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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.

Do you think that prices in Manchester and Birmingham will close in on that of London? Drop us a comment below. Don’t miss out on Manchester and Birmingham’s price boom — we have amazing projects there! If you are interested to invest in property in these two, or other regional UK cities, don’t hesitate to give us a call at 3163 8343 (Singapore), 03-2162 2260 (Malaysia), or email us at info@csiprop.com!


Sources:

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

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

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

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

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

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

Stamp Duty Land Tax (SDLT)

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

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

 

BUYING AS AN INDIVIDUAL

Residential Property

First-home buyers

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

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

Stamp Duty for First Home Buyers (buying as individual)

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

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

Single-House Owners

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

This also applies to property outside of the UK.

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

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

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

Stamp Duty for Single-House Owners (buying as individual)

Multiple-House Owners

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

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

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

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

 

Commercial/Non-Residential Property

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

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

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

Stamp Duty on Commercial Property (buying as individual).

 

BUYING THROUGH A COMPANY

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

Stamp Duty applicable to companies

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

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

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

By Ian Choong

Sources:

  • Gov.uk
  • Featured image: lowimpact.org
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UK care homes eclipsing Malaysian property

The returns from investing in the UK commercial care homes sector are undoubtedly attractive. But, beyond that, what this particular investment extends, above other investments, is the fulfilment of having played a part in providing care for those who need it.

Investor interest in the UK healthcare market reached historic highs this year.

By the end of May, investment volumes had hit £687bn – significantly higher than the £492bn invested in the same period last year and the £417bn reported in 2016.

Notable transactions in the first quarter of 2018 alone include Triple Point Social Housing REIT’s investment in supported housing worth more than £40m and Impact Healthcare REIT’s sale-and-leaseback deal on three purpose-built care homes operated by Prestige Care Group for £17m.

Healthcare investments in the UK from 2008 to 2018-to-date (Graphic: Propertyweek.com)

Healthcare is becoming an increasingly popular sector for investors. Results from CBRE’s recent EMEA Investor Survey show that healthcare is one of the most popular subsectors of the alternatives market, with large numbers of investors looking to get into the sector.

This is reflected in increased demand: in spite of healthcare staffing challenges arising from Brexit and a social care funding crisis, occupancy rates for UK care homes rose for the fifth consecutive year. Demand for the sector is now at its highest level in over 20 years, translating to a record volume of about £12bn healthcare deals in 2017, reports Knight Frank. It is anticipated that investment volumes in healthcare real estate will continue to grow thanks to strong investor demand for this sort of long-dated, fixed-income stock.

CBRE reports that the key factor underpinning the potential for future growth in the UK’s healthcare real estate sector is the need to accommodate the mounting care needs of the British aging population.

And, these needs are real, especially if one looks at the estimated shortfall of 148,777 market standard beds by 2021 coupled with 6,600 care homes at risk of closure over the next five years. Currently, 85% of care home stock in the UK is over 40 years old with half of the existing 480,000 care home beds not fit for purpose.

CBRE projects over-85s in Britain to grow by 50% to 2.28m in 2026, quadrupling to make up a total of 8.8% of the UK’s population by 2081.

Projection of UK elderly population growth to 2081 (Graphic: CBRE)

Dementia is a growing concern among the elderly as well, with a pressing need for specialist care to give sufferers an adequate standard of living. In the absence of a cure, the overall number of people in the UK with diagnosable dementia will treble to over 2.5 million by 2081.

In the care home sector alone, this growth will result in the need for an additional 200,000 specialist dementia beds over the next 25-30 years, representing an increase of 40% on current numbers.

Knight Frank Head of Healthcare, Julian Evans, said that investment was needed in the current market with demand outstripping supply.

He stressed that the care home sector was facing a “national crisis” of undersupply with 5,000 beds brought to the market last year and 7,000 beds being decommissioned.

Virata Thaivasigamony of property consultancy CSI Prop echoed the findings from CBRE’s Investor Survey, saying that there has been good response among Malaysian investors towards UK care homes.

“Our last few launches sold out quickly, but we are introducing more projects from this segment to meet the high demand that we have seen among Malaysian investors.”

But for him, there is more to the investment than monetary gains.

“What the elderly care homes investment extends to the investor — above other investments — is the fulfilment of having done something for the good of others. Yes, it is undoubtedly a profitable venture, but it is also an investment that adds value to society and truly makes a difference.

“Caring for the elderly and infirm, especially those with dementia, is not akin to caring for an elderly but, otherwise, relatively healthy mother or relative at home. It requires specialised care. It is enabling the elderly to have dignity in the last few years of life, providing them with the care that their children, family member and friends cannot provide for them,” Virata said.

UK Care Homes Vs Malaysian Property

There is good reason for the high investor demand. The comparison of investment yields below shows that UK care homes offer much higher returns compared to local residential property, with the added benefit of an easy exit:

Rental yields for a UK Care Home vs a Klang Valley Apartment

At the moment, residential property in Malaysia is showing lacklustre demand among investors. The glut of unsold housing indicates that the local market is currently on a downward trend, which is driving investors to search of better returns elsewhere.

The number of unsold completed residential units for the first quarter of 2018 totalled 34,532 units, worth RM22.26bil, the National Property Information Centre reported in June.

This represents a 55.72% increase from the 22,175 unsold units last year.

In ringgit values, this represents a rise of 67.82% from last year’s RM13.27 bil.

What are your thoughts about the investors flocking to the Care Homes sector in the UK? Drop us a comment below. If you are interested to jump on the Care Homes bandwagon with the 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.propertyweek.com/analysis-and-data/uk-healthcare-investment-volumes-show-strong-growth/5097120.article
  • http://www.carehomeprofessional.com/exclusive-investor-interest-uk-care-home-market-historic-high-says-knight-frank/
  • https://www.thestar.com.my/business/business-news/2018/06/28/unsold-residential-soho-units-at-rm22bil/#qvbDmpmyyufsX23G.99
  • https://www.cbre.com/research-reports/United-Kingdom-Healthcare-Property-Trends-May-2018
  • http://valuedinsights.cbre.co.uk/the-property-perspective-alternatives-h1-2018
  • http://www.knightfrank.co.uk/resources/healthcare-property-spring-market-overview-2018-spring-2018-5204.pdf
  • Featured image from cygnet.care
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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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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 ‘with labour to spare’.

The move dealt a devastating blow to the Brummie economy, and the once-great city fell into a steep decline in the 1970s. 200,000 jobs were lost 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, more than four and a half times London’s average at £743,930. Office rents in Birmingham are 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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Cryptocurrency: Hottest Investment of the Decade?

CRYPTOCURRENCY: BANE OR BOON? Despite being declared legal tender in many countries across the globe, cryptocurrency continues to draw an equal measure of flak and fealty. 

BREAKING NEWS: Yesterday, Bithumb, a South Korea-based cryptocurrency exchange announced the suspension of its deposit and withdrawal services after $35m worth of cryptocurrencies were stolen by hackers.

Bithumb is one of the busiest exchanges for virtual coins in the world and the second local exchange targeted by hackers in just over a week. The news sent ripples through the market with Bitcoin and Ethereum recording price falls, according to CoinDesk, a news site specialising in digital currencies.

Cryptocurrency: A Precarious Medium

This is not the first nosedive in the cryptocurrency world. Digital currencies — like the stock market — are highly reactive, recording multiple tumbles in recent history.

The price of Bitcoin, the world’s best known digital currency, has been tracking a downward spiral since the start of 2018, plummeting heavily from the Dec 2017 price of $18,960 to $6,762 at time of publication.

The price of Bitcoin, the world’s best known digital currency, has been tracking a downward spiral since the start of 2018, plummeting heavily from the Dec 2017 price of $18,960 to $6,762 . Source: CoinDesk & South China Morning Post

Still, cryptocurrency has risen from obscurity and is now legal tender in many countries across the globe. And, it continues to draw flak and fealty in equal measure.

Good:

The inherent nature of cryptocurrency and the world of blockchain ensures no possibility of double-spend as the system is built to be irreversible and transparent to the peers within its ecosystem. Cryptocurrency has also been touted as the hottest investment opportunity currently available. The potential rewards (and risks) are huge; its value can fluctuate by as much as a few hundred dollars in a single day and, potentially, one can either make (or lose) a lot of money in a short period of time. One can also trade in it, purchase goods with it, earn money from it (through mining), and it is recognised as a form of payment in some jurisdictions.

 

Cryptocurrency: how does it work? Image credit: Blockgeeks

Bad:

Cryptocurrencies are high-risk investments and, as such, their market value is highly volatile, fluctuating like no other asset’s. It’s easy to lose (or make) a tremendous amount of money in a day. Cryptocurrencies are not backed by a central bank/organisation, and are therefore unregulated to a certain extent. It is subject to price manipulation. Its security is questionable, as clearly demonstrated in yesterday’s Bithumb heist, as well as incidences of hacking in the past. Perhaps the biggest theft in the short history of cryptocurrency happened in 2014, when more than $450m in bitcoins disappeared from customers’ accounts in the Mt Gox exchange in Tokyo.

Rat Poison Squared

This year, Google, Facebook and Twitter announced a crackdown on cryptocurrency ads on their sites in a move to protect investors from fraud.

Bank of England Governor Mike Carney has been highly critical of cryptocurrency while Bill Gates has gone on record about betting against cryptocurrency, describing it as a “kind of pure ‘greater fool theory’ type of investment.”

More famously, Warren Buffet, in yet another rail against digital currency, described Bitcoin as “rat poison squared” and that it’s “creating nothing”.

“When you’re buying non-productive assets, all you’re counting on is the next person is going to pay you more because they’re even more excited about another next person coming along,” Buffet said in an interview with CNBC.

BitMex CEO Arthur Hayes, however, is unfazed by Bitcoin’s volatility, predicting that the cryptocurrency will hit $50,000 by the end of the year.

Cryptocurrency may well be the investment of the decade with incredible returns, agrees Virata Thaivasigamony of CSI Prop, a property investment consultancy with offices in Kuala Lumpur and Singapore.

“But it needs to approached with a combination of care and sheer ballsiness,” he adds.

“Investment is a very personal matter. For me, cryptocurrency pales in comparison with something tangible like property investment.  Real estate has more stability, proving time and again to be a hedge against inflation and a great asset for diversification. Investing in real estate traditionally outperforms most asset classes in risk-adjusted returns. When compared to bitcoin, it is unequivocally the safer investment.”

As inflation rises, so, too, do rents and housing values. In an inflationary environment, real estate assets react proportionally to inflation. And real estate has incredible tax benefits and cash flow incentives.

Ultimately, investing in cryptocurrency — as with all other investments — is a gamble. A question to ask yourself before embarking on any investment is: how risk-averse are you?

We are colossal fans of property investment (duh!) and we make no apologies for it. Still, we remain curious about the many other types of investments out there and would love to hear your thoughts in the comment box below. If you’re a die-hard property investment fan like us, and are thinking of expanding your UK and Australia property portfolio, hit us up: we’ve got some good stuff for you.

By Vivienne Pal

Sources:

  • http://www.scmp.com/week-asia/business/article/2131758/us1-billion-down-why-japan-still-love-bitcoin
  • https://www.theguardian.com/business/2018/jun/20/south-korea-bithumb-loses-315m-in-cryptocurrency-heist
  • https://www.cnbc.com/2018/06/19/south-korea-crypto-exchange-bithumb-says-it-was-hacked-coins-stolen.html
  • https://www.cnbc.com/2018/03/26/bitcoin-falls-7-percent-to-below-8000-after-twitter-bans-cryptocurrency-ads.html
  • https://www.express.co.uk/finance/city/960363/Bitcoin-cryptocurrency-free-fall-price-value-plummets-24-hours-6-price-drop-money-finance
  • https://cryptoslate.com/cryptocurrency-exchanges-are-charging-more-than-nasdaq-for-listings-faking-volumes/
  • http://fortune.com/2018/01/10/bitcoin-warren-buffett-cryptocurrency/
  • http://fortune.com/2018/05/07/warren-buffett-bitcoin-rat-poison/
  • https://blockgeeks.com/guides/what-is-cryptocurrency/
  • https://cointelegraph.com/bitcoin-for-beginners/what-are-cryptocurrencies#buy-goods
  • https://csiprop.com/uk-property-outlook-2018/
  • https://csiprop.com/australia-property-outlook-2018/
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Should you invest in property in Singapore?

Conventional wisdom, especially among Asians, dictates that you should invest in property. CSI PROP takes a closer look at investing in the Singapore property market and compares it to property in other markets overseas.

Property in Singapore is prohibitively priced

Being a tiny island surrounded by water on all sides with not much space available for construction, the only way to build is up creating the familiar high-rise skyline of Singapore.

With the severe lack of land, it is no surprise that property prices in Singapore are one of the highest in the region — the second highest in Asia after Hong Kong, according to S&P Global Ratings.

The prohibitively high prices of property raises the bar for investors, only allowing for the more affluent section of the population, with ample capital, to invest in the market.

The Prime Minister of Malaysia, Mahathir Mohamad had announced recently that the Kuala Lumpur to Singapore High Speed Rail development will be postponed until further notice.

Following this announcement, envisioned property price growth for the Jurong area in Singapore and the Iskandar region in Johor is unlikely to materialize, much to the dismay of investors.

Government intervention has, so far, kept housing price growth in Singapore in check. A report by S&P Global Ratings found that cooling measures and an accommodative monetary policy have helped to control house price inflation.

This may be good news to home buyers, but from an investment perspective, capital gains from investing in Singapore property may be lacking compared to investments elsewhere.

Poor rental yields

Singapore’s rental market remains in the doldrums, despite signs of a property market recovery from last year.

Property prices do not always have a direct relationship with rentals. Singapore’s rental market is very much driven by foreign demand, given that over 80% of Singaporeans own a HDB flat.

Overall gross rental yields for non-landed private homes from January 2017 to January 2018 hovered just around 3.2% the lowest in a decade.

The weak rental market deflates returns on investment in Singapore property, lessening its attraction for investors. Stamp duties, property tax, legal fees and agent commissions further cut into profits.

In Singapore, residential property that you own, but are not physically living in (whether rented out or vacant) is taxed from 10% to 20% depending on the house value. Commercial properties have a flat tax rate of 10%.

The rental income that you are able to earn from local property will be impacted by the high property tax, putting a damper on returns.

The United Kingdom

With less-than-stellar returns in Singapore property, it is no wonder that many investors are looking beyond its shores to overseas markets like the United Kingdom and Australia, which can be far more lucrative.

The UK currently faces a severe shortage of homes — in England itself, there is a backlog of 3.91 million homes, according to research by Heriot-Watt University.

The high demand and low supply for housing in the United Kingdom has driven capital growth. Local economies in the regional cities are booming due to initiatives like the Northern Powerhouse, which bring regeneration and infrastructure improvements to England’s North.

Cities in the Northern Powerhouse like Manchester have recorded price growth of an amazing 12.7% last year, with Liverpool following closely behind at 10.8%. This is an indication of the potential that these cities have to offer for the savvy investor.

Singapore currently holds the title of being one of the largest institutional investors in student property in UK and beyond, in recent years. Mapletree and GIC had spent a combined S$2.15 billion on student housing in the UK in 2016, in cities like Leicester, Birmingham, Nottingham, Oxford, Edinburgh, Manchester and Lincoln.

Just this month, Centurion Corp bought a student housing property in the British city of Manchester for S$33.66 million.

Australia

Australia faces a similar dilemma to the UK, with the last decade of construction failing to keep up with the country’s record population growth.

Melbourne, in particular, is one of the fastest growing cities Down Under. This city is slated to overtake Sydney as Australia’s most populous city according to the Australian Bureau of Statistics (ABS). 

The Urban Development Institute of Australia warned last year that Melbourne could have a shortfall of 50,000 houses by 2020.

Commsec Senior Economist Ryan Felsman commented, “if you look at Melbourne there’s 120,000 people moving to it per annum, but only 75,000 houses being built.”

Whilst the 5 Australian capitals collectively experienced a 0.7% drop in capital growth for the 12 months leading up to May 2018, property in Melbourne performed beyond expectations, growing by 3.3%.

Singaporeans are putting money into Australia. Last year, Cushman & Wakefield reported that Singapore overtook China as the largest source of foreign capital for Australian commercial real estate, as the Chinese government tightened restrictions on overseas investments for its citizens.

Investments into Australia from Singapore quadrupled from about $1bn in 2010 to an excess of $4bn in 2017.

Alice Tan, Knight Frank Singapore director of consultancy and research commented, “Australia has been a popular overseas property destination for Singaporeans, especially for the recent two generations,”

“It continues to maintain its appeal as evident from recent survey findings from Knight Frank’s 2018 Wealth Report, where Australia ranked second on the list of top five destinations where Singapore Ultra High Net Worth Individuals (UHNWIs) plan to buy prime property in 2018,”

“Australia’s economic resilience, adaptability and 26-year record of steady growth provide a safe, low-risk environment in which to invest and do business,” she added.

Cushman & Wakefield regional director for capital markets in the Asia-Pacific region, Priyaranjan Kumar added: “Outside of Singapore, Australia and UK boast two of the most transparent and stable property markets globally for Singapore investors who are largely very institutional in their approach to investments.”

Savvy investors can jump on the foreign property investment bandwagon and take advantage of the supply-demand imbalance in countries like Australia and the UK for more rewarding returns on their investments.

UK Commercial Property: Elderly Care Homes Launch (23 & 24 June at Hilton Orchard Rd 10am-5pm)

What are your thoughts about investing in the Singapore property market? Drop us a comment below. If you’re interested to tap into the attractive potential that overseas markets have to offer, don’t hesitate to give us a call at 3163 8343 (Singapore), 03-2162 2260 (Malaysia), or email us at info@csiprop.com!

Article by Ian Choong

Sources:

  • https://csiprop.com/institutional-investments-in-uk-student-property/
  • https://csiprop.com/uk-government-continues-focus-northern-powerhouse/
  • https://csiprop.com/regional-uk-property-tops-price-growth/
  • https://sbr.com.sg/residential-property/news/chart-day-private-home-prices-jumped-back-being-second-highest-in-asia
  • https://www.straitstimes.com/asia/se-asia/malaysia-singapore-hsr-postponed-not-scrapped-pm-mahathir
  • https://www.edgeprop.my/content/1357048/iskandar-malaysia%E2%80%99s-property-market-could-take-hit
  • https://www.straitstimes.com/business/property/cooling-measures-working-in-some-asia-pacific-markets-including-singapore-sp
  • https://sg.finance.yahoo.com/news/why-aren-t-rental-yields-034158065.html
  • https://www.iras.gov.sg/irashome/Property-Tax-At-A-Glance/Property-Tax-at-a-Glance/How-Is-It-Calculated-/
  • https://www.independent.co.uk/news/uk/home-news/housing-homeless-crisis-homes-a8356646.html
  • https://www.businesstimes.com.sg/real-estate/centurion-corp-plans-to-buy-uk-student-housing-project-for-%C2%A3187m
  • http://www.telegraph.co.uk/business/2017/05/14/student-accommodation-investment-soar-international-investors/
  • https://thenewdaily.com.au/money/property/2018/02/24/australia-not-building-enough-future/
  • https://www.businessinsider.com.au/australia-house-price-sydney-melbourne-property-listings-2018-5
  • https://www.smh.com.au/business/companies/singapore-now-the-biggest-foreign-investor-in-australian-property-as-chinese-investment-drops-69pc-20170825-gy4fqj.html
  • https://sbr.com.sg/commercial-property/in-focus/singapores-real-estate-investment-in-australia-ballooned-141-us35b
  • Featured image: Archinect
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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/
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England & the World Cup 2018

What has England, the World Cup and real estate got to do with each other?

The World Cup season is upon us! CSI Prop examines the unlikeliest connection between England, football and real estate.

Did you know that since its inception in 1930, 79 national teams have made at least one appearance in the FIFA World Cup Finals but, of this number, only 8 nations have ever won the Cup?

Drilling down a little further, now: England made history when it won the trophy for the first time in 1966. It may remain the only time, to date, that this will ever happen — pundits are claiming England has just about a smidgen of a chance (4%, to be exact) of winning the World Cup this year.

But where are we going with all this footie talk? Patience; we’re getting to it.

Watch England’s winning goal and a very pretty young Queen E presenting the cup!

History shows that 1966 is not just when England won the World Cup.

It was also a time when house prices in the UK were at a stupendously affordable average of £2,006.

Research shows that UK house prices are 106 times higher now than they were when England won the World Cup, catapulting from an average price of £2,006 in 1966 to £211,000 today.

Wages, meanwhile, had risen at around a third of the rate, moving from £798 to £26,500. Meaning, it’s 3 times harder to get on the property ladder than it was in 1966, when the Beatles’ Yellow Submarine rode the top of the charts, the miniskirt came into fashion, David Bowie released his first single, and Gordon Ramsay was born.

It gets a little grimmer. House prices aren’t deflating any time soon, not with demand far outstripping supply and driving prices to increasingly stratospheric levels.

In February, research by Heriot-Watt University showed that England is facing its biggest housing shortfall ever, with a backlog of 4 million homes. Meanwhile, rough sleeping or homelessness has risen by 169% since 2010.

This means, in order to address the escalating housing crisis in the UK, the government needs to build 340,000 new homes each year until 2031.

This is a significantly higher figure than the government’s annually targeted 300,000 homes that we talked about in some of our previous posts.

In 2017, Professor David Miles, a former member of the Bank of England’s monetary policy committee, said that the shortage of housing and restriction on the availability of land in the UK, will mean house prices keep soaring for decades to come. He referenced analysis that showed that house price inflation over the past 30 years is likely to continue for the next 50 years.

Britain is wont to remain a nation of renters, by the looks of it, particularly as the younger generation moves increasingly towards the idea of renting a home, rather than owning one.  

If you’d hedged your bets (and currency!) on UK property all these years, you’ve certainly scored big time on rental returns. We suggest you continue taking your chances on the UK property market, and forget about betting on England’s remote chances of winning the World Cup this year. Keen to talk property or even football? Call us at 03-2162 2260 or email info@csiprop.com. Or share your thoughts on who’ll win the World Cup this year in the comment box below!

By Vivienne Pal

Source:

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Serviced offices: workplace & income-generator of the future?

Global demand for serviced offices is growing rapidly

The United Kingdom is the world’s largest market for serviced offices. Growth of the sector is set not only to continue, but accelerate, with optimistic suggestions putting the sector’s value in the United Kingdom at £120 billion by 2025.

Today, more businesses than ever are seeking more flexible and dynamic workplaces.

The changing reality of modern business is placing serviced offices as an attractive option for a wide variety of companies. Serviced offices typically come furnished, providing its tenants with ready reception services and use of business facilities, allowing businesses to get started immediately without the hassle of setting these up.

This paradigm shift is not just limited to new start-ups or small firms, but also larger businesses looking to maintain a presence in distant markets or establish a project office – as serviced offices offer a ready package of services and contractual terms that cannot be matched by conventional commercial accommodation.

Traditionally, office space has been aimed at large corporates with a large footprint. In the United Kingdom back in the 90s, businesses generally only had the option of a 25-year lease to secure office space.

This has changed in recent years, with long lease structures becoming less common. The average lease length is now between three and five years.

The modern worker is mobile and can work away from a central office hub. Email and conference call facilities make a fixed centralised office less important. Office-based start-ups require more flexible contracts, while established businesses increasingly use satellite offices or temporary spaces to accommodate expansion.

According to software multinational company Citrix, which provides networking and cloud computing technologies across the globe, 91% of businesses worldwide are adopting mobile work styles.

It is unsurprising, then, that the growth of the serviced office sector in the United Kingdom has been so strong.

The United Kingdom is the world’s largest market for serviced offices – a British success story. Serviced offices in the United Kingdom account for around 36% of the world’s serviced offices, with more serviced office centres than in the Americas, and more than in the rest of Europe, the Middle East, Africa and Asia Pacific combined.

Research firm Ramidus Consulting estimates that there are over 6,000 serviced offices operating in over 100 countries around the world. Just 50 cities account for 46% per cent of the total global market; of these 50, twelve are in the United Kingdom.

The United Kingdom is at the forefront of the serviced office revolution (Source: Capital Economics)

Serviced offices have grown by over 30% in the United Kingdom since 2008. London is by far the largest and most mature market, with Manchester the second largest, followed closely by Birmingham.

Current estimates using a conventional office leasing business model estimate that the United Kingdom’s serviced office market is worth £16bn. However, a dedicated serviced office model based on workplace rental income, plus the additional charges from supplying a range of services typical to such offices, puts the sector at £19bn, close to 20% more.

“Growth of the sector is set not only to continue, but accelerate, with optimistic suggestions putting the sector’s value in the United Kingdom at £120 billion by 2025,” commented Melanie Leech, Chief Executive of the British Property Federation.

Investment management company JLL has predicted that by 2030, office space around the world will become 30% more flexible.

Economic research firm Capital Economics estimates that the United Kingdom serviced office sector could see its value rise from £19bn to £62bn by 2025. On more optimistic projections it could increase in size over fivefold and be worth over £120bn, an echo of Leech’s predictions.

These predictions are based on favourable trends and developments that are having a very positive impact on the sector, making it a compelling investment proposition.

While the serviced office market in the United Kingdom is more mature than other markets globally, it is still underdeveloped, with large untapped potential for further expansion. Following current trends, the growth in demand for serviced offices is set to continue and even accelerate over the coming decade.

The office market in Liverpool

The city of Liverpool is currently seeing its current stock of office space dwindling, with barely any new supply in the pipeline.

The city’s overall take-up for the combined commercial district and city fringe area increased by 25% in 2017, compared to the previous year. Available office space has decreased by 25% since 2016, and a whopping 53% since 2014.

The amount of total office stock in the commercial district has decreased by more than a million square feet since 2014, a 20% decrease. This highlights the continuing reduction of office stock, and the lack of new build activity in the Liverpool office market.

There is now no supply of prime Grade A office space within the Liverpool commercial district. In 2012, 8.6% of total available office space was in the Grade A sector. B* stock, which is comparative in quality to Grade A, and key to filling its void, has fallen by 40% since 2014.

62% of the currently available stock is in the poorer quality and unrefurbished Grade C and D categories.

Investments in Liverpool offices totalled £87 mil in 2017, which would have been higher but for the lack of suitable space.

Liverpool’s huge growth in demand for office space has created lucrative opportunities for investors. In 2016, London-based real estate company GKRE reported a 76% rental growth rate for serviced offices in the city.

New serviced offices in the city are positioned to take advantage of this rapid growth in demand, and the correspondingly high rental yields.

Centric Serviced Offices, located right in the heart of the CBD, is a prime example. Its location opposite the Moorfield train station makes it extremely accessible, which will be of importance to any business tenant. It is professionally-managed, and offers to investors attractive 7% nett returns which is assured for 5 years.

As one of the major cities of the Northern Powerhouse, Liverpool is set to grow in the next couple of years as billions of pounds are ploughed into the city. Already we can see massive redevelopment projects gearing up to push the city into a major economic powerhouse in the North.

The savvy investor will note Liverpool as a vastly untapped market in the office sector, with a huge potential for rapid growth over the next couple of years.

Do you think serviced offices are the workplace of the future? Drop us a comment below. If you’re interested to tap into the attractive potential that the Liverpool office market has to offer, don’t hesitate to give us a call at 03-2162 2260, or email us at info@csiprop.com.

Article by Ian Choong

Sources:

  • Serviced offices: A new asset class, Capital Economics
  • Commercial Office Market Review 2017, Liverpool BID
  • Workplace of the Future: a global market research report, Citrix
  • https://jll.turtl.co/story/57d80fbaba28b7e565271ddf

 

*Note:

Grade A space is defined as office space that was completed since 1st January 2013, Grade B space completed before 1st January 2013 or other accommodation recently refurbished or due to be refurbished, Grade C as unrefurbished but ready for occupation. Grade D is office space which could not be occupied without substantial refurbishment and where no plans exist for such refurbishment