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New Guidance to UK Landlord Licensing Scheme

A significant change to the landlord licensing scheme is the exemption of licensing for smaller HMOs.  If you are a landlord renting out your premises in the UK to multiple occupants and have been exempt from licensing all this while, you may want to pay attention to the latest changes in legislation.

Since its implementation in the UK some 8 years ago, the landlord licensing scheme has brought changes to the UK housing market, affecting landlords across the country. 

Landlord licensing, also known as selective licensing, sets out to ensure that landlords are “fit or proper persons” and that buildings for rent are fit for occupation — all with the intention of raising standards and improve the rental market.

Recently, the UK government released new guidance affecting landlords of houses in multiple occupations (HMOs). The overhaul will take effect on 1 October.

Due to their shared facilities, HMOs often offer cheaper accommodations to students, migrant workers, and young professionals looking for cheaper rental housing.

The new guidance in the landlord licensing scheme is aimed at tackling overcrowding and ensuring all landlords’ properties reach minimum standards.

One of the most significant additions in the landlord licensing scheme is that the previous rules exempting smaller HMOs from licensing, will be removed. Other mandatory changes in selective licensing for HMOs below:

Part 1 of changes – minimum room size

The Mandatory Conditions of Licences 2018 according to Schedule 4 of the Housing Act 2004, introduces new conditions of minimum sleeping room sizes as follows:

  • Not less than 6.51 square meters for one person over 10 years old;
  • Not less than 10.22 square meters for two persons over 10 years old;
  • Not less than 4.64 square meters for children under 10 years old.

Rooms that do not fulfill the minimum requirement are not allowed to be used as sleeping accommodation. Those who abuse the regulations will be charged a penalty of up to £30,000.

Part 2 of changes – waste disposal

The government also set out new guidances related to waste disposal,  given that waste generation by HMOs is higher than standard households due to the high number of occupants.

All the above new amendments will take effect in cities in which  the landlord licensing scheme applies, for instance, London, Liverpool, Nottingham City, Leicester City, and few regions in Manchester.

We published an article on the landlord licensing scheme on our blog last November. Landlords should keep abreast of regulations affecting them or risk being penalised by the UK government. To find out about the scheme in general, take a look at first blog here: https://csiprop.com/landlord-licensing/. CSI Prop looks forward to continously keeping our readers and investors updated on the latest happenings in the Australian and UK housing markets. For a detailed list of the changes to HMOs, scroll down to the sources below. 

By Noorasikin Ali

Source:

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Liverpool: Hotspot for Economic & Population Growth

A new survey on the UK’s 24 leading urban economies saw Liverpool rated as one of the top four hotspots in the UK for economic growth potential.

Liverpool’s economic growth rate, coupled with investments into the city’s development and infrastructure, is poised to create more jobs, further driving demand for housing and cementing its reputation as one the best-performing property investment locations for landlords.

The results of a survey on the UK’s 24 leading urban economies saw Liverpool rated as one of the top four hotspots in the UK for economic growth potential.

The study was executed by a global design and infrastructure consultancy known as Arcadis. To achieve the rankings, six key features of a prospering city were calculated and compared: workforce and skills, infrastructure, business environment, place, city brand and housing. Liverpool was ranked within the top four economic hotspots together with Edinburgh, Oxford, and Cambridge.

The report was welcomed by both City Region Metro Mayor Steve Rotheram and managing director of the Liverpool City Region LEP, Mark Basnett.

Mr Rotheram said: “This is an encouraging report but, in a sense, it tells what we already know. External validation is always useful and helps to signal to UK and international investors the huge opportunities that exist within the city and wider city region. Devolution gives us a huge opportunity to realise that potential by prioritising the areas identified in this report.”

The report revealed that Liverpool’s strengths were its brand, infrastructure, positive business environment and quality and affordability of housing supply — the latter has earned Liverpool a considerable number of titles as one of the UK’s best buy-to-let areas.

 

Not the First Time

A look at Liverpool’s economic history reveals that its position at the top of a list on economic growth is not some newfangled occurrence. In 2015, figures by the Office for National Statistics (ONS), revealed that Merseyside, a metropolitan county that comprises Liverpool among other cities, experienced an economic growth rate faster than London, Manchester and any other major British city.  Just last year, Liverpool was voted as ‘The UK’s Buy-To-Let Hotspot’ for property investment returns and capital growth. With this positive trend extending into 2018 along with major regeneration schemes, Liverpool and economic growth are set to be well-acquainted in the years to come.

Liverpool’s strengths were its brand, infrastructure, positive business environment and quality and affordability of housing supply.

 

 

Liverpool’s Knowledge Quarter: Catalyst of Economic & Student Population Growth

What will further catapult Liverpool’s economic progress is the Knowledge Quarter, a £2bn vision to establish  the city as one of the world’s leading districts for science, technology, innovation and education.

For this goal to be actualized, it is crucial for well-resourced and world-leading universities to take the lead due to their resources and conducive environment. What is usually forgotten is that labs and classrooms are the birthplace of pretty much all the latest technology. AI and deep learning, automation and predictive analytics have all, in some form, started in an educational institution and not a traditional software development environment. The Knowledge Quarter is a perfect example of the UK’s progress towards this major goal, marking its transition into the next digital revolution and cementing Liverpool’s position as one of UK’s core cities taking part in it.

With several universities already residing in Liverpool’s Knowledge Quarter, a growing student population is bound to follow — Liverpool is home to a whopping 67,000 students!

Worth noting is the rising demand for proper accommodation  in the undersupplied student property market. Found below are figures that illustrate the dire shortage of purpose-built student accommodation (PBSA) in Liverpool as of late 2017:


Student Population: 67,000

Amount of Housing Available Through University: 4,500
Amount of Total Student Housing Available: 17,857
Potential Yields: Approx. 8% per annum

 

This shortage, a burgeoning student population and the relevance of the Knowledge Quarter as a one-stop education and technology centre, make PBSA in Liverpool the ideal investment.

Natex, one of the latest and most iconic PBSA developments to date, offers investors 9% returns, assured for five years. The 566-unit student residential scheme is approximately a 5-minute walk from two of the UK’s top universities: University of Liverpool and Liverpool John Moores University — it boasts all the facilities a student would ever need (and more!).

Natex is located within 5 minutes walk of 2 of Liverpool’s top universities and is in close proximity to some of the city’s top hotspots. Image by Mount Property Group

 

Opportunities for investment are also found in the residential property sector as high house rental values have given Liverpool’s city centre some of the highest rental yields in the UK. According to latest research, Liverpool and Nottingham were the best performing property investment locations for landlords with average nett rental yields of 6.2%, no doubt greatly credited to the education sector. With Paddington Village, a massive regeneration scheme within the Knowledge Quarter, poised to create up to 10,000 jobs and fuel demand for housing, we see this trend continuing into the future.  

With Liverpool’s Knowledge Quarter and education centres in mind, it would be a good idea to dip your toes into the pool of Liverpool’s looming success as soon as possible! 

Feel free to contact the team at CSI Prop for more information about how to get involved with Natex and how to build an impressive property portfolio.

By Nimue Wafiya


Sources:

http://lbndaily.co.uk/liverpool-one-top-four-hotspots-growth-potential-new-report-says/

http://www.finsmes.com/2018/03/new-report-reveals-liverpool-is-one-of-the-top-hotspots-for-growth.html

https://www.timeshighereducation.com/blog/uk-cannot-compete-digital-age-without-top-universities

http://www.primesite-developments.com/5-best-student-towns-invest/

www.movecommercial.com/12439-2/

https://www.propertywire.com/news/uk/liverpool-nottingham-top-buy-let-investment-rankings-uk/

www.csiprop.com/uk-property-outlook-2018/

www.resolutionfoundation.org/media/press-releases/merseyside-grew-fastest-in-a-strong-year-for-britains-major-city-economies/

www.csiprop.com/liverpools-knowledge-quarter-world-class-innovation-district/

www.csiprop.com/properties/natex/


CSI Prop proudly promotes international investment property with high yields at low risk. Our portfolio comprises residential and purpose-built student property in cities across the United Kingdom (London, Luton, Manchester, Liverpool, Newcastle, York, Glasgow, Scotland; Sheffield, etc); Australia (Melbourne, Perth, Brisbane) and Thailand (Bangkok). Our projects are concentrated in high-growth areas with great educational, infrastructural and job growth potentials. We aspire to make a difference in the lives of our clients by helping them achieve their investment goals through strong market research backed by third party experts and due diligence. 

Disclaimer: CSI Prop does not provide tax & legal advice and accepts no liability. Readers are encouraged to consult a qualified tax or legal advisor for a thorough review.

Need advice or clarification? Call us for more information and/or to find out about our projects! Hotline: 03-2162 2260

 

 

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What’s Trending: Becoming a Landlord in the UK

In the UK, becoming a landlord has become increasingly popular with recent data indicating an average increase of over 100,000 new landlords every year over a four year period since 2011/2012. Image by Simon Stannard from LinkedIn.

The reason behind this sharp upswing in landlords is greatly credited to the fact that they receive good income from rental property.

In the UK, letting out property has become increasingly prevalent. Recent data provided by HM Revenue & Customs (HMRC) indicate an average increase  of over 100,000 new landlords every year over a four year period since 2011/2012.

The reason behind this sharp upswing in landlords is greatly credited to the fact that they receive good income from rental property. With savers receiving lacklustre returns from banks and building societies, thousands more people are turning to the buy-to-let sector to fetch lucrative returns.

The figures prove this: according to HMRC, more than 1.9 million people received an income from property in the financial year 2015/2016. The total income earned by landlords in the UK reached £16.2 billion, an increase of £4.1 billion over a short span of only four years!

The annual personal income statistics published by HMRC also show that total income from property dividends almost doubled over the same period, from £42.5 billion to £83.8 billion, as the average income soared to £17,000 per investor.

Recent statistics released by the Office for National Statistics (ONS) on house price growth in the UK reveals a thriving property market. Additionally, the UK property outlook for 2018 illustrates the stability of the economy in the UK — it is no surprise that many have turned to the property market as a means of supplementing their income.


UK Landlords & The Rent Control Debate: It Isn’t Bad

Accompanying this spirited news, however, is talk of Labour leader Jeremy Corbyn’s pledge to enforce a cap on rent rises. Taken at face value, the news is bound to unsettle those involved in the property market, but, a closer look at long-term effects of the regulation could prove it to be quite advantageous for investors, tenants and renters alike. Investors, it appears, could find either condition advantageous.

Amid opposing views on rent control exists neutral ground where a notable point is made: with the number of renters continuing to rise, increasing the number of homes available should be higher on the priority list than capping rent rates. The British government, aware of the housing crisis plaguing the nation, has committed to a target of building 300,000 homes a year. But dissenters question if these homes will be affordable, and the realisation of this pledge remains to be seen.  

But, back to the subject at hand. The current state of rent rates are as follows: there is no limit as to how much landlords can increase rent rates across England. One of the proposed methods for bringing rents under control would be to ensure it can be increased at no more than the level of inflation.

Bricklane chief executive Simon Heawood, who supports the idea of rent controls, explains the bright side to the implementation: “Capped rent rises inside longer tenancies make a lot of sense. Renters get certainty that they’re not going to be priced out of their property on a whim, while UK landlords get happier tenants that stay longer and, therefore, improving returns. Indeed, rent rises could be lower than inflation if the market dictates, in which case we don’t believe tenants would be worse off.”

Whether or not Corbyn’s plans for rent control is implemented depends on Labour’s performance in the next general election. Ultimately, with or without the regulation, the property market continues to grapple with undersupply and a growing Generation Rent population, giving rise to opportunities for savvy investors.

 

Not the First Time, Not the Worst Time

Rents have been capped in the UK in the recent past. The Valuation Office Agency used to set a “fair” level of rent for each property, as well as calculating the amount by which rent could be increased, until the 1988 Housing Act came into play and reduced regulation in the sector.

Worth noting are other superpowers in Europe currently practicing rent control. Paris, Berlin, Munich and Scotland are all home to different types of rent control, yet their economies  continue to thrive. Paris, in particular, continues to be one of the most desirable property markets in Europe despite the cap!

What are your thoughts on rent control? Ever thought of investing in UK property? If you feel the urge to jump onto the landlord bandwagon in the UK, contact us!

Sources:

www.csiprop.com/regional-uk-property-tops-price-growth/

www.csiprop.com/uk-property-outlook-2018/

https://www.ft.com/content/134a8a32-cf73-11e7-b781-794ce08b24dc

www.buyassociation.co.uk/2017/04/20/build-rent-developers-investors-make-three-year-tenancies-norm/

https://www.propertywire.com/news/uk/becoming-landlord-becoming-increasingly-popular-uk/

https://www.buyassociation.co.uk/2018/03/06/rent-control-debate-caps-help-hinder-uk-tenants/

By Nimue Wafiya

CSI Prop proudly promotes international investment property with high yields at low risk. Our portfolio comprises residential and commercial property including student accommodation and carehomes, in cities across the United Kingdom (London, Luton, Manchester, Liverpool, Newcastle, York, Glasgow, Scotland; Sheffield, etc) and Australia (Melbourne, Perth, Brisbane). Our projects are concentrated in high-growth areas with great educational, infrastructural and job growth potentials. We aspire to make a difference in the lives of our clients by helping them achieve their investment goals through strong market research backed by third party experts and due diligence. 

Disclaimer: CSI Prop does not provide tax & legal advice and accepts no liability. Readers are encouraged to consult a qualified tax or legal advisor for a thorough review.

Need advice or clarification? Call us for more information and/or to find out about our projects! Hotline: 03-2162 2260

 

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Generation Rent & The Property Ladder

Does getting on the property ladder exist merely as an idea in the UK now, especially for young people such as the Gen-Y-ers or the Millenials? CSI Prop explores the notion of Generation Rent and how this is an opportunity for the rental market in Britain.

What most call the property “ladder” is the idea that homeowners will own different homes according to their needs during their lifetime.

A young couple early on in their careers would ideally buy a “starter home” and move on to a larger (and more expensive) property when they plan to have children. This has been possible in the past, because their household income would have increased through salary growth and career progression.

However, with wage stagnation, rising house prices and the squeeze on the cost of living today, this may be quite impossible for them, and many others like them.

The average UK house price is, at just over £200,000, almost 10 times the average wage, compared to just under four times the average wage at £31,000 in 1985. Home ownership in the UK has fallen to 63.8% (from 70.8% in 2003).

According to research by PwC, almost 60% of 20- to 39- year- olds in England will rent their homes by 2025, while just 26% will have got on the housing ladder.

 

Renting: the new normal?

Renting has become the new normal for millions of people in the UK. Rising house prices and a lack of new homes for first-time buyers takes home ownership out of reach of millennials, particularly in the southeast of England, where house prices have far outstripped salaries. And with the burden of debt from student loans (the an average debt is £32,220 for graduates in England), it’s easy to see why many think twice about taking on a mortgage.

A survey indicated that over three-quarters of British adults aged 18 to 30 don’t believe they will ever be able to afford to buy a home even though they have full-time jobs.

Philip, 26, from Yorkshire, said this of his experience so far: “By the time you have saved up an extra £1000 towards a deposit, the house values have gone up by £2k, £5k, £10k. It’s impossible.”

“It’s embarrassing to still live at home with your parents, even though I know increasing numbers of people in their 20s are doing so. It’s annoying that my life in that respect hasn’t turned out how it planned. I left uni at 23 telling myself that my move home would be for a few weeks at most, and I’m still there 3 years later,” he says.

Some, like Jamie, a Business Manager for a Health GP Company in Northumberland, have a slightly different view.

“I have no issues with (renting). There is, to a degree, temporised value; you can often live in a nicer area, nicer street etc. for a cheaper monthly payment than a mortgage payment. Some see renting as ‘throwing money down the drain’ but I see it differently. Renting allows you to become, in some odd regard, a more static member of the travelling community.” he says.

Other countries across the Channel don’t look as highly towards house ownership like the British. In France, just over 50% of the population live in their own properties. And in Paris, the figure is less than one in three. In Germany, house ownership is even more scarce. Only 39% of Germans own the homes that they live in, and in Berlin this figure dwindles down to just a mere 13% of the population owning their own home!

Could this be the future of house owners in the UK?

The decline of the “property ladder”, or house ownership means a large potential market for the buy-to-let investor in the UK. Even as the introduction of the stamp duty surcharge on additional property and changes to tax relief have eaten into landlords’ profits, the market continues to grow amid the high demand and low supply.

We see regional markets as the best option for investors looking to make high returns with low capital in the UK. The Government’s ongoing push for the Northern Powerhouse, which includes Liverpool, Manchester and Sheffield, is a good indicator of the potential for future property price growth and solid returns.

Liverpool postcodes dominate the top 25 areas of the buy-to-let yield list, with L7 – which covers the city centre, Edge Hill, Fairfield and Kensington – taking the top position with a huge average yield of 12.63%. This is based on a median rental value of £1,224, and a median asking price of £116,259. There is high rental demand in Liverpool as the city is home to three universities as well as a growing number of young professionals.

Other top performing Liverpool postcodes are L6 in second place with a 10.57% average yield, L15 in third place with a 10.29% yield, L1 in 10th place with an 8.61% yield, and L3 in 11th place with an 8.47% yield.

Manchester also makes a couple of appearances in the top 25, with M6 – which encompasses increasingly popular Salford – in 14th position with an average yield of 8.25%. The rental market in Manchester has been growing in strength in recent years, and its four universities provide ample opportunities for landlords who are willing to invest in student accommodation. Sheffield makes the cut for the top 25 as well, with its S2 postcode at 16th place, giving an average yield of 8.07%.

The Northern Powerhouse, ie, the British government’s attempt to rebalance the UK economy by pushing development upwards into the regions to bring it on par with that of the capital and southeast, can only be a good thing.

Article by Ian Choong

CSI Prop proudly promotes international investment property with high yields at low risk. Our portfolio comprises residential and commercial property including student accommodation and carehomes, in cities across the United Kingdom (London, Luton, Manchester, Liverpool, Newcastle, York, Glasgow, Scotland; Sheffield, etc) and Australia (Melbourne, Perth, Brisbane). Our projects are concentrated in high-growth areas with great educational, infrastructural and job growth potentials. We aspire to make a difference in the lives of our clients by helping them achieve their investment goals through strong market research backed by third party experts and due diligence. 

Disclaimer: CSI Prop does not provide tax & legal advice and accepts no liability. Readers are encouraged to consult a qualified tax or legal advisor for a thorough review.

Need advice or clarification? Call us for more information and/or to find out about our projects! Hotline: 03-2162 2260

 

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Britain, a Nation of Renters?

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Reason #4: The UK has an undersupply of housing

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

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

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

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

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

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

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

Conclusion

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

CSI Prop proudly promotes international investment property with high yields at low risk. Our portfolio comprises residential and purpose-built student property in cities across the United Kingdom (London, Luton, Manchester, Liverpool, Newcastle, York, Glasgow, Scotland; Sheffield, etc); Australia (Melbourne, Perth, Brisbane) and Thailand (Bangkok). Our projects are concentrated in high-growth areas with great educational, infrastructural and job growth potentials. We aspire to make a difference in the lives of our clients by helping them achieve their investment goals through strong market research backed by third party experts and due diligence. 

Disclaimer: CSI Prop does not provide tax & legal advice and accepts no liability. Readers are encouraged to consult a qualified tax or legal advisor for a thorough review.

Need advice or clarification? Call us for more information and/or to find out about our projects! Hotline: 03-2162 2260

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Keeping a Close Watch on Perth Property

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

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

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

The Numbers are Looking Good

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

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

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

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

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

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

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

10 Years Rental Assurance

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

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

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

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

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

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

CSI Prop proudly promotes international investment property with high yields at low risk. Our portfolio comprises residential and purpose-built student property in cities across the United Kingdom (London, Luton, Manchester, Liverpool, Newcastle, York, Glasgow, Scotland; Sheffield, etc); Australia (Melbourne, Perth, Brisbane) and Thailand (Bangkok). Our projects are concentrated in high-growth areas with great educational, infrastructural and job growth potentials. We aspire to make a difference in the lives of our clients by helping them achieve their investment goals through strong market research backed by third party experts and due diligence. 

Disclaimer: CSI Prop does not provide tax & legal advice and accepts no liability. Readers are encouraged to consult a qualified tax or legal advisor for a thorough review.

Need advice or clarification? Call us for more information and/or to find out about our projects! Hotline: 03-2162 2260

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Manchester: Best Property Investment Yields

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

CSI Prop proudly promotes international investment property with high yields at low risk. Our portfolio comprises residential and purpose-built student property in cities across the United Kingdom (London, Luton, Manchester, Liverpool, Newcastle, York, Glasgow, Scotland; Sheffield, etc); Australia (Melbourne, Perth, Brisbane) and Thailand (Bangkok). Our projects are concentrated in high-growth areas with great educational, infrastructural and job growth potentials. We aspire to make a difference in the lives of our clients by helping them achieve their investment goals through strong market research backed by third party experts and due diligence. 

Disclaimer: CSI Prop does not provide tax & legal advice and accepts no liability. Readers are encouraged to consult a qualified tax or legal advisor for a thorough review.

Need advice or clarification? Call us for more information and/or to find out about our projects! Hotline: 03-2162 2260

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Melbourne Property: CBD or Fringe

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

MELBOURNE PROPERTY: CBD VS FRINGE

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

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

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

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

MELBOURNE CBD: SMART INVESTORS STAY AWAY

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

Here’s why:

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

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

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

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

  1. No Exit for the next 10 Years++

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

 

CBD FRINGE PROPERTY – HIGH RETURNS, GREATER CAPITAL APPRECIATION

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

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

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

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

Comparative data of property located at Melbourne CBD-fringe

CSI Prop proudly promotes international investment property with high yields at low risk. Our portfolio comprises residential and purpose-built student property in cities across the United Kingdom (London, Luton, Manchester, Liverpool, Newcastle, York, Glasgow, Scotland; Sheffield, etc); Australia (Melbourne, Perth, Brisbane) and Thailand (Bangkok). Our projects are concentrated in high-growth areas with great educational, infrastructural and job growth potentials. We aspire to make a difference in the lives of our clients by helping them achieve their investment goals through strong market research backed by third party experts and due diligence. 

Disclaimer: CSI Prop does not provide tax & legal advice and accepts no liability. Readers are encouraged to consult a qualified tax or legal advisor for a thorough review.

Need advice or clarification? Call us for more information and/or to find out about our projects! Hotline: 03-2162 2260

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UK Student Property in 2016

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

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

UK Student Property

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

Is Growth in the Sector Set to Continue?

The answer is yes.

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

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

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

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

Conclusion

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

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

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

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

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

CSI Prop proudly promotes international investment property with high yields at low risk. Our portfolio comprises residential and purpose-built student property in cities across the United Kingdom (London, Luton, Manchester, Liverpool, Newcastle, York, Glasgow, Scotland; Sheffield, etc); Australia (Melbourne, Perth, Brisbane) and Thailand (Bangkok). Our projects are concentrated in high-growth areas with great educational, infrastructural and job growth potentials. We aspire to make a difference in the lives of our clients by helping them achieve their investment goals through strong market research backed by third party experts and due diligence. 

Disclaimer: CSI Prop does not provide tax & legal advice and accepts no liability. Readers are encouraged to consult a qualified tax or legal advisor for a thorough review.

Need advice or clarification? Call us for more information and/or to find out about our projects! Hotline: 03-2162 2260

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

Good news for Buy-to-let Investors

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

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

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

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

What do these measures mean for the Malaysian Investor?

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

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

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

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

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

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

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

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

Student Property Investors

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

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

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

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

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

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

What about the London property market, specifically?

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

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

CSI Prop proudly promotes international investment property with high yields at low risk. Our portfolio comprises residential and purpose-built student property in cities across the United Kingdom (London, Luton, Manchester, Liverpool, Newcastle, York, Glasgow, Scotland; Sheffield, etc); Australia (Melbourne, Perth, Brisbane) and Thailand (Bangkok). Our projects are concentrated in high-growth areas with great educational, infrastructural and job growth potentials. We aspire to make a difference in the lives of our clients by helping them achieve their investment goals through strong market research backed by third party experts and due diligence. 

Disclaimer: CSI Prop does not provide tax & legal advice and accepts no liability. Readers are encouraged to consult a qualified tax or legal advisor for a thorough review.

Need advice or clarification? Call us for more information and/or to find out about our projects! Hotline: 03-2162 2260