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New Australian PM Scott Morrison: A Property Person’s Prime Minister

Exactly one week ago, Malcolm Turnbull saw his three-year reign at the helm replaced by former treasurer Scott Morrison, following much political chaos within the ruling Liberal party. Australians and foreign investors alike will be keeping an eye on what happens to the economy and housing market. Here’s a snapshot of the new Australian PM.  

Former treasurer, Scott Morrison is Australia’s new Prime Minister, replacing Malcolm Turnbull who stepped down after three years following a bitter tussle in the Liberal Party leadership.

Scott Morrison, or ScoMo, is also Australia’s 30th Prime Minister — the sixth, in fact, in the last 11 years alone. In a closed-door meeting of Liberal lawmakers last week, Morrison won 45 votes to 40 over right-wing populist Peter Dutton. Morrison was known as the most conservative members of the Liberal’s moderate wing.

 

ScoMo the Regular Joe

The Prime Minister is an observant pentecostal Christian who grew up in a Christian home, in the beachside suburb of Sydney. Married with 2 daughters (after a long 18-year wait and 10 attempts at in vitro fertilisation), Morrison had a brief career as a child actor, appearing in several TV commercials. He achieved some notoriety as managing director of Tourism Australia when he approved an $180m international advertising campaign that was subsequently banned in Britain for crass language.

 

ScoMo on Politics & Immigration

Morrison’s exposure to politics began at a young age. At 9, he handed out “how to vote” pamphlets on behalf of his father, a former policeman and local councillor who served as mayor for a spell. He was elected  member of parliament in 2007, holding several positions in government, including minister of Social Services, minister of Immigration & Border Protection and, up until last week, Treasurer.

ScoMo was (in)famously an ardent supporter and enforcer of a contentious policy which turned away immigrants who tried to enter Australia illegally by boat. These asylum seekers were detained in offshore camps.

Conversely, when it comes to skilled migrants, Morrison is clearly a supporter and was known to rebutt former Prime Minister Tony Abbott’s proposal to cut migration rates.

According to Abbott, the current intake of permanent migrants had affected house prices and wage growth in Australia. He suggested that  immigration numbers to be cut by 80,000 a year.

The suggestion did not sit well with ScoMo who felt that Australia had benefitted tremendously from skilled migrants.

“If you cut the level of permanent immigration by 80,000 it would cost the budget, it would hit the bottom line — the deficit — by $4 billion to $5 billion over the next four years,” Morrison quickly countered.

“Basically the economy (would not be) growing at the same level and people who come as skilled migrants pay taxes, make a net contribution to the economy.

“Currently two-thirds of permanent migrants have skills needed by the economy. A cut in overall numbers would reduce the skilled total and emphasise family migration which ultimately gets more dependent on welfare,” he added.

Australia’s foreign migrant inflow continues to drive the growth of the housing market.

 

ScoMo & the Housing Market

Morrison is a supporter of APRA’s regulatory controls, believing that it would help in rebalancing the market. This, according to an analysis in the Australian Financial Review, is part of what makes him a “property person’s prime minister”. He is no stranger to real estate, having worked as national policy and research manager for the Property Council of Australia for 6 years and, according to industry captains, has “shown a deft touch in managing fears around the overheated investment market”.

Morrison is well aware of the conditions of the housing market in Australia but holds a firm belief that the country is not headed towards a housing market crash, citing APRA’s regulatory controls to credit access will help create a smooth landing.

To date, Australia holds the record for not going through a recession for 26 years. During ScoMo’s watch as Treasurer, Australia’s economy grew 1% in 1Q2018 and 3.1% annually, placing Australia on top of advanced economies in terms of economic growth.

 

Looking Ahead

Up until now, not a single Australian Prime Minister has completed a full term. The frequent upheavals have left foreign allies uncertain, according to experts.

In his speech, the newly minted prime minister said, “We will provide the stability, the unity, the direction, and the purpose that the Australian people expect from us.”

What happens from here is anyone’s guess. There are supporters and naysayers on both sides of the political divide, but ScoMo has, at the very least, until May 2019 when the country goes to the polls, to prove himself and the Liberal Party worthy.

How do you think Scott Morrison will fare as the new Prime Minister of Australia? Share your thoughts with us in the comment box below. If you’re keen to learn more about investing in Australian property, call us at 016-228 8691/ 9150 (MY) or (65) 3163 8343.

By Noorasikin Ali
Additions & Edits by Vivienne Pal

Sources:

  1. https://www.theguardian.com/australia-news/video/2018/aug/28/australias-new-pm-who-is-scott-morrison-video
  2. https://www.nzherald.co.nz/world/news/article.cfm?c_id=2&objectid=12113008
  3. https://www.nytimes.com/2018/08/23/world/australia/scott-morrison-prime-minister.html
  4. https://www.theguardian.com/australia-news/2018/aug/24/who-is-scott-morrison-churchgoer-behind-australias-tough-line-on-immigration
  5. https://www.nytimes.com/2018/08/24/world/australia/scott-morrison-malcolm-turnbull-prime-minister.html
  6. https://www.bloomberg.com/news/articles/2018-08-23/australia-waits-to-see-who-will-lead-country-as-turnbull-reels-jl6ibqux
  7. https://www.nytimes.com/aponline/2018/08/23/world/asia/ap-as-australia-politics.html
  8. https://www.smh.com.au/national/hockey-calls-for-compassion-in-funeral-row-20110215-1av7e.html
  9. https://www.news.com.au/national/politics/scott-morrison-slaps-down-immigration-reduction-calls/news-story/23f18bcc8a30010765d4a1ae0906420a
  10. https://www.theguardian.com/australia-news/2018/feb/21/scott-morrison-slaps-down-abbott-over-push-to-slash-immigration
  11. https://www.news.com.au/finance/economy/federal-budget/is-scott-morrisons-generous-budget-really-a-big-risk/news-story/e0f9fff4882d6ced2d174ab2db91a570
  12. https://thenewdaily.com.au/money/finance-news/2017/09/17/affordable-housing-treasurer-own-goal/
  13. https://www.afr.com/real-estate/scott-morrison-is-a-property-persons-prime-minister-20180826-h14jfz
  14. https://www.sbs.com.au/news/housing-policy-settings-right-morrison
  15. https://www.smh.com.au/politics/federal/scott-morrison-moves-to-reassure-investors-australias-housing-market-isnt-heading-for-a-crash-20171012-gyzgnp.html
  16. http://www.abc.net.au/radio/programs/am/australias-economy-strengthening-scott-morrison/9844018
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100 Days On, Is there Hope in Pakatan Harapan?

Today marks Pakatan Harapan’s 100th day in power since the political earthquake that shook Malaysia — the 14th General Election.

The pressing question is whether the nascent government has delivered on its word and lived up to the expectations of Malaysian voters thus far.

The last three months for Pakatan has been like a walk on the proverbial tightrope, with the coalition struggling to deal with the threat of bailing investors and a sovereign downgrade, and a national fiscal debt that has turned out to be more critical than expected.

A survey carried out by the Merdeka Centre earlier this month (August 2018), found that Malaysian citizens were largely satisfied with Pakatan Harapan ministers, but with some concerns about the economy, and racial and religious rights.

As part of its election manifesto, the government had pledged to deliver 10 promises in 100 days, but not all of these promises have been fulfilled.

Tun Dr Mahathir Mohamad, the Prime Minister, said that the reason behind the government’s inability to fulfil the 10 promises was because they had to prioritise other important matters.  

“The government’s focus is not only on the 10 promises in 100 days, the government has a lot of work to do and this includes ‘cleaning up’ the government which was tainted with corrupt practices and abuse of power during the past administration,” he said.

Harapan Tracker, a website which monitors the government’s performance, gave Pakatan a score of 45%, a cumulative average from its two scores of “the letter of the promise” (30%) and “the spirit of the promise” (60%).

 

Housing Not Part of 100-day Pledge

The housing sector, in particular, was not included in Pakatan’s list of 100-day promises. 

Many Malaysians are concerned about housing, and rightly so. There has been a glut of high-end residential property and a scarcity of affordable housing in the country —  an imbalance that has caused many Malaysians, especially those from the bottom 40% of income earners (B40), to be unable to afford their own homes.

Pakatan's 10 pledges to be achieved in 100 days
Pakatan’s 10 pledges to be achieved in 100 days

Dr Carmelo Ferlito, an economist with the Institute for Democracy and Economic Affairs (Ideas) said the spectacular growth of the high-end property segment was ignited by rising profit expectations, growing demand and easy credit conditions.

“The mix of elements generated a bubble which reached its peak between 2012 and 2013.”

Zuraida Kamaruddin, the new Housing Minister, has embarked on a consolidation of all affordable housing projects under the Ministry in an effort to streamline the building of affordable homes. Certain projects like the 1Malaysia Housing Programme (PR1MA) were previously placed under the Prime Minister’s Department.

The new National Affordable Housing Council is expected to begin its work this month (August 2018) once papers regarding its set-up are finalised by the Cabinet. The council will monitor the construction of affordable housing, coordinate databases and implement a self-renting scheme for the B40 and M40 (middle 40% of income earners) groups nationwide.

Ms Zuraida also plans to set up a one-stop online platform for affordable housing that would enable buyers to submit an application online, and find out their approval status within days.

In an effort to further bring down the price of housing in Malaysia, Finance Minister Lim Guan Eng announced that building materials and construction services will be exempted from the upcoming Sales and Service Tax (SST). The SST is set to kick in on Sept 1.

Under the previous Goods and Services Tax (GST) regime, building materials and construction services were subjected to a 6% tax. However, players in the construction industry are not optimistic that the tax exemption will impact house prices significantly.

Datuk Steve Chong, chairman of the Real Estate and Housing Developers’ Association (Rehda) in Johor, thinks that the exemption is insufficient to bring down the prices of homes.

“We believe that the savings is too small to be passed on to homebuyers which will not in any way translate to a significantly lower price for homes in future,” he said.

Malaysian Institute of Architects (PAM) president Ezumi Ismail added that raw materials only accounted for less than a third of the total development cost, and other factors contributed to high housing prices.

“The rest … would consist of the cost to purchase the land and other compliance charges that come with the building the houses or units. SST may reduce the house prices but it may not be much.

“Some projects require the developers to construct basic infrastructure and facilities that are supposed to be built by utility companies. The added cost would then be (pushed) back (to) the consumers. It would be better if the authorities come up with a building master plan that could address these issues,” he added.

A new National Housing Policy is expected to be announced in September with a considerable number of changes, one of which includes the rental-tenancy market.

The rising supply of residential properties, particularly condominium and apartment units, has caused rentals to continue to drop in Kuala Lumpur.

Previndran Singhe, CEO of Zerin Properties said, “It is a tenant market right now as they have plenty of choices. There have been drops in rental in KL, generally around 10%.”

“Some owners have to reduce their rents because their units are already old and they will not be able to compete (with newer properties) if they don’t upgrade their homes.”

 

Silver Lining

There is a silver lining in sight. Yet, it may be a long while before housing issues are fully addressed in the country. Until then, what stands to remain is the loftiness of house prices in prime areas like the Klang Valley and Penang — and to a certain extent, Johor Bahru —  which will impact not just first home buyers, but also local property investors.

With economists slashing economic growth forecasts due to weak economic data (ahead of Bank Negara Malaysia’s release of GDP 2Q2018 figures), and potentially more fiscal tremors ahead, a single 5-year term may not be enough for the government to make the changes it wants to.

Investors should continue to maintain a wait-and-see stance before embarking on investment-related decisions in the local property market or, alternatively, look beyond Malaysian shores. Virata T of CSI Prop says that investors can still get good returns on properties in countries abroad.

“With rental yields dropping locally, investors wanting to invest in property could look overseas to get better returns on investments. There is a rising interest among Malaysian investors for this type of investment,” he said. 

“Up-and-coming cities in countries with a stable economy like the UK and Australia, are particularly attractive as they provide good returns while reducing investors’ exposure to economic risk.”

What do you think of Pakatan’s performance so far?  Leave us a comment below!

If you are curious about investing overseas and the returns you can obtain thanks to low vacancy rates, call (+65) 3163 8343 (Singapore), 016-228 8691/ 9150 (Malaysia), or email us at info@csiprop.com!

By Ian Choong
Additions & Edits by Vivienne Pal 

Sources:

  • https://www.thestar.com.my/news/nation/2018/08/15/merdeka-centre-august-poll-show-voters-happy-with-pakatan-leaders/
  • https://www.thestar.com.my/news/nation/2018/08/17/pakatan-govt-needs-to-make-good-on-its-promises/
  • https://harapantracker.polimeter.org/
  • https://www.nst.com.my/news/nation/2018/07/392262/pm-concedes-government-not-able-realise-10-promises-100-days
  • http://www.theedgemarkets.com/article/housing-and-local-govt-ministry-set-online-platform-govt-affordable-housing
  • https://www.thestar.com.my/business/business-news/2018/07/25/changes-in-national-housing-policy-to-be-unveiled-in-september/
  • https://www.thestar.com.my/news/nation/2018/08/12/guan-eng-construction-services-building-material-costs-exempted-from-sst/
  • https://www.malaymail.com/s/1662133/johor-developers-sst-exemption-wont-impact-homebuyers
  • https://www.malaymail.com/s/1661951/sst-wont-mean-much-cheaper-homes-says-architect-group
  • http://www.thesundaily.my/news/2018/06/12/national-affordable-housing-council-begin-work-august
  • https://www.edgeprop.my/content/1407669/new-national-housing-policy-rakyat-december
  • https://www.thestar.com.my/business/business-news/2018/07/25/review-on-housing-policy-next-month-says-minister/
  • http://www.thesundaily.my/news/2018/08/16/kl-rental-drops-rising-supply
  • http://www.theedgemarkets.com/article/hlib-cimb-research-slash-msia-2q18-gdp-growth-forecasts-amid-weaker-data
  • Featured image: malaysianaccess.com
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UK Interest Rates Increase on Economic Growth

The Bank of England raised interest rates for the second time in under a year. What does this signal and how will it affect the UK housing market?

The Bank of England (BOE) has raised interest rates to 0.75%.

The hike was the second since the 2008 financial crisis. Last November it rose to 0.5% from 0.25%, the first time in almost a decade.

The BOE Monetary Policy Committee, which decides interest rates, voted unanimously for an increase in rates following positive economic growth and an encouraging labour market.

BOE Governor Mark Carney told reporters that economic growth rebounded in the second quarter, after a slight slowdown at the start of the year.

The bank’s forecasts show that consumer price rises could reach 2.2% in 2019 and 2.1% in 2020.

The BOE is likely to increase rates further if its forecasts prove right. Any future rise in rates, however, is likely to be at a gradual pace and to a limited extent.

This points to continued stability in the real estate market.

Andrew Burrell, JLL EMEA Head of Forecasting, says: “The (rate) rise has been largely priced in and is not expected to have major impact on real estate markets.” He observes that there will be more pressure on yields from market rates eventually.

Despite the rate hike, returns from real estate continue to remain attractive when compared to other asset classes.

Working in favour of the UK real estate market is the employment rate and stable consumer confidence, as well as the OECD predictions of global GDP growth at 3.8% for this year.

Sterling set to rise?

The falling pound dropped to its lowest level against the euro in nearly a year last week on 9 Aug, but edged higher against the Euro to 1.12 this week (as of 16 Aug).

Sterling's fall against the Euro and the Dollar (Source: BBC)
Sterling’s fall against the Euro and the Dollar (Source: BBC)

Stabilization of the pound could be due to the rate hike, which usually pushes up its value, and news reports detailing the potential for a concession being put on the table by the EU in the ongoing round of Brexit negotiations.

Some member states are reportedly ready to allow Britain to remain in the single market for goods while opting out of the free movement of persons. The trade-off is that the UK replicates all new EU environmental, social and customs rules in addition to those set out in Theresa May’s Chequers proposal.

This marks the first major divergence between the European Council, which is made up of leaders from member states and the European Commission. The concessions will be discussed at a meeting of leaders from both sides in Salzburg this September.

The currently weak pound provides foreign investors with a window of opportunity to buy into UK property and obtain good returns.

Jeremy Stretch, head of FX strategy at Canadian Imperial Bank of Commerce said the pound typically underperformed during the August holiday period. CIBC had tracked the pound’s performance on a monthly basis over the last 15 years.

Following this trend, foreign investors who are interested in UK property may want to consider entering the market now before the pound starts to rise again.

By Ian Choong
Edited by Vivienne Pal 

Sources:

 

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Could Birmingham be the next London?

As the world progresses into a new era and populations grow, cities, too, will evolve, transforming from nondescript outer suburbs into big capital cities, like Manchester, Liverpool, Birmingham – even Kuala Lumpur. Infrastructural growth is the main catalyst for the changes that attract migrants, causing an increment in population numbers. Thus, small cities become capital cities.

In the UK, some of the most exciting cities today in terms of population, job and infrastructural growth are Birmingham, Liverpool and Manchester.

Research compiled by Centre for Cities cites Birmingham as the second fastest growing city after Liverpool from 2002 – 2015, increasing from 9,800 to 25,800 people — 7 times faster than London over the same period. This is impressive, given how London had completely eclipsed Birmingham in the past. How the tides have changed!

Knight Frank reports that the number of people living in Birmingham will rise by 171,000 to a total of 1.3 million people by 2039, especially with the expansion of the HS2 high-speed rail line being built in central Birmingham and nearby Solihull, followed by other regeneration projects.  A sweet enticement to new investors indeed.

Birmingham: One of the Best Performing Cities in England & Wales

In the face of this renaissance, this booming city, also fondly known as “The City of A Thousand Trades” maintains its status as the heartland for British industry. The growth of the motor car as well as manufacturing continues to support the industrial sector in England and Wales,  creating more job opportunities and attracting more people — many of whom have relocated from London.

Between 1998 and 2015, job growth in Birmingham hit 30%, representing around 30,600 jobs in total.

       Biggest Growth in City Centre Population & Jobs in England and Wales

Rank City Population growth in city centre (2002-2015) Jobs growth in city centre (1998-2015)
1 Manchester 149% 84%
2 Leeds 151% 34%
3 Birmingham 162% 30%
4 Liverpool 181% 27%
5 Milton Keynes 110% 52%
6 Bristol 86% 41%
7 Newcastle 112% 29%
8 Cardiff 86% 19%
9 Brighton 38% 31%
10 Norwich 57% 16%
20 London 22% 71%

Source: BirminghamLive

However, despite the massive development and job growth, Birmingham is facing a shortage of housing. Between 2011 and 2016, only an estimated 8,000 new houses were built, whereas the actual demand was around 20,000.

The latest data by Hometrack shows that Birmingham is at the third place of house price growth in England, after Manchester and Liverpool, whilst London remains at the bottom.

Manchester clinched top spot at 7.4% growth, followed by Liverpool at 7.2%, and Birmingham at 6.8%. London stayed somewhat flat at only 0.7%.

The average price in Birmingham was at £161,200, slightly lower than Manchester at £166,100, and Liverpool, at £121,900.While price growth in London has been static, house prices there are more than double the national average at £494,800!

Price growth of leading cities in the UK over the last 12 months
Source: Hometrack

Clearly, cities in the Northwest received high capital gains over the last 12 months, yet there is still much room for growth.

Source: Hometrack
Source: Hometrack

The outlook for the housing market in Birmingham appears rosy, thanks to its economic growth thus far.

The region’s strong performance is mainly attributed to its manufacturing sector. In 2016, manufacturing made up 11% of employment in Birmingham, compared to the average for UK cities of 8.8%.

Due to costly house prices, as well as lesser employment opportunities, many Londoners, especially millennials, are relocating to Birmingham, and the other booming cities of Manchester and, Liverpool .

Ultimately, urban regeneration has played a vital part in these cities’ transformations, influencing the movement of millennials towards greater opportunities such as education, jobs and employment options.

Savvy investors are starting to see the opportunities in store for Birmingham. Are you an investor? Are you thinking of making your money work for you? Then you don’t want to miss out. Call us at 03-2162 2260 or (65) 3163 8343.

By Noorasikin Ali
Additions & Edits by Vivienne Pal

Sources:

Image source:

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Victoria Smashes NSW as Australia’s Strongest Economy

Victoria, for the first time ever, has finally overtaken New South Wales (NSW) as Australia’s strongest economy, according to CommSec’s latest State of  the States report.

CommSec (Commonwealth Securities) is Australia’s largest online stockbroking firm operated by the Commonwealth Bank of Australia. Each quarter, it releases its State of the States report, which is an economic performance report of Australia’s states and territories. The report covers eight major economic indicators including population, employment, housing, investment, and construction.

Victoria has never owned the top spot in the report’s nine-year history until now, thanks to strong population growth numbers which have been instrumental in driving construction activity. The state currently ranks first in economic growth, dwelling starts and construction work done. In economic growth, Victoria is ahead at 26.5%, followed by NSW at 25.7% and Northern Territory at 25.6%, while Western Australia remains in the last place by 7.6%.

NSW, long standing at the top spot for economic growth in the last four years, slipped to second place due to declines in a number of housing indicators.

Figure shows the percentage of economic growth by state in Australia. Source: CommSec
Figure shows the percentage of economic growth by state in Australia. Source: CommSec

The gap between the two states, however, remains narrow, leading to the possibility of a change in positions over the next 12 months, said CommSec’s chief economist Craig James.

In terms of population growth, Victoria maintains its position as the clear winner, having toppled other states since 2015. Victoria currently holds a population growth rate of a cool 2.3% above the Australian Capital Territory (ACT) at 2.15% and Queensland at 1.67%.

Meanwhile, the Northern Territory has the lowest population growth at 0.23%.

Victoria is poised to remain in the lead for population growth with research predicting that population figures will reach approximately 6.26 million in 2018.

Victoria claims the highest population growth for the 4th time. Source: CommSec
Victoria claims the highest population growth for the 4th time. Source: CommSec

High population growth will continue to drive the broader economy — by fuelling retail spending and housing demand.

Thus, Victoria’s meteoric population growth will continue to spur Melbourne on as it maintains its credentials as Australia’s “most attractive city” due to stronger rental growth supported by tight vacancy.

As it is, Melbourne — Victoria’s capital city — is predicted to have a swell in population due to its huge student population and migration. In 2016, the Australian Bureau of Statistics (ABS) reported Melbourne as having the most epic population growth of any Australian city, making up almost a third of Australia’s population growth. The contrast is quite significant, with 2.4% in Melbourne compared to 1.2% in the rest of Australia.

With the current undersupply of housing, and demand driving prices, it appears that Melbourne will continue to remain, for some time to come, Australia’s Most Attractive City for global property players in the Asia Pac region.

Looking to purchase a property in Melbourne City? Hit us up — we’ve got limited stock of one of the best residences in one of the most coveted locations in the city. Or, just connect with us to find out more!

By Noorasikin Ali
Additions & Edits by Vivienne Pal

Sources:

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Investor Club World Cup Fever 2018

GOOOOAAAAALLLLLLLLL!!!!!!!

Excitement was the order of the day as the CSI PROP Investor Club combined an educational and advanced session on UK property taxes together with a screening of the FIFA World Cup Finals on July 15.

In keeping with our theme of Gila Bola, CSI PROP served an ambrosial mamak-style spread featuring roti canai and thosai cooked a-la-minute and made extra fragrant with generous drizzles of ghee.

Thosai and roti canai made with love and generous drizzles of ghee
Thosai and roti canai made with love and generous drizzles of ghee

The other delightful dishes of belacan fried rice, roti jala, dhall curry and mutton Myrose Rajah were a real treat, too!

More to fill those empty stomachs
More to fill those empty stomachs

While the guests filled their bellies, CSI PROP director, Virata Thaivasigamony took the stage to deliver a formal welcome and share about the investment outlook in the UK and Australia for the year. He spoke about how property in the various cities in which our projects are located  had performed over the past year, particularly the regional UK cities, which saw good growth values. Melbourne also performed well, superseding all other Australian cities.

Special welcoming speech from CSI PROP director
Special welcoming speech from CSI PROP director

Guests had the chance to win exciting prizes in the Lucky Draw, which comprised  a 3D2N stay at Pangkor Laut Resort, return flight ticket to London, afternoon tea at The Majestic Kuala Lumpur and the official World Cup Ball. (Adidas Telstar 18) and.

Lucky winners for the Lucky Draw
Lucky winners for the Lucky Draw

Knowledge —  as much as Having Fun — is an important part of the CSI PROP mission.  Richard Jepson, our special guest speaker from Adams and Moore Tax Consultancy Ltd, flew in from the UK to talk about Advanced Strategies for UK Tax as well as Basic Tax Filing It was indeed a pleasurable sharing session by someone who has been in the industry for over 15 years.

Sharing session from our special guest speaker, Richard Jepson
Sharing session from our special guest speaker, Richard Jepson

Richard highlighted few components of the UK tax system, as well as the investment vehicles that investors can employ in buying, renting and selling their investment properties. As a bonus, he also stressed on the top three things that savvy UK property investors can do to manage their UK taxes. These are important as a guide for those who want to invest in the UK property market.

To add to the excitement and joy of the atmosphere, we held a thrilling foosball competition for our sporting guests. The grand prize was a pair of return flight tickets to Melbourne, whilst our runner-ups won Adidas Telstar 18 Glider balls.

Excitement was in the air as guests sportingly participated in the CSI PROP Investor Club foosball competition.  
Excitement was in the air as guests sportingly participated in the CSI PROP Investor Club foosball competition.

The mini foosball tournament was based on actual World Cup 2018 matches, complete with  quarter-final, semi-final and final rounds. Each team comprised two people representing the 16 countries that qualified for the World Cup.

The CSI PROP Investor Club event ended with alive screening of the World Cup 2018 finals between France and Croatia on a huge high-definition LED screen. Shouts of excitement and frustration reverberated across the hall as our high-spirited guests supported their preferred teams.

The night ended on a high note — certainly, it served as a perfect precursor to our next Investor Club this September. Stay tuned for yet another fun-filled and memorable experience!

Don’t you wish you were there watching the World Cup Finals with us? If you’d like to get started on high-yield, low-risk property investments overseas and be a part of our ever-growing group of savvy investors, give us a call at 03-2162 2260, or email us at info@csiprop.com. 

By Ian Choong
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Investment Vehicles: Disposing Of Your UK Property

Investors have the option of purchasing property as an individual or via an investment vehicle, such as through a company. Different taxes apply at different stages of owning a property — when you buy it, whilst you own it, and when you dispose of it.

In Part 1, we covered the taxes that are applicable at the purchase stage of the investment. Part 2 covered the next stage of investment, ie when you have already taken possession of the property. Here in Part 3, we talk about what entails when you dispose of your UK property.

Capital Gains Tax (CGT)

When you sell your home, you may need to pay Capital Gains Tax (CGT) on any gains you make when you dispose of your property.

CGT is currently only applicable to residential property. Commercial property such as student property and care homes will be subject to CGT from April 2019.

Your taxable gain is the difference in price between the purchase and sale of your property, after taking away any allowable expenses and your personal allowance (if selling as an individual).

SELLING AS AN INDIVIDUAL

All non-UK residents get an annual personal allowance of £11,700 for CGT.

Allowable expenses include the stamp duty paid upon the purchase of the property, agent fees and legal fees incurred during the purchase or sale, and payments for valuations made on the property.

CGT is taxed at 18% if your taxable gain is £46,350 or less, or 28% if more:

UK Capital Gains Tax (CGT) Rate
UK Capital Gains Tax (CGT) Rate

Example:

Jason sold his apartment for £275,000. He had previously bought it for £200,000, giving him a total cash gain of £75,000.

Jason must report the sale to HMRC, complete a full CGT computation and pay any CGT within 30 days of transfer.

Jason’s expenses come up to £30,400, and after deducting his personal allowance, he has a total taxable gain of £32,900.

Jason’s taxable gain is less than £46,350, so his CGT rate is 18%, and this will come up to a tax of £5,922, or 2.15% of the apartment’s sale price.

Example 1: Calculation of CGT
Example 1: Calculation of CGT

 

SELLING THROUGH A COMPANY

CGT for Companies
CGT for Companies

 

INHERITANCE TAX
Leaving your property to your heirs

If you are leaving your house to your heirs, you may want to take note of the taxes involved in bequeathing it.

Inheritance Tax will need to be paid on any UK assets you pass on. Currently the tax is at 40% for any amount above £325,000 per individual (what is called the ‘nil-band’ allowance).

UK Inheritance Tax (IHT) Rates
UK Inheritance Tax (IHT) Rates

Example:

Andrew owns a house worth £350,000, which is his only UK asset. He leaves the house to his son.

The house’s value exceeds the allowance threshold by £25,000, and the Inheritance Tax on that amount would be £10,000.

The tax is paid by Andrew’s son who inherits the house.

Example 1 of IHT Calculation
Example 1 of IHT Calculation

You can put estate-planning in place to significantly reduce the tax your heirs will need to pay.

This could be something simple like bringing on a spouse or re-mortgaging your house.

Spouses can inherit their partner’s allowance, effectively doubling their tax-free allowance to £650,000.

Example:

Barry owns a house worth £500,000, which is his only UK asset. He leaves the house to his wife.

There is no IHT for passing on the house to a spouse, so Barry’s wife will not pay any tax. However, Barry’s wife also inherits Barry’s allowance.

When Barry’s wife dies, the son inherits the house. Barry and his wife’s joint allowance is £650,000, which is more than the value of the house, and the son will not need to pay any IHT.

Example 2 of IHT Calculation
Example 2 of IHT Calculation

An outstanding mortgage can also be tax-deductible against your estate, and will lower the amount of Inheritance Tax charged.

Here are some other ways of estate planning:

  • Using a trust
  • Using a UK company
  • Taking out a life assurance policy not based in the UK

A good tax planner will advise you on your best options, ensuring that your heirs will get the maximum benefit out of what you leave to them.

Click here for more guides on property investment, and please subscribe to our website notifications to get the latest updates! Do leave us a comment below if you have any thoughts on our article.

If you are interested to explore UK Property’s potential for high returns, or if you need us to refer you to a good tax firm in the UK, don’t hesitate to give us a call at 3163 8343 (Singapore), 03-2162 2260 (Malaysia), or email us at info@csiprop.com!

Disclaimer: This article serves as a guide to investors. Kindly note that CSI Prop is not a licensed tax advisor. Accordingly, you should seek advice based on your particular circumstances from independent advisors and planners.

By Ian Choong

Sources:

  • Adams & Moore Ltd
  • Featured image: YourNewHouse.co.uk
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Manchester Tops House Price Growth in UK

Manchester recorded a 7.0% increase in house price growth compared to London’s dismal 0.4%.

Manchester is England’s top performing city for house price growth, the latest data from Hometrack shows, while London remains on a flatline.

The data comes from the property research firm’s UK Cities House Price index, which tracks housing data across 20 UK cities and regionally.

For house price growth over the last 12 months, Manchester obtained top spot at a cool 7.0% increase followed by Birmingham at 6.5% and Liverpool at 5.9%.

Price growth in London showed no signs of recovery, staying at a stagnant 0.4%.

Across the UK as a whole, prices have gone up by 4.3% over the last 12 months.

Price Growth of UK Cities in last 12 months
Price Growth of UK Cities in last 12 months: Leading cities in the UK that outshine London.

Many cities in the Northwest have posted high capital gains over the average for the last 12 months. Yet, there is still much room for growth, as prices remain low, well under the national average.

The average price in Manchester was at £163,200, Birmingham is at a slightly lower £159,800, and Liverpool, at £118,800.

Comparatively, the average price of a home in Britain is £217,400.

Although price growth in London is stagnant, housing in the capital costs more than double the national average, at a whopping £491,200!

Average Prices in UK Cities
Average Prices in UK Cities: London prices are at stratospheric levels, making high yields and capital gains quite impossible.

Richard Donnell, Insight Director at Hometrack says that the London market is going through a period of price alignment, having posted some very large gains over the past 8 years.

“Over the last 12 months, average prices in London have grown by just under 1%. This is much lower than the annual average growth of 9% over the last 5 years. These averages mask a wide range of house price growth at a sub market level. Actually, house prices are falling across a third of London’s local authority areas.”

Homes in the capital have become unaffordable for many people after years of surging prices, while wage growth remains meagre and lenders apply tougher mortgage criteria.

However, the price gap between regional cities and the capital is narrowing.

Hometrack expects the gap in prices between London and other UK cities to close further over the next two years. This follows a similar pattern from 2002 to 2005 when London house price growth was relatively weak compared with the rest of the country, after a period of surging prices from 1996 to 2000.

Richard says, “We expect house prices to keep rising across regional cities such as Birmingham, Manchester and Edinburgh over the next two to three years. During this time house price growth in London will remain flat, with annual price rises of approximately 0-2%. As a result, the gap between house prices in cities outside of the south-east and house prices in London will continue to contract.”

Price falls in London will reduce the gap between it and regional cities
Price falls in London will reduce the gap between it and regional cities

Manchester and Birmingham are expected to be the first cities to move closer to London prices, with demand for housing likely to be boosted by strong job growth. They are forecast to return towards average prices being around half of those in the capital compared to a third today.

“The level of house price inflation seen in large regional cities during the last peak, between 2000 and 2003, gives a good indication of how much prices may rise this time around. If history is to repeat itself and these cities are to get back to where they were, then prices could increase by as much as 20-25%,” Richard adds.

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By Ian Choong

Sources:

  • https://www.theguardian.com/money/2018/jun/29/london-house-price-growth-at-nine-year-low-amid-edinburgh-and-manchester-spurt
  • https://www.hometrack.com/uk/insight/uk-cities-house-price-index/may-2018-cities-index/
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Investment Vehicles: Buying A UK Property

Have you ever wondered if you should invest in property through an investment vehicle, instead of as an individual?

In this three-part series on investment vehicles, we’ll go through the various types of taxes that are applicable when buying property in the UK individually and through a company, so that you can have a better idea of the differences between the two.

Different taxes apply at different stages of owning a property — when you buy it, whilst you own it, and when you sell it.

In Part 1 of 3, we go through the initial stage of owning a property in the UK, which is when you buy one.

The tax involved when you buy a property is called the Stamp Duty Land Tax (SDLT).

Stamp Duty Land Tax (SDLT)

When buying a property, you are required to pay stamp duty to HM Revenue & Customs within 30 days of completion.

Generally, your solicitor, agent or conveyancer will assist with filing and paying the tax on your behalf and adding that amount to their fees. Otherwise, you can file the return and pay the taxes yourself.

 

BUYING AS AN INDIVIDUAL

Residential Property

First-home buyers

If this is your first home purchase, and it costs less than £500,000, you can claim relief as a first-home buyer.

This means that you don’t pay any stamp duty up to £300,000 and only 5% on the portion from £300,001 to £500,000.

Stamp Duty for First Home Buyers
Stamp Duty for First Home Buyers (buying as individual)

If you already own or previously owned a home outside the UK, you can’t claim relief.

If your first home purchase costs more than £500,000, you follow the rules for Single-House Owners.

Single-House Owners

Single-house owners are those who have previously owned a house before, but have sold it. 

This also applies to property outside of the UK.

Single-house owners don’t pay any stamp duty up to £125,000.

You only begin paying stamp duty at various increments from the next £125,000 (the portion from £125,001 to £250,000) onwards.

Any portion above £1.5 million is charged at 12%.

Stamp Duty for Individuals Not Owning Any Other Property
Stamp Duty for Single-House Owners (buying as individual)

Multiple-House Owners

If buying another house means you will own more than one property, higher rates apply, unless the house you are buying is less than £40,000, in which case you pay 0% stamp duty.

Stamp duty rates are higher by 3% across the bands for buyers who already own a home (in or out of the UK).

Stamp Duty for Individuals Owning Multiple Houses
Stamp Duty for Multiple-House Owners (buying as individual)

If you own just one house now, and are planning to buy a new one as a replacement, Multiple-House Owner stamp duty is applicable. However, you can get a refund if you sell the old one within 36 months of purchase.

 

Commercial/Non-Residential Property

Buyers of commercial property don’t pay any stamp duty for property price up to £150,000.

You pay stamp duty of 2% for the next £100,000 (the portion from £150,001 to £250,000).

Any portion above £250,000 is charged at 5%.

Stamp Duty on Commercial Property for Individuals
Stamp Duty on Commercial Property (buying as individual).

 

BUYING THROUGH A COMPANY

The taxes are different if you are buying through a company:

Stamp Duty applicable to companies
Stamp Duty applicable to companies

Do stay tuned for Part 2 of Investment Vehicles: Owning a UK Property.

What are your thoughts about buying UK Property through an investment vehicle? Drop us a comment below. If you are interested to explore UK Property’s potential for high returns, don’t hesitate to give us a call at 3163 8343 (Singapore), 03-2162 2260 (Malaysia), or email us at info@csiprop.com!

Disclaimer: This article serves as a guide to investors. Kindly note that CSI Prop is not a licensed tax advisor. Accordingly, you should seek advice based on your particular circumstances from independent advisors and planners. 

By Ian Choong

Sources:

  • Gov.uk
  • Featured image: lowimpact.org
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Effects of the Banking Royal Commission on Australia Property Prices

Evidence has emerged to suggest the ongoing Banking Royal Commission will impact availability of financing for house purchases. However, experts say that this is unlikely to have much effect on house prices in the long term. The real drivers of property prices are land availability, construction costs, population growth, and to a lesser extent finance access and cost

The Australian Banking Royal Commission was established last December, after years of public pressure, to investigate alleged misconduct by Australia’s financial services entities.

So far, proof of appalling behaviour by Australia’s major banks and financial planners from the past decade has surfaced, which include alleged bribery, forgery of documents, the repeated failure to verify customers’ living expenses before approving loans, and selling insurance to people who are unable to afford it.

In the aftermath of the scandals, several high profile finance executives have resigned, while shares of Australia’s major banks have all fallen at least 20% from highs reached before last May’s budget.

Commonwealth Bank, Westpac, and National Australia Bank shares are about 23% below their peak of late April 2017, while ANZ’s stock has fallen 20%.

Even as the Royal Commission goes on, tighter lending standards have already been enforced by the Australian regulator, with some self-imposed, as banks attempt to realign lending practices with responsible lending principles.

What the experts say

There has been concern that as tightening regulations reduce availability of financing, demand for property will follow suit, causing a drop in house prices. Several experts have chimed in on the matter.

JP Morgan’s Australian economics team suggests that the Royal Commission will cause slower credit growth, job losses in the finance sector and slower household consumption, which will lead to declines in house prices in the short term.

While JP Morgan believes the fallout from the Royal Commission creates short term downside risks for the Australian economy, in the long run it will leave Australia’s finance and household sectors, as well as the broader economy, on a stronger footing than is currently the case.

All else being equal, JP Morgan is of the view that this should be positive for the longer-term investment and productivity outlook.

Rachel Ong, Professor of Economics at Curtin University says that the stricter regulations are not likely to impact house prices.

“The tightening of banks’ lending standards and stricter credit controls should lead to a reduction in demand for properties.

“However, this prospect is unlikely to translate into any meaningful reductions in property prices. Property prices in Australia have remained persistently high since the early 2000s,” she says.

Brendan Coates, Fellow from Grattan Institute, says that any short term reduction in house prices is unlikely to have much of an impact.

“Tighter lending standards to reduce the amount of money prospective homebuyers could borrow would push down property prices, at least in the short-term. But the effect is likely to be modest, because banks have already tightened lending criteria in recent years,” he says.

Maria Yanotti, Lecturer of Economics and Finance, from University of Tasmania, is of the opinion that the Royal Commission is more likely to affect the supply of financial services, than demand for loans.

“As a consequence of the commission’s findings we would like to think that financial institutions will have to put in place better compliance processes and stop cost-saving or income-generating practices that disadvantage or put consumers at risk. These new processes and practices will translate into higher costs for the financial institutions, which will be passed on to consumers via higher interest rates and/or lower access to finance.

“This situation will result in lower demand from those looking to own a home, in favour of higher demand for rental housing. But the effect of higher interest rates may not be strong enough to decrease demand for property by real estate investors and businesses.

“The real drivers of property prices are land availability, construction costs, population growth, and to a lesser extent finance access and cost,” she observes.

It seems apparent that falls in property prices are unlikely to make much of an impact, or are merely confined to the short-term, giving a good outlook for investment in Australian property for investors keen to get a bargain whilst capital growth has slowed.

What are your thoughts about the impact of the Banking Royal Commission on property in Australia? Drop us a comment below. If you are interested in Australia and, particularly, Melbourne’s potential for high returns, don’t hesitate to give us a call at 3163 8343 (Singapore), 03-2162 2260 (Malaysia), or email us at info@csiprop.com!

By Ian Choong

Sources:

  • https://www.businessinsider.com.au/australia-banking-royal-commission-economic-impact-jp-morgan-employment-house-prices-2018-5
  • http://www.afr.com/real-estate/will-the-banking-royal-commission-push-down-property-prices-we-ask-5-experts-20180514-h102gm
  • https://www.smh.com.au/business/banking-and-finance/housing-royal-commission-jitters-drag-big-banks-into-bear-market-20180613-p4zl88.html
  • https://www.theguardian.com/australia-news/2018/apr/20/banking-royal-commission-all-you-need-to-know-so-far