properties increasing and landlords making a profit. By region, the Northwest has shown the highest yields to date.

88% of landlords in the UK made a profit in the last three months (July – Sept), research by BM Solutions found.

The buy-to-let arm of Lloyds Banking Group did a survey of 700 landlords in the UK, finding further that landlords who reported a loss were a mere 4% of those surveyed, with the remaining 8% breaking even.

This is positive news for property investors, one that is buffered by the undersupply of housing in the UK.  

BM Solutions head Phil Rickards said, “Despite many recent challenges to the buy-to-let market, it’s encouraging that more landlords have made a profit from their buy-to-let properties this quarter, and that landlords are feeling slightly more upbeat when it comes to the near-term prospects for rental yields, the UK private rental sector and their own letting business compared to (the same quarter) last year.”

Average rental yields in Q3 2018 were still at a high of 5.9%, albeit not at the record levels seen last quarter at 6.2% – the highest since Q4 2014.

By region, yields in the Northwest were the highest at 6.7%, while the lowest yields were found in Scotland at 4.9%. Central London was at 5.3%.

Tenant demand had increased to the highest level recorded since Q2 2017. The proportion of landlords reporting a drop in tenant demand is now at its lowest point since the end of 2016, falling 8% from the last quarter.

Mr Rickards said, “For those speculating about the future of buy-to-let, the figures supporting tenant demand should help to dispel this myth. Considering the much talked about shortage of housing supply, it is vital that we continue to support a healthy private rental sector and with tenant demand scores improving, or remaining stable across all UK regions, it is clear that the private rental sector still has a very important part to play.”

A third of landlords surveyed raised rents over the past 12 months, representing a slight increase from Q2. There was also an increase in the proportion planning to increase rents in the next six months, reaching 27% from 24%. More landlords are also seeing rents rising in the areas where they let properties, with an increase of 9% from Q2.

Even in the capital, where house price growth has seen better days, demand for residential property continues to rise.

Residential letting specialists Benham & Reeves says that the last quarter has been the busiest in their history. Q3 2018 had a 22.1% increase in transaction volumes compared to 2017 Y-O-Y.

The agency said in a statement: “We now have 22 applicants per property, compared with 16 at the same time last year, a sure sign that the world’s capital, London, shows no sign of lessening in popularity in terms of where to live.

“It’s been a staggering three months when you consider how much the London property market has been in the news, in addition to fears around Brexit continuing to make the headlines. This has not impacted on the appetite for London rentals, however. From small units to large, from new-build apartments to period, basement properties, demand has been high across the board, and at every price point.”

Interested in being a UK landlord and benefitting from the intense demand for housing there? Come check out our latest investment in the Northwest and find out how you can get amazing yields. Give us a call at (+65) 3163 8343 (Singapore), 03-2162 2260 (Malaysia), or email us at info@csiprop.com!

By Ian Choong; Edits by Vivienne Pal

Sources:

  • http://www.propertyreporter.co.uk/landlords/record-number-of-landlords-make-profit-in-q3.html
  • https://www.mortgagestrategy.co.uk/record-proportion-of-landlords-make-profit-bm-solutions/
  • http://www.propertyreporter.co.uk/landlords/could-average-rents-in-the-north-west-be-about-to-soar.html
  • Featured image: expatriates.co.uk
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Perth Property Prices to Increase in Jan 2019

These next two months will be the last for foreign investors to make substantial savings on Perth property purchases. Come Jan 2019, Western Australia will join the rest of the country in imposing a stamp duty surcharge on foreign property buyers in the state.

 

Earlier this year, the Western Australia (WA) government announced that foreign buyers of residential property in the state will have to pay a stamp duty surcharge of 7%. WA is the last state in the country to impose a stamp duty surcharge on foreign property buyers.

The tax will be in force from 1st Jan 2019, and brings WA into line with the rest of Australia in imposing a foreign purchaser duty surcharge. This surcharge is now imposed by the six Australian states and the ACT at varying rates and scope.

Current additional stamp duty rates for foreign buyers in the Australian states.

Australian citizens, Permanent Residents and special category visa holders do not need to pay this tax.

Corporations and trusts are not exempted as long as foreign interests in the entity exceed 50%.

Residential developments with 10 or more lots are excluded from the tax.

Cost breakdown of a WA property valued at A$500,000

Industry players like the Real Estate Institute of Western Australia (REIWA) have opposed the tax. Its outgoing President, Hayden Groves said the tax will cause an upward pressure on rental prices.

A turn for the better

Perth’s median house price for September was at $505,000, 1% lower compared to last year YOY. Comparatively, 3 years ago the median house price was declining at a more significant pace, recording a 4.2% decline between September 2015 and September 2014.

Although prices in Perth remain soft, the decline of house prices has slowed, which is good news and an indicator that prices are starting to bottom out. Improved affordability in the Perth housing market presents investors with an excellent opportunity to get in before the additional stamp duty kicks in on Jan 1st, 2019 and prices start to rise again.

Incoming REIWA president Damian Collins said that in this quarter leasing activity was up, median rents remained stable, stock levels had reduced, average leasing times were quicker and the vacancy rate had plummeted to its lowest level in more than four years.

Perth’s vacancy rate declined to 3.9% during the September 2018 quarter – the lowest level Perth has experienced since the March 2014 quarter.

Located on Murray Str, in the heart of Perth city, NV is within 1 minute reach of top designer brands (King’s Str) and a vibrant F&B & lifestyle area (Shafto Ln). NV boasts top notch lifestyle amenities and is a trophy property in this growing city. NV will be envy of all. INVEST NOW BEFORE STAMP DUTY INCREASE OF 7% ON 1 JAN 2019.

Mr Collins said, “With all key market indicators improving during the September quarter, Perth’s vacancy rate has now fallen below the 10 year average.

“The rental sector is really leading the charge in the Perth property market recovery. The September 2018 quarter results are very encouraging and should provide landlords and investors with a lot of confidence.”

Interested in to get into the Perth property market before the 7% tax kicks in? One of the latest developments in the city’s prime CBD (central business district), NV Apartments, has a superb location with a whole host of luxurious amenities, from just A$313,000. Act quickly and give us a call at (+65) 3163 8343 (Singapore), 03-2162 2260 (Malaysia), or email us at info@csiprop.com.

By Ian Choong
Edited by Vivienne Pal

Sources:

  • https://reiwa.com.au/about-us/news/perth-rental-market-has-strong-september-quarter/
  • http://www.ironfish.com.au/blog/2018/06/06/foreign-investors-consider-western-australia/
  • https://reiwa.com.au/about-us/news/foreign-buyer-surcharge-sends-wrong-message-to-vital-skilled-migrants/
  • Featured image: Nomads Hostels

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