Property investment is a steady game. Its low risk profile and ability to bring returns in the form of capital growth AND rental income is what makes it very attractive. But it is a slow game, too, because it takes time: your money gets tied up in bank loans, which limits the number of properties you can buy at one time and consequentially, your ability to double, triple or quadruple your returns. Or so we think. But there’s a way to multiply your properties and increase your returns faster without feeling over-leveraged to the gills. We explain how refinancing is an important strategy/ hack in helping you build wealth.
[vc_row][vc_column][vc_column_text]The tussle between Manchester and Birmingham for the position of the UK’s second city is a longstanding one. What Manchester offers in Science & Technology achievements, Nobel prize winners (25 and counting!), the Oasis and as the UK’s Most Liveable City; Birmingham counters with the likes of its incredible diversity, JRR Tolkien, Duran Duran and perhaps the highest number of Michelin-starred restaurants outside the capital! Both cities have a young population, are home to the prestigious Russell Group Universities, and are growing dynamically as a result of massive regeneration in the last decade. But how do Birmingham and Manchester measure up in investment terms?
[vc_row][vc_column][vc_column_text]Last Thursday, 22 Sept, the Bank of England (BoE) raised interest rates by 0.5 percentage points, to its current 2.25%, to control high inflation. The BoE joins several other central banks around the world who have also increased their bank rates.
Yet, with the possibility of recession looming ahead, UK property investors remain bullish about the UK property market. Sounds counter-intuitive, no? Read on to learn the the Top 3 Reasons why UK property remain a sound investment in current times.
A Guide for Singapore Residents to Invest in UK Property
Are there restrictions for Singapore residents who want to invest in UK property?
Singapore citizens face no restrictions when it comes to investing in UK property and do not require approval from the UK government to do so. However, Singaporeans will need to have residential status if they want to buy property to live in the UK. Get information on UK visa and immigration requirements here.
If you are purchasing a property as an investment, always ensure that you choose a location that has good demand for rental property. Remove emotion from your purchase. Low vacancy rates will ensure that there is good demand for rental property, thus ensuring good returns on your investment.
Following our mid-2021 UK Property Outlook, here is our mid 2021 London Property Outlook.
A key contributor of the UK economy, London has held the pole position of #1 City in the World’s Best Cities 2021 rankings for 5 consecutive years based on a number of criteria including human capital, infrastructure and culture, experience and prosperity. It has also held on to its title as the overall European City of the Future in the Financial Times’ fDI rankings for 2020/21. London is the best city in the world for property investment, second only to Los Angeles in the Global Cities 30 Index rankings.
How will London negotiate the challenges of COVID-19 and the uncharted terrain of a post-Brexit world? Will the UK’s main city, continue to be known as the “capital of capitals”?
The recent Covid-19 pandemic has sent stock markets across the world reeling. US futures and Asian stocks tanked as policymakers worldwide took dramatic steps to cushion the economic blow caused by the outbreak.
The US Federal Reserve and Bank of England slashed interest rates to a historic low of near-zero, with the former launching a massive $700 billion quantitative easing program to shelter the economy from the effects of the virus.
Investors are having concerns over the volatility of the property markets, as many countries go into full or partial lockdown to deal with the spread of the coronavirus.
But how much of an impact could current health fears actually have on house prices? The stock markets have fallen dramatically, but compared to property, stocks are largely driven by sentiment.
What to look out for when you invest in UK property this year.
Brexit has happened. How rosy — or bleak — is the outlook for the UK in 2020? As the UK braces itself for change, we take a look at several fundamentals: population, the economy, and the housing market.
UPDATED 12 MARCH 2020
The UK has had quite an eventful start to the year. Fresh out of a General Election that saw the Conservatives’ win by a clear majority in Dec 2019 (its second in 2.5 years!), the country finally saw Brexit “get done” once and for all — at least, somewhat**.
After three years of Brexit-related hubbub, the crossover from Brexit Day on 31 Jan to 1 Feb was, paradoxically, quite undramatic. Henceforth, what’s left is for the UK to chart new territories while transitioning out of the EU.
Foreign Currency Can Be Your Aide with UK Property Investment
Hedge foreign currency wisely and make more returns on your investment, not just in stocks, but also in property such as Australia and UK property investment.
With 2019’s mediocre outlook for the local property market, Malaysian investors are turning to other avenues for growth. One area that has come to the forefront is the international property market.
Institutional investors are typically the biggest players in the international property investment space. Of late, however, more individual investors looking for rewarding returns, have been buying into foreign real estate.
As an investor, the key to making a profit is to understand your investments.
International investments differ in some ways from domestic investments. An important thing to note in international investments is that one of the largest impacts on your returns will be from currency fluctuation.
Investing internationally also means that you are actually making two separate investments — you are not only investing in the currency, but also the investment itself.
Example 1
Let’s say you bought RM1,000 worth of Apple shares in the US last year. This turned out to be a bad move, as Apple’s new phone sales were disappointing and the stock price dropped by 10%. You might think that your investment is only worth RM900 now.
You have an urgent need for cash and decide to sell your shares, even though the stock price went down. Strangely enough, you get back RM1,000, instead of the RM900 you were expecting to receive.
It turns out that the reason you were able to recoup your RM1,000 was because the US dollar appreciated against the ringgit by 10% over the period of your investment.
From the American investors’ point of view, this would have been a bad investment, as they would only have received 90% of what they put in. But, as a Malaysian investor, you benefited from the currency which hedged your investment.
Where currency hedges a poor investment
Example 2
You also bought RM1,000 worth of Amazon shares in the US, which was a better investment because their stock price increased by 10%. Now, since the US dollar appreciated against the ringgit by 10% during the same period, you made a total gain of 20%, making your investment now worth RM1,200.
Where currency multiplies your returns
The above example illustrates how currency effects help in portfolio diversification. Foreign exchange rate exposure doesn’t necessarily lead to higher risk.
Hedging the Currency & UK Property Investment: When & How
Stronger and more mature economies like the US and the UK tend to bounce back quickly after a recession. Developing countries, however, are more likely to take longer to recover economically from risks such as ongoing political instability.
It’s a good time to invest while your target currency is low because appreciation will multiply your returns. The following chart illustrates how the British pound and the US and Australian dollars performed against the ringgit over the past 24 years:
Yearly averages of GBP, USD & AUD against MYR (1995-2019). If you had placed your money into UK property investment, imagine the returns on your investment today when you combine capital growth and currency growth.
In the above chart you will see that these currencies achieved a similar peak growth historically, with the British pound having a poorer showing right now due to Brexit, as in the table below:
The UK Pound is at a low right now.
An analysis of the pound sterling shows a large drop after 2007, correlating with the 2007 global financial crisis (which wiped out the infamous Lehman Brothers). The pound went on to recover after 2013, but declined again after the Brexit announcement in 2016.
Watch the Pound for UK Property Investment
Presently, the pound remains weak due to the uncertainty of the UK’s future relationship with the EU. However, experts predict the pound will rise significantly following the confirmation of a trade deal.
Going back to our earlier examples of how currency exchange affects investments, this is a great opportunity for investors to take advantage of the pound’s weak state. If you buy UK property investment now when the pound is low, the subsequent rise in the value of the sterling can increase your returns greatly.
The fundamentals of the UK residential property market are strong — due to the critical shortage of housing supply in the face of rapidly rising demand — which will ensure continued steady capital and rental growth.
As an example, let’s consider a £240,000 house in Manchester, which achieves a conservative 5% rental yield and 5% capital growth per year. In 5 years’ time, the house would be worth £306,308 and you, as a landlord, would have collected £69,623 in rents. This gives an impressive 57% ROI, without taking into account currency fluctuations. If the pound rises by 10% during that period, your total ROI would shoot up to an amazing 72% after conversion.
A £240,000 property after 5 years
We urge budding UK property investors to look at developing cities, especially those in the Northern Powerhouse region where large amounts of Government money has been invested into infrastructure and commercial development. These regional cities have showed strong growth recently, with room to move upwards. This means UK property investment provides good potential for high yields with lower risk.
Article by Ian ChoongEdits by Vivienne Pal & Jagdeep Kaur
The British pound is set to rise quickly, which means property investors can get better returns by buying now. Don’t miss out! If you are looking for UK property investment in the cities of London, Manchester, Birmingham and more — give us a call at (+65) 3163 8343 (Singapore), 03-2162 2260 (Malaysia), or email us at info@csiprop.com!
If you would like to read more on UK property investment, check out our Investment Guide here.
On behalf of the developer, we provide you with the latest images and information as of January 2019 from The Residence construction site in Manchester, a UK property investment opportunity. Kindly click on the image below to access and flip through the update.
FLASHBACK: The Residence – UK Property Investment Opportunity
The Residence is only a few minutes’ walk from Manchester City Centre. It sits at the doorstep of Spinningfields (The Canary Wharf of the North), Manchester’s main shopping and commercial district and Deansgate, the financial district of the city. The Residence occupies a prominent position within the stunning new £400 million Greengate Masterplan Project and, upon completion, will be one of the tallest residential buildings in the city, making it highly desirable for tenants. The regeneration of Greengate is expected to unlock £400 million of investment over the next 15 years.
CSI Prop proudly promotes international investment property with high yields at low risk. Our portfolio comprises residential 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.
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 / UK Property Investment Opportunities! Hotline: 03-2162 2260 (MY); +65 3163 8343 (SG)
The UK Autumn Budget proved that despite the government’s latest initiatives in addressing housing affordability for firsthome buyers, landlords remain pivotal to the supply of housing in the UK.
At a glance, the Autumn Budget (Oct 29) had good news for first-time house buyers in the reduction of stamp duty on jointly-owned property. The relief applies to homes of up to £500,000 and is in addition to the first-time buyer stamp duty exemption announced last year.
The Chancellor also declared that the government would allocate £500m for the Housing Infrastructure Fund to enable a further 650,000 homes to be built. This is on top of the previous pledge of 300,000 homes per year, on average, to raise housing supply by the mid-2020s.
Alongside the newly announced stamp duty relief for first home buyers, this is a laudable measure to alleviate housing unaffordability, yet there remains a lack in optimism where the issue of housing supply is concerned.
Landlords & Private Rental Sector: A Necessity to Solve UK Housing Woes
Historically, the UK has been plagued by a chronic shortage of housing. Not only had the government failed to meet its previous target of building 240,000 homes by 2016 (a target set in 2007), it had also changed Housing Ministers 16 times — more than 20 times faster than the average UK homeowner moves houses!
A research by Heriot-Watt University shows that the undersupply has become even more critical: England alone faces a backlog of 4 million houses.
UK house price and rental forecast 2018-2021 (CBRE)
More houses are needed to address homelessness as well as skyrocketing house prices and rents. And this is where the private rental sector comes in. Not only are landlords pivotal in ensuring the supply of rental housing for the growing number of young people unable to afford their own homes, they also provide flexibility for millennials who prefer to rent.
New research has shown that UK property remains a lucrative investment with 88% of landlords able to gain a profit, as the imbalance in supply and demand continue to drive rental prices.
Updated Incentives/Exemptions for Landlords
Investors and landlords can look forward to the following updates moving forward:
(a) PERSONAL ALLOWANCE
Landlords can claim an increased personal allowance amount of £12,500 off their taxes in 2019/20. The personal allowance is currently at £11,850.
(b) CGT ANNUAL EXEMPTION
The Capital Gains Tax (CGT) annual exemption will be increased from £11,700 in 2018/19 to £12,000in 2019/20.
Potential SDLT surcharge
Some weeks ago, Prime Minister Theresa May announced the possibility of a Stamp Duty Land Tax (SDLT) surcharge of 1% – 3% to be imposed on overseas landlords/ property buyers from Jan 2019.
The government has now revealed that it will propose a surcharge amounting to only 1% during the Budget, and that a consultation on the surcharge will be published in January. Stay tuned as we continue to monitor the news and provide updates in due course.
Interested to invest in UK property and be a landlord? Invest before the foreigner SDLT surcharge kicks in in 2019! Call us and make that smart choice today at (+65) 3163 8343 (Singapore), 03-2162 2260 (Malaysia). Or, email us at info@csiprop.com!
Find out more about Arden Gate, our latest Birmingham residential investment property in the Midlands. Birmingham has been voted one of the UK’s fastest-growing city by PwC. Come meet our developer rep and learn about Birmingham’s bullish property market.
By Lydia Devadas
Edits & additions by Vivienne Pal
