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Investors Can Look Forward to UK Rents Increase of 15%

UK rents are expected to increase by 15% over the next 5 years, according to research by the Royal Institution of Chartered Surveyors (RICS).

The survey observed that smaller landlords were quitting the buy-to-let sector, affecting supply. “A reduced pipeline of supply will gradually feed through to higher rents,” RICS Chief Economist Simon Rubinsohn said.

Meanwhile, the supply of rental property in the UK continues to fall. In 2017, buy-to-let properties were sold at a rate of only 3,800 a month, leading to the first drop in the number of homes available to rent in 18 years, according to the latest report from the Ministry of Housing. 

In total, the number of privately rented homes in England fell by 46,000 last year — the largest reduction since 1988.

Buy-to-let properties decreased drastically last year. Source: Thisismoney.co.uk, Ministry of Housing, Communities and Local Government

The drop is attributed to the UK Government’s recent tax measures which, among others, increased stamp duty and reduced landlord relief claims against mortgage interest. The stamp duty changes have made it more expensive to purchase a buy-to-let property, and tax relief is set to drop further yearly until the 2020-21 tax year. 

These changes have made it less profitable for UK landlords, especially those on a mortgage, to rent out their properties. House prices have also grown faster than rents, prompting many landlords to exit the sector. Trade association UK Finance highlighted a 19% fall in new mortgages approved for buy-to-let homes in the UK.

Demand continues to rise, and rents are expected to spiral over the next few years. This points the way towards the purpose-built rental sector as a replacement for the traditional buy-to-let properties, which are often older houses on the outskirts of city centres, geared toward owner-occupiers.

Still, rental properties located in prime city centre locations remain attractive to young working professionals who are unable to purchase their own homes. These rental properties are set to rise in the face of dwindling buy-to-lets.

Developing cities in the UK regions like Manchester, Birmingham and Liverpool are growing quickly, and properties in the city centre offer access to business opportunities, employment, and entertainment demanded by a modern working lifestyle.

While interest rates remain low, investors looking towards the UK can thus take advantage of the shortage in supply for rental properties, investing in prime locations in developing cities where the demand is the highest.

Manchester, Liverpool and Birmingham are the best places to invest in the UK. Click on the hyperlinks embedded into the cities if you want to learn more.  If you are interested to explore investing in regional UK property for high returns, don’t hesitate to give us a call at +65 3163 8343 (Singapore), +603 2162 2260 (Malaysia), or email us at info@csiprop.com!

By Ian Choong
Edited by Vivienne Pal 

Sources:

  • https://markets.businessinsider.com/news/interestrates/uk-property-rents-to-rise-15-over-next-5-years-rics-1027444780
  • https://static.halifax.co.uk/assets/pdf/mortgages/pdf/August-2018-House-Price-Index.pdf
  • https://www.thisismoney.co.uk/money/buytolet/article-5771875/Landlords-offload-4-000-buy-lets-MONTH.html
  • https://www.savills.co.uk/blog/article/243068/residential-property/buy-to-let-landlords-face-falling-yields.aspx
  • Featured image: alfahir.hu

 

 

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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

RankCityPopulation growth in city centre (2002-2015)Jobs growth in city centre (1998-2015)
1Manchester149%84%
2Leeds151%34%
3Birmingham162%30%
4Liverpool181%27%
5Milton Keynes110%52%
6Bristol86%41%
7Newcastle112%29%
8Cardiff86%19%
9Brighton38%31%
10Norwich57%16%
20London22%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!

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

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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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: 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: 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

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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Birmingham’s Big Comeback

A bullish property market ahead for Birmingham (Img source: BirminghamLive)

Birmingham was once called ‘the first manufacturing town in the world’ and was the strategic heart of manufacturing Britain in the 20th century.

The rise of the city in the immediate years after World War 2 led to fears at the top that it was becoming too powerful at the expense of the rest of the country. The government moved some 200 industrial firms and projects out of the region to other parts of the country, which dealt a devastating blow to the Brummie economy.

The once-great city fell into a steep decline in the 1970s, and unemployment rose from zero to close to 20%. In just a couple of decades, Birmingham transformed from the manufacturing powerhouse of a fast-growing Britain to a symbol of failure.

Today, however, paints a very different picture.

All Eyes on Birmingham

The city is currently enjoying a burst of economic success, owing its change in fortune to a pro-development attitude by the Labour-run council and a well-judged government decision to press ahead with important transport infrastructure.

Birmingham’s Big City Plan, announced in 2010, sets out a development masterplan that  aims to expand the city core by 25%. This will add £2.1bn yearly to the city’s economy.

As part of the plan, £4bn in transport improvements have been announced to transform road and rail links in the city. Birmingham is the first stop on the High Speed Rail (HS2) coming from London, which will put the city’s more than 1.1 million people within under an hour’s journey of the capital, when it is ready in 2026.

As it is, Birmingham is the most popular destination for people moving from London. More than 6,000 people left London for Birmingham last year, according to the Office for National Statistics (ONS), and it looks like the HS2 will continue to inspire this exodus in the coming years. The second, third and fourth most popular destinations were all within 80km of London.

Birmingham is the most popular destination for people moving from London (Img: BBC)

Businesses are also relocating from London to Birmingham. HSBC’s new head office for its retail and business lending operation, is due to open in July 2018. The bank’s move brings with it more than 1,000 of its existing London staff, and will employ some 2,000 people when it opens.

Deutsche Bank has also expanded its operations in Birmingham, with a total of 1,500 employees in front and back office capacities.

Property Market Outlook for Birmingham

The average house in Birmingham costs £162,701, just over a third of London’s average at £478,853. Office rents in Birmingham are also about a third of those in the capital.

Little wonder, then, that many Londoners and businesses operating in the capital are choosing to move to Birmingham.

Nevertheless, as with other parts of Britain, the supply of housing in this Brummie city hasn’t quite kept pace with demand, charting a potential shortfall of some 30,000 homes.

The deputy leader of Birmingham City Council, Ian Ward said: “Our expanding population means that we need to provide around 80,000 new homes by 2031 and our urban area does not have enough space. If we don’t explore other options we will have a shortfall of 30,000 homes.”

Supply of land is scarce and constrained by the greenbelt, which is a legally protected green area surrounding the city, and not allowed to be used for development.

With the shortfall in housing, rental demand is growing due to an ever-increasing affordability gap for the city’s young population trying to get on the ladder.

JLL predicts an increase in build-to-rent housing with a shift of focus from price towards quality and location. They forecast prime values to hit £500 p.s.f. by 2020 with performance being strongest in the city centre.

Compared to London, Birmingham is still currently 60% cheaper for a new-build project, suggesting significant upside potential.

Investors can look at new-build apartments like Arden Gate in the city centre as a great option for investment. This development has an attractive location, being only a few minutes’ walk from the central transport hub of New Street Station, which has just undergone a £600m renovation. It is close to entertainment and shopping centres and major businesses, including the HSBC head office.

In a 2017 survey, PwC ranked Birmingham as the highest performing UK city, ahead of Manchester, Edinburgh and London.

Regional chairman of PwC in the Midlands, Matt Hammond said, “This may be, in part, due to the big improvements in the city’s infrastructure, including the continuing development of HS2, the extended tram lines and the halo effect created by the redevelopment of New Street Station and the opening of Grand Central.”

Real estate consultancy Knight Frank predicts 19.7% rental growth by 2021, and 23.5% house price growth by 2022, further building investors’ confidence that Birmingham is a high growth market with a promising potential for high returns.

What are your thoughts about the city of Birmingham? Drop us a comment below. If you are interested in Birmingham’s investment 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.ft.com/content/26c293dc-fe12-11e4-8efb-00144feabdc0
  • https://www.ft.com/content/d6c58242-b280-11e7-a398-73d59db9e399
  • https://www.birminghampost.co.uk/business/business-news/birmingham-finally-bouncing-back-after-8772639
  • https://www.birminghammail.co.uk/news/business/birmingham-among-top-cities-job-14435552
  • http://www.birminghamupdates.com/birmingham-remains-britains-leading-regional-city-for-start-up-creation/
  • http://www.itv.com/news/central/update/2013-10-11/plans-for-51-000-homes-near-birmingham
  • PwC Emerging Trends Europe Survey 2017
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How Improvements in Transport Affect Your UK Investment

Birmingham is a fast developing city, supercharged by regeneration and transport improvements (Source: Paradise Birmingham)

 

Two-thirds of buyers still work in the capital, and transport links are what enable them to live away from London. Larger homes are cheaper to find away from the capital, and, with improvements to the public transport networks, many prefer the larger living space, despite having to take a longer commute to work.

Migration out of London is at its highest ever level. The number of Londoners in their 30s leaving the capital has risen by 27% over the past 5 years, according to the Office for National Statistics (ONS).

Unsurprisingly, the most popular destinations for these leavers are concentrated around London’s commuter belt.

Savills data shows that 14% of all their new home buyers across the UK were moving from London in the last 3 years, with 39% of them upsizing to a larger property. Between 2015 and 2017, the average new build home bought by a Londoner was 14% larger than a home bought by someone moving from elsewhere.

Two-thirds of buyers still work in the capital, and transport links are what enable them to live away from London. Larger homes are cheaper to find away from the capital, and many prefer the larger living space, despite having to take a longer commute to work.

Transport improvements trigger higher demand

Transport has a key role to play in the delivery of new homes. As people look to move to a new area, a transport hub can fuel residential demand and, consequently, house price growth.

Train stations that have seen the largest increase in passenger use over the last two years are those that have seen larger volumes of new homes delivered. Areas such as these have, on average, seen house price growth that is 5% higher than neighbouring areas over the past five years.

As people continue to move out of London, improvements to infrastructure can provide an opportunity for developers to take advantage of the demand for new homes in commuter locations.

Commuter belt hotspots

Over the past 2 years, stations that saw the largest increase in passenger use were those within a 19- to 39-minute journey from a central London terminal. These are also the markets which have seen the largest increase in secondhand sale prices over the past five years – an average of 44% against the average for England and Wales of 20%.

Some of the highest increases in passenger use were in lower-value locations in the Home Counties such as Ebbsfleet, Apsley and Luton – areas on the cusp of higher-value ones. As affordability in the capital becomes more stretched, we expect these up-and-coming locations to remain popular with London movers, particularly if they are located on new or improving lines such as HS1 or the Midland mainline.

Train stations with highest increase of passengers over the past 2 years likely have affected house price growth in their areas (Source: Savills Research)

Beyond the commuter belt

Hotspots beyond traditional London commuter locations have already benefited from infrastructure improvements.

The upgrade of Birmingham New Street, for example, has seen a 33% increase in passenger use since 2015, while house prices within 2km of the station have increased by 44% over the past five years.

Ahead of High Speed Rail 2 (HS2) at Curzon Street station, there has been significant investment in the regeneration of Birmingham city centre. This has fuelled commercial investment from companies such as Deutsche Bank and HSBC, and has helped to support residential demand and subsequent house price growth.

This is also rippling out into markets surrounding Birmingham. Rugby, Coventry and Long Buckby have all seen an increase in commuters of between 18% and 19% while house prices have increased by 35%, 46% and 67% respectively over the past five years.

New residential developments in the city are attractive to investors as a result. One example is Arden Gate which is located in the prime city central area. These luxury apartments are only a few minutes away from the central New Street train station, close to entertainment, shopping centres, and major businesses, including the HSBC HQ. Currently the developer is offering a 6% rental assurance for the first 12 months. Prices start from £182,950, with up to 70% financing available.

Up in the Northern Powerhouse, Transport for the North (TfN) which became England’s first sub-national transport body in April revealed a £70bn 30-year plan that includes the Northern Powerhouse Rail. Under the plan, new lines and upgraded existing lines will be linked to the HS2, increasing connectivity between the North’s largest cities and enhancing opportunities for both workers and investors alike.

The ripple is taking effect for, as a direct consequence, Manchester’s Piccadilly station and its surrounding areas will be overhauled. This could be the start of a series of more overhauls across the Northern Powerhouse.

Outlook

The ripple effect of Londoners moving to the commuter belt is expected to gain momentum. Occupiers searching for more space are likely to bring London’s equity with them and will be targeting markets with the quickest links to the capital. These include established prime locations and up-and-coming areas which are more affordable than its surroundings.

This ripple effect will be expected to move beyond London’s commuter zone to markets in the Midlands and the North. House prices there have risen more in line with wages, and therefore remain more affordable. The most capacity for growth will likely be there over the next few years.

The strong local economy and infrastructure investment will remain catalysts for residential demand and house price growth. The £1.7 billion Transforming Cities Fund will provide funding for improved connectivity in areas such as Greater Manchester, Cambridgeshire, the West Midlands and Liverpool City Region.

What do you think about transport improvements driving house prices? Drop us a comment below. If you’re interested to take advantage of transport improvements in the pipeline, and invest in property in the UK regional cities, don’t hesitate to give us a call at 03-2162 2260, or email us at info@csiprop.com.

Article by Ian Choong

Sources:

  • https://www.savills.co.uk/research_articles/229130/228279-0
  • https://csiprop.com/uk-government-continues-focus-northern-powerhouse/
  • https://www.buyassociation.co.uk/2018/05/15/transport-for-the-north-will-unleash-new-opportunities-outside-london/
  • https://www.buyassociation.co.uk/2018/03/15/hs2-northern-powerhouse-rail-transform-manchester-piccadilly/