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Can Tun Mahathir Solve the Malaysian Housing Crisis?

Houses in Malaysia are seriously unaffordable for the masses (Source: The Malaysian Insight)

 

With the recent change in government, all eyes are on Pakatan Harapan to solve the housing supply-demand crisis in Malaysia. The current situation is dire with a severe lack of affordable housing, and a glut of expensive properties, and many Malaysians not being able to afford to purchase their own home.

The previous Najib administration had set a target of building 1.1 million affordable homes by 2018 to address the shortage, but after 5 years, only 23% (255,341) of the total was completed.

In November 2017, Tan Sri Noh Omar, the Urban Wellbeing, Housing and Local Government Minister blamed state governments for the delays, citing a lack of cooperation.

Addressing a question in the Dewan Rakyat, Noh said that 25.6% (285,097) of the houses were still under construction while 39% (432,415) was in various planning stages. He said the remaining 12.4% (138,775) had yet to make it to the planning stage.

At the same time, there was an overhang in the amount of PR1MA homes for sale nationwide. Slightly under half (12,492) of the total PR1MA homes (25,132) had yet to be sold.

The PR1MA Malaysia Corporation was established under the PR1MA Act 2012 to develop housing for middle-income households in key urban centres, with a target price range of between RM100,000 to RM400,000.

This programme that was initially meant to help the average Malaysian buy his or her first house was relaxed in 2013 to allow purchases of second homes, and eligibility was widened this year to include households with a monthly income of RM15,000.

The overhang showed that PR1MA homes were still priced out of reach for its target market. The maximum affordable house price in Malaysia is estimated by Bank Negara to be RM282,000.

Property expert Ernest Cheong has said PR1MA should stick to its objective of providing affordable homes to middle- and low-income earners instead of jumping on the high-end property bandwagon. In PR1MA’s Jalan Jubilee development in Kuala Lumpur, the largest unit, a 1,089 square foot unit with three bedrooms and two bathrooms, was going for RM445,000.

A nationwide housing expo was held in March this year entitled “Housing Sale Expo Towards a Million Dreams, Experience A Wholesome Lifestyle”. The expo was a joint initiative by the Ministry of Urban Wellbeing, Housing and Local Government, the National Housing Department (NHD), PR1MA Malaysia Corporation, Syarikat Perumahan Negara Bhd (SPNB), 1Malaysia Housing Projects for Civil Servants (PPA1M) as well as state government agencies.

According to a report by The Malaysian Insight, hopeful buyers at the expo in Kuala Lumpur were disappointed with the severe lack of homes below RM250,000 for sale.

Pakatan’s pledges for the housing sector

Pakatan has pledged to institute a couple of reforms in the housing sector. One of those reforms is to ensure that developers under the PR1MA program do not merely build a small number of affordable houses, after obtaining land at discounted prices.

However, Pakatan’s manifesto has not addressed the pricing issue that PR1MA is currently facing. The reforms they undertake must include pricing homes within the means of the average Malaysian, otherwise the current overhang of PR1MA homes will continue.

Pakatan plans to establish a National Affordable Housing Council which will:

  • Build 1 million affordable houses within 2 terms of their administration, by 2028;
  • Coordinate an open database on unsold affordable housing;
  • Coordinate a national rent-to-own scheme for the B40 and M40 group, with a special scheme for young people;
  • Coordinate with the banking sector to expand access to financing for first-home buyers.

Building one million affordable homes by 2028 is a more realistic target versus the previous one set by the Barisan Nasional administration. Nevertheless, current house building efforts must be doubled to meet this target, judging from the rate of construction we have seen so far.

The open database on unsold affordable housing is a welcome one in the interests of transparency, allowing potential house buyers to find information on available affordable housing. This will prevent unscrupulous developers from hiding information from unwitting house buyers, and maximising their profit by marketing the premium market instead.

The expansion of financing for first-home buyers will allow more Malaysians to own their own homes, while the rent-to-own scheme acknowledges segments of the population that do not qualify for financing, or are otherwise unable to purchase an affordable home.

Other plans Pakatan has for the housing sector include raising the quota for affordable houses; to introduce a time limit for developers to complete constructions, so that land-hoarding can be avoided; and tax incentives for developers who focus on affordable housing, to encourage the use of efficient building technologies to reduce cost.

The new government’s manifesto appears to address many issues in relation to affordable housing shortage. Still, one hopes that the PR1MA reforms they take will fix the current lack of focus in the programme. The nascent Pakatan administration is yet untested, but under the experienced hand of Malaysia’s longest-serving prime minister, buyers and stakeholders alike can look forward to a comprehensive reform of the housing sector, with hope that the current crisis can be solved.

Investment prospects in the housing market

The current glut of higher-end housing, and undersupply of affordable housing is causing activity in the investor market to remain stagnant. If Pakatan can correct the supply-demand imbalance, property prices may start to rise again. Policies will take time to be implemented, and it will be some years before we see real change.

As we have said previously, the local market in 2018 is shrouded in uncertainty — a situation thrown into even sharper relief as the nation waits for the current Government’s plans to take effect.

With the recent fall of the UK and Australia currencies, properties in those markets are more attractive than ever, offering investors an opportunity to take advantage of the currency rate and get on to the overseas investment bandwagon.

Do you think Tun Mahathir and Pakatan can do better than BN in addressing housing affordability concerns in Malaysia? Share with us in the comment box below. If you think your money would be better spent on property investment overseas rather than the local market, give us a call at 03-2162 2260! 

 

Article by Ian Choong

  • http://www.thesundaily.my/news/2017/11/02/affordable-housing-project-lagging-behind-target-11-million-homes
  • http://www.thesundaily.my/news/2017/11/21/overhang-pr1ma-units-calls-review-approach
  • https://www.themalaysianinsight.com/s/24137/
  • https://www.themalaysianinsight.com/s/45067/
  • https://csiprop.com/the-general-election-2018-and-malaysias-property-market/
  • http://pakatanharapan.com.my/diymanifesto.php

 

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Are We Birkin Up The Wrong Tree?

The Hermes diamond and Himalayan Nilo Crocodile Birkin handbag at Heritage Auctions offices in Beverly Hills, California September 22, 2014. Image credit: REUTERS/Mario Anzuoni/File Photo

The iconic Hermes Birkin handbag is said to be a worthy investment, outperforming gold and the S&P 500 in investment returns and stability. CSI Prop investigates how this bag holds up against brick and mortar.

So the Birkin smashed the almighty Box Office of Buzzwords a few days ago when a raid at one of former Malaysian PM Najib Razak’s residences uncovered the haul of the century: 284 boxes of luxury handbags, a good number of which were in the signature Hermes orange hue.

The former PM’s missus, as the entire world probably knows by now, is a huge fan of the Birkin. Word on the street is that a rare, record-setting Hermes Birkin could be among the 284 handbags seized during the raid. The purse, which has white gold and diamond hardware, fetched an eye-watering $221,755 at an auction in Hong Kong in 2015 — the most expensive bag sold at auction at the time.

One wonders if Datin Sri Rosmah’s collection could give Victoria Beckham a run for her Birkins (note: Mrs B apparently has 100 Birkin handbags). Especially since a New York Times article reportedly quoted a broker’s estimation of Datin Sri Rosmah’s Hermes Birkin collection to be worth at least US$10 million.

Whatever the rumour, it looks like the cat’s finally out of the handbag…err, bag.

So, what has a handbag got to do with property, you might ask. Here’s our cheeky comparison between bag and brick — after all, both are investments in their own right and share many similarities. Or do they? You decide.   

The cat’s out of the (hand)bag: Some of the Birkin handbags confiscated from one of former PM Najib Razak’s residences last week. Image credit: The Malay Mail Online/Hari Anggara

TOP 5 BRICK VS BAG

  1. Time = Perfection

It takes Hermes artisans a minimum of 5 years training before they’re allowed to independently create a Birkin. The artisan makes a Birkin by hand from start to end, a process which takes possibly up to 48 hours.

A house, however, takes a good many months or years to complete, requiring the skill of experts from various fields in order for it to withstand way more than a huff, a puff and a blowing down by the Big Bad Wolf.

  1. Undersupply = Exclusivity

Birkins are expensive because they are scarce, with only 200,000 bags in circulation around the world. One cannot simply buy a Birkin without a purchase history at the store or knowing someone who has bought a Birkin, before getting on the wait list.

Property prices are also governed by the rule of demand vs supply. The UK is experiencing a critical undersupply of homes, and the government is facing challenges in achieving its goal of building 300,000 homes a year to even out the demand-supply balance. This continues to push property prices upward, making it increasingly difficult for first-time house buyers to get on to the property ladder. Oh, and for the record, you can’t own a property just like that either — you need to clear checks by the regulators first. Think AML, bank loan approvals, that sort of thing.

  1. The Right Price

The price of the humblest Birkin starts at around $12,000. It could go all the way up to more than $200,000. That’s the price of a house in some parts of Petaling Jaya, according to a report in The Star.

Property is expensive, too; the greater the undersupply, the higher the price. Take Melbourne property as an example. AUD$500,000 could likely get you a landed property, but we’re talking some 16km away from the city centre. For AUD$550,000 you may get a 2-bedroom apartment in the stylish Palladium Tower apartments in Melbourne CBD, but apartments in this part of the city, at this price, is becoming a rare find (call us if you’re interested; we can hook you up).

  1. Capital Appreciation

According to research by Baghunter, the price of the Birkin had risen by an average of 14.2% since its launch, outperforming traditional investments such as the S&P 500 and gold markets. A Himalaya Birkin handbag made from the albino Nilo crocodile hide with white gold and diamond hardware and auctioned in 2014, was reported to cost as much as a 2-bed/2-bath apartment in the heart of Brisbane!

Interestingly, Savills predicts that property in the UK will grow by 14.2% over the next five years in spite of Brexit-related uncertainty. One might argue that this was a drop from the 28% price growth between 2013 and 2018 but, hey, that was during the good times. Like, pre-Referendum. We remain confident that the UK will recover after a spell of uncertainty following Brexit in 2019. 

In Australia, meanwhile, the average price of a property in Melbourne had increased by more than 6-fold from A$142,000 to A$943,100 today!

And we haven’t even talked about rental yields yet! Investment in the UK commercial property sector such as purpose built student accommodation and commercial care homes, can fetch handsome yields of up to 9%!

  1. The Show-Off Factor

Of course, all said and done, one can debate that you could bring a Birkin anywhere and show it off to anyone, while a property is most ‘inconveniently’ tied to the location in which it is built.

OK, that’s true but, hey, you can’t live in a handbag, can you?

Birkin worshippers will probably have more compelling reasons why the Birkin makes a fantastic investment, and naysayers would have equally compelling arguments for rebuttal. Perhaps we could all put ourselves in the shoes (or sandals) of the current Prime Minister and think on how to have a bata (better) management of our finances. What are your thoughts? Share with us in the comment box below. Or if you think your money is better spent on property investment, give us a call at 03-2162 2260! Don’t be birkin up the wrong tree now!

Current PM Tun M seems to have a bata grasp of what the simple things in life is. Image credit: gempak dot com
By Vivienne Pal

Source:

  • https://www.straitstimes.com/lifestyle/fashion/284-luxury-handbags-seized-from-najib-linked-apartments-5-things-about-the-hermes
  • www.realstyle.therealreal.com/how-long-it-takes-make-one-birkin/
  • http://says.com/my/lifestyle/what-are-hermes-birkin-bags-and-why-the-heck-are-they-so-expensive
  • www.csiprop.com/uk-property-outlook-2018/
  • http://www.dailymail.co.uk/news/article-5749817/Study-reveals-500-000-buy-Australias-cities.html
  • https://baghunter.com/blogs/insights/why-are-birkin-bags-so-expensive
  • http://www.freemalaysiatoday.com/category/nation/2018/05/18/forget-gold-stocks-buy-birkin-handbags/
  • http://www.savills.com/_news/article/3359/224244-0/11/2017/uncertainty-and-lending-constraints-to-slow-5-year-house-price-growth-and-limit-house-buying-activity.-rents-to-keep-pace-with-wages–but-landlords-feel-the-squeeze
  • https://www.businessinsider.my/uk-house-prices-will-they-rise-or-fall-in-2019-2017-9/?r=UK&IR=T
  • https://www.businessinsider.com.au/a-home-in-sydney-now-costs-more-than-14-times-average-earnings-2017-4
  • www.csiprop.com/care-homes-investment-stand-asset-class/
  • https://www.thestar.com.my/news/nation/2018/05/19/hermes-birkin-pinnacle-of-bag-perfection/
  • Image credit: Reuters

 

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#GE14: Investors and the Battle for Malaysia

In just a matter of hours, Malaysia will enter what could be the biggest tussle for leadership yet — the 14th General Election. Image credit: Asian Business Software Solutions

In just a matter of hours, Malaysia will enter what could be the biggest tussle for leadership yet: the 14th General Election (#GE14).

Once again, the incumbent government faces a serious onslaught (its most critical since Independence, perhaps) as factions from the Opposition unite to mount a formidable challenge for rulership of the land. As the latter’s weapon of warfare looms in the shape of 92-year-old former Prime Minister, Tun Dr Mahathir Mohamad; the former continues to push its promises of cash and stability-in-the-status-quo to the masses.

The rising costs of living hogs the spotlight this #GE14, but yet another issue coming to a head as voters go to the polls tomorrow, is the lack of affordable housing, especially for middle class urbanites known as the M40 (ostensibly because they form part of the middle 40 percentile). This is an issue most pronounced in the bustling urban constituencies of Kuala Lumpur, Selangor and Johor Bahru. 

Bank Negara in its quarterly bulletin in Feb 2018, noted that homes had become “seriously unaffordable” in 2016 by international standards. The local media has also reported extensively on the lacklustre performance of the Malaysian property market and now, with the spectre of the general election looming ahead, contesting parties have pledged to tackle housing affordability as part of their election manifestos.

Not only is the M40 watching for the change(s) that could come with the #GE14; investors are paying close attention, too.

Currently, investors are adopting a wait-and-see approach. Wealthy Malaysian investors are diversifying their money into real estate opportunities across residential and commercial properties both at home and overseas, as well as assets such as bonds and gold in light of a more cautious market and the upcoming general election. The general sentiment is that investments into local property could pick up after the election once the dust settles and new policies are put into place.

Be that as it may, Knight Frank’s latest Wealth Report Attitudes Survey 2018 reveals that 43% of its Malaysian clients have plans to invest in properties overseas, going forward, with the top five overseas destinations being Australia, United Kingdom, Singapore, New Zealand and the United States. Interestingly, Malaysia tops the survey, followed by Hong Kong (40%), China (37%) and Singapore (30%).

The rising interest in overseas properties investment is not surprising, given the favourable returns that investors get (our portfolio of property investments can offer up to 10% nett returns for 10 years!).

“With the current property glut and wait-and-see approach adopted by investors, it is certainly a driver to continue investing abroad,” says Knight Frank Asia Pacific head of research, Nicholas Holt.

In a recent article in The Malaysian Reserve, Henry Butcher Real Estate Sdn Bhd COO Tang Chee Meng said that speculators and investors have been deterred by a host of issues including oversupply in certain locations, cooling measures by the government and cap on loan margins. The reduced interest from developers, he added, had resulted in more sluggish take-up rates for developers, thus contributing to the increase in the overhang statistics.

Stagnating rental growth rates have also clouded the local property market. And, with new developments moving at such a rapid rate, the rental market is hard pressed to keep up.

After tomorrow, the next few months will be crucial. The nation will be watching to see if promises are kept and if manifestos on bread-and-butter and housing issues will take effect in reality.

To all Malaysians traveling to cast their votes this #GE14, CSI Prop wishes you a safe journey. Selamat Mengundi.

By Vivienne Pal

Sources:


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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Are British Accents A Reflection of the UK Housing Market?

How do the Brits rate the many different accents in the British Isles and are they a reflection of the British property market?

There is a sort of ‘pecking order’ to the accents found in the British Isles. But here’s the question: is this pecking order a reflection of the performance of the property market in the different cities in the UK?

There is a common fallacy that surrounds the British accent, the misconception being that there’s only one. Well, there isn’t.

If you were to do a quick analysis of English dialects, you will find that there are roughly as many accents in the British Isles as there are in the whole of North America – including Canada, Bermuda and Native American dialects. Drill deeper and you will find that there is one dialect per every 1.3 million people in the British Isles (vs. a rather unimpressive one in 10m people in North America)!

This is a fact known to few, with many not even realising the huge variety in British accents, let alone the hilariously painful hierarchy associated with it.

Thanks to YouGov, an international Internet-based market research and data analytics firm headquartered in the UK, the mystery to this social pecking order has been  has unravelled.

There is a hierarchy associated with all the accents in the British Isles. Which do you prefer? Image credit: YouGov

YouGov conducted a research based on the public’s ratings of the attractiveness of the 12 main British accents in the UK and found that the public has deemed the Birmingham ‘Brummie’ accent the most unattractive. A study by psychologists from Bath Spa University expressed the reason behind this prejudice: apparently, people with Brummie accents sound like crooks, and are viewed as less intelligent and less imaginative.  Of course, these stereotypes are not rooted in science, and should not be treated as a true measure of intelligence.

Interestingly, the Liverpool ‘Scouse’ and Manchester ‘Mancunian’ accents were the second and third worst, respectively.  A good thing, then, that accents are neutralised in song, for Liverpool-born Paul McCartney and John Lennon of The Beatles, along with Mancunian Liam Gallagher of English rock band Oasis, might have had a harder time topping the charts!

 

So, Which British Accent Won the Linguistic Battle of Appeal?

Taking the top spot in YouGov’s research is the Southern Irish accent. Those keeping up with news on entertainment may have come across the likes of Saoirse Ronan and Cillian Murphy, whose speeches and interviews alone may well prove the report true.

Quite surprisingly, though, Received Pronunciation (RP), the very accent of the Qqueen herself, came in second place with a considerable 11-point difference from the first spot. RP has quite the prestigious reputation with only 2% of the British population speaking it, all of whom are of high social standing.

Waltzing into third place is the Welsh accent. A separate study by The Language Gallery revealed that people who speak with the Welsh twang were perceived as sounding happier than those with other English accents. Robert Downey Jr. has taken up the challenge of learning this jolly accent for his upcoming film, and Welsh fans are ecstatic about it.  

 

All British Accents Retain Their Glory Outside the UK

In the end, regardless of what the Brits themselves think, it appears that the rest of the world continues to marvel at the sophistication of all British accents.

Lyndsey Reid, a Brummie-speaking writer at Business Insider in the US recounts that there really isn’t a “bad” British accent in America given the numerous compliments she has received since landing in New York.

Her accent, she says, is a novelty that sets her apart in a positive way. Since her move to America, she has been asked to do presentations at events and provide an insight into the British English language. And, it is her voice that has been used in voice-overs for internal corporate videos.

“You guys think I sound like Emma Watson,” says the wordsmith, “and even though that couldn’t be further from the truth, I’ll take it.” 

 

British Accents Are Not A Reflection of the Housing Market 

While their accents don’t quite meet the mark (at least among the Brits), Birmingham, Liverpool and Manchester have something else going on for them — their property market.

Those keeping up with the news must be aware of the regional city rise, whereby house prices in cities outside London are experiencing greater growth than in the capital. Shrewd investors would know that these three cities, while home to the UK’s bottom three accents, are actually subject to  have some of the best house price growth rates in the UK.

And, as such, we conclude that the scales have tipped in favor of the flourishing cities of Birmingham, Liverpool and Manchester.

At CSI Prop, while we cannot offer lessons on the British accent, we can help you invest in some of the best properties the UK has to offer! Contact us at +603 2162 2260 to invest in properties Birmingham, Liverpool and Manchester.

By Nimue Wafiya

Sources:


 

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UK Property Investment Beyond Brexit

In less than a year, the UK  will officially exit the EU. Here is an overview of the Brexit effect on the UK property market.

Recently, popular actor Sir Patrick Stewart joined Members of Parliament and business leaders in London for the launch of a campaign called The People’s Vote. The campaign calls for a second Brexit vote, and drew some 1,200 people, including representatives from all of Britain’s major parties.

The actor, who played Professor X in X-Men, and Captain Jean-Luc Picard in Star Trek: The Next Generation, had earlier said that both his iconic X-Men and Star Trek characters would have backed Remain. This provoked a retort from Boris Johnson, the British Foreign Secretary. Mr Johnson drew upon Star Trek’s famous line, saying that Brexit will enable the UK to “boldly go” to areas it has neglected in recent years as it seeks trade deals.

On 29 March 2019, the UK will cease to be part of the EU as per the terms of Article 50. Taking into consideration the time needed for ratification by both the EU and UK, negotiations need to be complete by the end of 2018, or both parties risk a ‘cliff edge’ scenario where ties are suddenly severed with no arrangement as to how to move forward outside World Trade Organization (WTO) rules.

The UK has long been a global superpower with London as the world’s financial, education and cultural centre — even before it became a member of the EU.

Brexit and the property landscape

The UK has long been a global superpower with London as the world’s financial, education and cultural centre, even before it became a member of the EU.

Our position has always been that there will, undeniably, be risks and opportunities. And while uncertainty is bound to rock the housing and economic market, we are positive that the UK will adapt to changes caused by Brexit. The slowdown in the housing market is likely a short-term one as the lack of housing supply in the UK will not change overnight, thus there will continue to be opportunities for property investors.

CBRE, in its Brexit Guide for Real Estate Decision Makers released last month (March 2018), echoes the sentiment and concludes that Brexit is not likely to have a significant impact on the property market.

The British Prime Minister has said on many occasions that she would rather that no deal be made (in negotiations with the EU), than a bad one. CBRE calculates the probability of a no-deal Brexit scenario at around 25%. A no-deal scenario would mean the UK leaving on WTO rules, rather than continued preferential market access. Such an outcome could be damaging for the short-term confidence in the UK economy, especially if the UK is not well prepared.

What is significant for the real estate market are the current negotiations on future trade and migration arrangements.

Migration controls are likely to be tighter, but it is not clear yet to what extent the controls will be. In the 2017 General Election, the Government restated its target to cut nett migration to below 100,000 people per year. This will be challenging given that nett migration into the UK is currently more than double that amount, and added on to the fact that the Government wants to allow highly-skilled EU immigrants to continue to come to the UK.

The reduction in immigrants could very well cause labour shortages and inflation. A shortage in labour affecting the construction sector could mean the slowing down of on-going developments, inevitably causing real estate demand to rise. This was implicitly recognized in the Government’s November 2017 Budget, in which £34 mil was allocated to retraining the unemployed to work in this sector.

However, any attempt to tighten migration controls will not be made until 2021 at the earliest, given that the Government has made a commitment to import the entire body of EU law into domestic legislation, which will take a while.

This will also mean that regulatory legislation for the property market is likely to stay stagnant until after 2021 as well. Tax change is not likely to differ either. Most taxes have been nationally-determined, with the exception of VAT and customs duties where the EU has specific influence. Thus Brexit will not induce much change in that regard.

Residential Property

The residential property market is on the road to recovery, going up by 34% from the post-crisis sales rate, which was about 1.2 million sales in 2017.

First-time buyers have increased from the long-term average of 41% to 48%. This can possibly be attributed to the Government’s Help to Buy program, which provides more accessible financing for those looking to purchase residential property. Movers are hindered by a lack of stock coming onto the market, and this trend is most pronounced in London.

CBRE predicts that house price growth will slow to around 1.5% in 2018, but rally in 2019 and reach 17.1% in the next five years.

CBRE house price and rental forecast for 2018-2021

Commercial Student Accommodation

Commercial student accommodation is set to be a growth area, with or without a Brexit deal. Research from Cushman & Wakefield showed that the supply of studio rooms has more than doubled since 2014. In 2017 a record-breaking 30,000 bed spaces were provided.

However, supply is still not keeping pace with the growth of students in recent years. CBRE’s research shows that there still is much headroom for further provision of student accommodation in many cities in the UK.

CBRE’s valuation index of 65,000 bed spaces reached double-digits, with total returns at 11.9% in the 12 months to Sept 2017. This significantly outperformed the Investment Property Database (IPD) All Property Index at 9.5%, which provides an indication of investment performance for the entire real estate market as a whole.

Nett rental growth of the index reached 4.1%, which was pushing double the IPD ERV (Estimated Rental Value) growth, at 2.2%.

Future demand for student property is likely to increase as latest UCAS figures show that student applications have gone up. The number of applications by EU and international students for university places in the UK increased to over 100,000 for the first time in 2018, a rise of almost 8% compared to last year. From this it can be seen that Brexit is irrelevant to students looking to further their studies, and the UK remains a popular place due to the reputation it has for quality tertiary education.

David Feeney, advisory associate at Cushman & Wakefield explains, “The UK is still a global education hub, attracting the best students from around the world. Even with Britain’s exit from the EU progressing, the relatively weak pound has attracted additional applications from non-EU students, with their numbers rising 5% over the last year. It is a key market, as 23% of the UK student population is now from overseas.”

Healthcare

Healthcare real estate investment hit record prices in 2017, reaching double (£1.4bn) that of the whole of 2016 (£720m) in just January to October. A majority of investments went into commercial care homes, far surpassing the rest of the healthcare sector.

Healthcare Investment Volumes for 2016 and 2017 (CBRE)

The large disparity of care home supply and demand has driven investments in this area. The UK’s population is ageing rapidly and existing facilities are already unable to cater to the current demand. There is also a lack of support for sufferers of dementia, a demographic which is also increasing rapidly.

We can see more real estate investment trusts (REITs) starting to focus on this in 2018 and beyond. AXA’s acquisition of Retirement Villages and L&G’s acquisition of Inspired Villages and Renaissance Villages were all purchases involving established operators with development pipelines.

Conclusion

The current uncertainty in the air continues to dampen confidence and growth in the UK’s economy. Currency-induced inflation has not yet fully dissipated, slowing consumer spending. Yet, as we have said previously, the weak pound has attracted a good number of international real estate investors to the UK, increasing demand for property. The weak sterling provides investors with a great opportunity to get into the UK property market right now, and cash in later when the market regains its footing.

Certain sectors like commercial student property and commercial elderly care homes are Brexit-proof due to the high demand and low supply, regardless of whether the UK does or does not exit the EU with a deal. These sectors also have the advantage of being accessible to the individual investor and not just REITs, with their availability to be purchased in affordable units.

Article by Ian Choong

  • http://fortune.com/2018/04/16/patrick-stewart-brexit-second-peoples-vote/
  • http://www.irishnews.com/news/worldnews/2018/04/16/news/boris-johnson-draw-upon-star-trek-catch-phrase-to-defend-brexit-1305065/
  • https://www.ft.com/content/d0e520be-cf6b-11e7-b781-794ce08b24dc
  • http://valuedinsights.cbre.co.uk/uk-student-accommodation-storylines-applications-affordability-and-appetite-from-investors/
  • CBRE Brexit Guide for Real Estate Decision Makers
  • https://csiprop.com/brexit-uk-property-outlook/
  • https://csiprop.com/international-applications-to-uk-universities-hit-record-high/
  • https://csiprop.com/press-release-silver-lining-behind-brexit-for-malaysian-investors/
  • Feature image: offshorelivingletter.com

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’s Younger Generation Opt to Rent As Over-50s Dominate Property Market

The latest data from Savills looking at UK homeownership has revealed that the amount of the nation’s property wealth held by the older generation is on the rise, while youngsters are increasingly less likely to own a home.

It looks like the odds are stacked against UK’s younger population. Many are leaning towards alternative ownership schemes, and in most cases, are opting to abandon the idea of owning a house entirely, in favor of renting.

The latest data from Savills on UK homeownership revealed that the wealth generated from the nation’s property market and held by the older generation, is on the rise. Meanwhile, what seems to be increasing for the UK’s younger generation is how unlikely they are to own property. Recent statistics from the Institute for Fiscal Studies show that the 25 – 34-year-old age group are around half as likely to own a property now than they were 20 years ago.

A whopping 75% of housing wealth in Britain is held by the over-50s, with a meagre 6% belonging to the under-35s. Zooming in on more specific age groups, the over-65s currently dominate the housing market, holding 43% of the country’s real estate wealth.

The discrepancy in equity between varying age-groups is summarised below:

The latest data from Savills looking at UK homeownership has revealed that the amount of the nation’s property wealth held by the older generation is on the rise, while youngsters are increasingly less likely to own a home.

This illustrates the thinning group of homeowners in Britain’s younger generation.

A deeper analysis reveals that homeowners have piled up equity by living longer, paying off their mortgages and watching as prices grew steadily in the final decades of the last century. While the latter has proven to greatly benefit the older generation, it has become quite the game changer for young, first-time home buyers.

First-time Home Buyers: The Discrepancy Between Average Income & Deposit

First-time home buyers are finding that complete homeownership is moving further out of reach as average annual income currently struggles to keep up with skyrocketing house prices. House prices are now 5.2 times higher than the average income, while in London, it’s a staggering 14 times higher!

In most regions, it takes the average first-time buyer about eight years to save for the deposit needed to buy a home. This rises to nine years in the southeast and 11 years in London. The typical deposit required to purchase a one-bedroom or studio apartment in London is £77,407, and £112,555 for a three-bedroom home. Meanwhile, the median income of a first-time buyer in London averages at £66,111. The stark reality is, many are unable to save such a sum and over a third reported that a proportion of their savings came from a gift or loan from family or friends.

UK’s Younger Generation Look Towards Renting and Partial Homeownership

UK’s younger population is currently looking towards alternative ownership schemes, and in most cases, opting to abandon the idea of owning a house entirely, in favor of renting.

The alternative scheme referred to is shared ownership, whereby buyers have the opportunity to purchase a percentage share of a property between 25% and 75% of the home’s full market value, paying a subsidised rent on the remaining share. Buyers can then choose to purchase additional shares as and when they can afford to, known as staircasing, allowing them to ultimately own their home outright.

Renting, on the other hand,  has been gaining momentum, with a considerable number of people turning towards it by choice. A research conducted by AXA revealed that less than 50% of its research participants are renting because they cannot afford to buy their own homes. The research also revealed that many enjoy the freedom of not being tied down by a hefty mortgage!

Conclusion: Renting is the Way to Go 

While UK’s older generation is predicted to continue benefiting from house price growth, the future is also welcoming a new wave of young renters. More people are choosing renting as a lifestyle option, particularly young professionals who enjoy the flexibility of renting, whilst being mortgage-free.

Jamie, a Business Manager for a Health GP Company in Northumberland, has a positive viewpoint of the evolving property market in the UK: “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.

Britain seems to be transforming into a nation of renters, which only adds to the appeal of property investment. For more information on this, click the following link: https://csiprop.com/britain-a-nation-of-renters/. If you are interested in investing in UK property, do contact us!

By Nimue Wafiya

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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 Millionaires Say Wealth Starts with Property

UK Millionaire Gill Fielding on her wealth: “My wealth has come gradually and organically — starting with property. 

“The quickest and most reliable way to financial freedom is through investing in property, which we see time and time again through the results that our property-investing students achieve.” — Gill Fielding, UK millionaire & wealth management guru

How to be a millionaire: Top 5 reasons why investing in UK property could be your best option

Meet Gill Fielding, expert at all things UK property and founder of Fielding Financial, a UK-based company that specialises in providing financial planning, wealth management and mortgage solutions — did we forget to mention her millionaire status?

Fielding provides the following summary of her well-earned affluence:  “My wealth has come gradually and organically – starting with property.”

The qualified chartered accountant co-founded Fielding Financial on the basis of a personal mission: to educate the nation in managing and improving their own financial position. The company strongly believes that the quickest and most reliable method to attain this is through property investment, especially in the UK, where Fielding herself has invested in multiple projects. Take a peek at UK’s property outlook for 2018 and see why the property market there will continue to prosper and fetch great yields well into the future.

It goes without saying that a great number of investors have also acquired wealth through the same means as Fielding; a closer look at various types of investments shows that the odds truly are in your favor when investing in property (in the right places, of course). Oh, and in case you didn’t know, the three best buy-to-let hotspots in the UK that are set to offer the most competitive returns in 2018 are Manchester, Liverpool and Gateshead — something we have said so over and over in the past. 

Fielding Financial: Why Property Investment is the Best Option to Supplement Your Income

Fielding Financial has listed 5 key reasons why they believe property is the safest place to put your money (and they are very convincing, to say the least):

1. Investing in property puts you in the driver’s seat, while others do the work

Even though you may subcontract the management of the property to others, you’re in charge of the process and get to decide how and when things are done.

2. Residual income earned through rent yields higher returns than other investments

As a property investor, you’ll earn more money through rental income than if your money was in a high-interest bank account.

3. Anyone can become a property investor, even without personal start-up capital

The beauty of property-investing is that anyone can do it, even with no start-up capital.  Experienced agencies can teach you how to get started, even if you don’t have a deposit.

4. Fantastic capital gains

Properties are always in demand because there is a huge undersupply of homes in the UK. This means that even when there is a dip in the market, property prices often quickly bounce back up.

5. It allows you to leave a wealth-generating asset to your children

Due to the high demand for rental homes in the UK, a property portfolio can give your children (and future generations) a guaranteed income that a pile of money can’t provide them.

Property investment saved Rob Moore from debt and made him a millionaire. Image from BT

How to Invest in Property Successfully According to Rob Moore

Fielding’s fellow Brit and property millionaire, Rob Moore shares a common goal with her: to help bring to light the immense potential of the property market.

Moore’s story is a compelling one. Investing in UK property had not only saved him from a £50,000 debt; it generated enough income to transform him into a major property millionaire.  And it all started when a gallery owner urged him to attend a property networking event, insisting that most people on the rich list are in property.

True enough, Moore now stands among the wealthy, with many people looking up to him for financial guidance. Here are some of his tips for success, serving as a guide for beginners and a reminder for experts.

1. Have a clear financial plan and money bucketing systems

Decide what percentage of your income you will live off, save and never touch, then invest. After your income increases, change your plan accordingly; the challenging part, of course, is to never break these rules.

2. It is never too late to start but always too late to wait

Get perfect later, start investing and learning now!

3. Continually invest in yourself

Listen to podcasts, read books, take up courses and consult experts  — the more you learn, the more you earn!

These are sound tips, and the last point is particularly noteworthy: knowledge and research are key to successful investments! If you are interested in learning more about these millionaires’ takes on property investment, here are links to their latest books on the subject:

Gill Fielding – https://www.fieldingfinancial.com/landing-pages/property-puzzle-book-newbook/

Rob Moore – http://unlimited-success.co.uk/progressive-multiple-streams-of-property-income/

Ready and looking to invest in your first (or second or nth) property overseas? We’re here to help you invest (and possibly become a millionaire if you aren’t already). We have fabulous portfolio of Australian and UK residential and commercial property to choose from. Call us!  


Sources:


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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Care Homes Investment: Where is the UK’s Oldest Population?

Areas with a large older population face greater demands in terms of health and social care provision.

Over the past two decades, the average age of a UK resident has risen by 2 years, to 40. Within 30 years, 1 in 4 people is expected to be aged 65 and over. Freshly released data from Centre for Cities reveal where the youngest and oldest populations in the UK are concentrated.

Recent figures predict one in six Britons alive today will live to a century.

The number of centenarians in the UK currently stands at 15,000 and the predicted growth of this older population is staggering. The population of people aged 90 and over has grown more rapidly than other age groups in recent years with forecasts revealing that around 10 million people alive today will reach their centenary!

Such findings have prompted the UK government to allot more than £300m to support the ageing population. Business Secretary Greg Clark announced that £210m will go towards the development of early diagnostic tools and innovative treatments while £98m will be spent on a ‘healthy ageing programme’ designed to help the elderly with the quotidian affairs that come with old age.

In conjunction with the government’s ambition to tackle dementia, England’s leading cause of death, another £40m will go to a dementia hub that will be established in London in partnership with University College London. The hub will host 350 leading scientists researching new treatments for the debilitating disease, supporting the government’s agenda to have the best dementia care internationally by 2020.

UK’s Oldest and Youngest Population

Freshly released data from Centre for Cities reveal where the youngest and oldest populations in the UK are concentrated. According to the independent think tank, over the past two decades, the average age of a UK resident has risen by two years, to 40. Within 30 years, one in four people is expected to be aged 65 and over.

While the youngest population in the UK reside in Slough with an average age of 33.9, the oldest population belongs to Blackpool, a seaside resort on the Irish Sea coast of England with an average age of 43.2. Following Blackpool are fellow coastal cities: Worthing (43), Bournemouth (42.8) and Southend (42.2). More than one in five residents of each city were 65 and over in 2016 — this seems to illustrate the attraction of the seaside for those in retirement  and welcoming their sunset years.

The oldest population in the UK is in Blackpool, a seaside resort on the Irish Sea coast of England with an average age of 43.2. Image by The Beach Guide UK

Blackpool: Poor Health, Rich Demand for Care Homes

Areas with a large older population face greater demands in terms of health and social care provision. The 2017 Health Profile for Blackpool reveals that the health of the people there are generally worse than the England average.

According to a report by Joint Strategic Needs Assessment (JSNA), Blackpool has a higher recorded prevalence of dementia in those aged over 65, with a 3.4% population in Blackpool compared to 3.2% nationally. Not surprisingly, the majority of admissions to care homes in Blackpool is due to dementia.

The UK is alarmingly ill-prepared for this rapidly growing population, as JSNA reveals that even family carers of people afflicted with dementia themselves are infirm. This called for NHS to treat dementia as a priority area and thus, a National Dementia Strategy was launched in 2009. However, in 2011, NHS Blackpool conducted a survey of local GPs which suggested that dementia care of every degree still has many serious improvements to make, particularly towards the development and implementation of local care pathways and education programmes to meet GP requirements. Overall dementia care in Blackpool must improve and expand dramatically to tackle the increasing number of people with the disease.

Figure 1 – Blackpool: Males and Females aged 65+ expected to have dementia (projected to 2030)

Blackpool has a higher recorded prevalence of dementia in those aged over 65, with a 3.4% population in Blackpool compared to 3.2% nationally. Not surprisingly, the majority of admissions to care homes in Blackpool is due to dementia. Image by JSNA BLackpool.

The JSNA report also stated that the next common health crisis besetting the older population in Blackpool is depression, with depression rates expected to rise in the following years.

Again, it must be stressed that well-equipped and well-staffed care homes that cater to a range of diseases besetting the elderly, is not confined to Blackpool; the media is fraught with news of poorly-run and ill-equipped care homes across the UK.

Thus, the UK care sector is in urgent need of dementia-specific care facilities and nursing, with several being closed down due to an inability to meet Care Quality Commission guidelines and regulations. Moreover, care homes of substantial quality are particularly in high demand!

What inevitably trails such conditions is a thriving market that benefits investors. It is evident that high demand and seemingly perpetual relevance will continue to propel the care home market forward, and a weighted analysis of the yields will undoubtedly manifest the immense potential of this asset class.

Care Homes Investment: A Stand Out Asset Class

Care for the elderly generates in excess of £14.5 billion for the UK economy. According to The National Audit Office’s 2014 report into Adult Social Care, care needs are climbing. Effectively, the government is predicting that 1.7m more adults will require some form of care and support over the next 20 years.

Given its escalating demand, property group Knight Frank has placed care homes at the top of the list of high returns from property in the health sector, where yields of up to 10% are common.

Aside from rewarding returns, this commercial property investment also offers an exit in the form of a sell-back option to the developer at an appreciated value.

Carlauren Lifestyle Resorts Blackpool, once completed, will be one of the latest lifestyle quality care homes in Blackpool, offering investors 10% returns assured for 10 years. Exit is available from year five onwards. Alongside access to 24/7 care home packages, the luxurious 61-studio care home scheme located on Blackpool’s seafront boasts spectacular sea views, fine dining and bar, cinema, hair and beauty salon, and spa.

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

By Nimue Wafiya

Sources:


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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International Applications to UK Universities Hit Record High

So much for Brexit: latest figures show that the number of EU and international students applying for university places in the UK has increased to over 100,000 for the first time, a rise of almost 8% compared to last year. Image by Universities UK

The number of international applicants into UK universities rose by 11.1% to 58,450, the highest number on record.

Latest UCAS figures show that the number of applications by EU and international students for university places in the UK has increased to over 100,000 for the first time – this is a rise of almost 8% compared to last year.

UCAS (The Universities and Colleges Admissions Service) operates the application process for a large number of universities in the UK. Its figures show that the number of EU applicants increased by 3.4% to 43,510. Last year, the number of EU students applying to British universities fell by 7%, right after the Brexit vote results.

HESA figures show that over the past decade, non-EU international applicants rose the highest, by 70%, compared to EU students at 48% and UK students from outside the region at 24%. Chart from Cushman & Wakefield Student Accommodation Report 2018

Meanwhile, the number of international applicants rose by 11.1% to 58,450, which is the highest number on record. HESA figures show that over the past decade, non-EU international applicants rose the highest, by 70%, compared to EU students at 48% and UK students from outside the region at 24%. Amongst international students in the UK, the highest numbers come from China, Malaysia and Hong Kong. Latest statistics place China, Malaysia and the US as the top three foreign student nationalities in the UK.

One factor contributing to the increase in overall applications is the weaker pound. Since the UK voted to leave the EU on 23 June 2016, the pound had devalued sharply, falling by as much as 21% per cent against major currencies. This makes studying in the UK a more affordable option for foreign students seeking a British education, particularly those from countries with lower exchange rates compared to the sterling.

Amongst international students in the UK for the 20015- 2015 period, the highest numbers come from China, Malaysia and Hong Kong. Latest statistics place China, Malaysia and the US as the top three foreign student nationalities in the UK. Chart by Cushman & Wakefield Student Accommodation Report 2018.

An explanation for the rise in EU students, in particular, could be the reduced tuition fees that they currently qualify for. Prospective students could be making a last-ditch effort to secure places in a British university before the UK formally leaves the Union, and the subsequent increase in fees.

The Government had announced that EU students starting in this academic year would be entitled to reduced fees and funding support for the duration of their course, even after the UK leaves the Union. EU nationals who have resided in the UK for over five years are also able to apply for undergraduate maintenance support and postgraduate loans.

Ultimately, British universities continue to be world-renowned and sought-after for their quality education. The prestigious University of Oxford and Cambridge are ranked number one and two, respectively, in the Times World University Rankings 2018. A total of 31 British universities managed to rank in the top 200 worldwide.

Helen Thorne, Director of External Relations at UCAS, said: “The UK’s universities are highly popular with EU and international students because of the quality of the teaching and experience they offer.”

For quite some time now, university-managed accommodation in the UK have been unable to keep pace with student numbers, giving rise to privately-managed purpose-built student accommodation (PBSA). The popularity of PBSAs has also been boosted by a more discerning and affluent student population, which demand a higher standard of living than private landlords in the UK can provide. PBSAs are typically located close to universities and the city centre, and are well-equipped with a myriad of amenities.

This rapid increase of EU and international students, upon the backdrop of declining numbers of UK home students, will continue to fuel the need for commercial student property, granting investors a brilliant opportunity for investment in one of the UK’s top performing asset classes.

One up-and-coming PBSA development in the Liverpool city centre, Natex, is a impressive 566-unit student residential scheme, approximately 5 minutes walk from two of the UK’s top universities (University of Liverpool and Liverpool John Moores University). It offers a unique opportunity for commercial property investors with 9% nett rental returns assured for 5 years. Construction is poised to begin in Aug 2018, and completion is expected in Q3 2020.

By Ian Choong

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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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Landlords: Abide by UK Energy Efficiency Law or Face Fines

UK residential and commercial property landlords must abide by minimum energy efficiency standards effective today or face fines.

Hundreds of thousands of UK residential and commercial landlords could face fines for failing to make their rental homes more energy efficient once legislation comes into force. The regulation takes effect today (1 April) for new rental lets and renewals of tenancies, and for existing tenancies, on 1 April 2020.

A fine of up to £5,000 can be issued for those renting out homes that fall under the lowest F or G rating in the Energy Performance Certificate (EPC). Under the law, it is illegal for landlords to rent out property that breaches the requirement for a minimum E rating unless exemptions apply.  

Like the Landlord Licensing scheme (if you are a landlord, read about the scheme here), the requirement for energy-efficient homes is not news, having been set out in The Energy Efficiency (Private Rented) Property Regulations 2015, and the onus for compliance rests with property owners and landlords.

The older the property, the poorer its energy efficiency is likely to be. Landlords with homes built in the Victorian era and early part of the twentieth century ias particularly at risk of being caught out as these types of property are often most lacking in insulation. The Department for Energy and Climate Change said when it announced the move that 65% of F and G EPC rated private rentals were built before 1919.

Many properties that are F or G rated could be made compliant just by making one change. For example, 40% of privately-rented properties could be improved above an F or G category just by installing loft insulation.

Energy Efficiency Regulation Impact on UK Rental Market

Chief executive of ARLA Propertymark, David Cox, says: “There isn’t a huge amount of awareness among  UK landlords and tenants on the energy efficiency laws.

“However, over the last five years, the number of properties which are EPC rated F or G has gone down from around 700,000 in 2012, to less than 300,000. Therefore, even without statutory enforcement, UK landlords are responding to tenants’ demands for better quality, and better insulated properties.”

However, statistics seem to suggest that landlords are behind in getting their properties ready for the deadline. Monthly data by the Association of Residential Letting Agents (ARLA) show that overall rental properties managed by letting agents fell by 5% in February compared to January, the lowest level since May 2016.

Cox explained that the drop in rental supply indicates that UK landlords are cutting it fine and removing their properties from the market to make the necessary changes before the regulation takes effect.

“We could see up to 300,000 properties taken off after the deadline passes because they don’t reach the minimum requirements,” he warned.

It will, however, be difficult to know how UK landlords will be policed, says Cox, adding that less than 500 landlords are prosecuted every year and adding new laws is unlikely to improve prosecution rates.

UK property landlords can find out about recommended improvements for their property by checking their Energy Performance Certificate Recommendations Report, or obtaining a Green Deal Advice Report. There are many options for financing under the Green Deal and even receiving free insulation work under the Energy Company Obligation.

Benefits of Compliance for UK Landlords

The Department of Energy and Climate Change claims that increasing a property’s energy efficiency could increase its market value.

Data shows that the average annual cost of energy for an EPC band G property is £2,860, and £2,180 for an F rated property. This contrasts with an average annual cost of £1,710 for an EPC band E property.

Therefore a tenant whose home is improved from EPC band G to band E could expect to see their energy costs reduced by £1,150 a year so long as there were no wider changes in how they use energy in the property.

Research by AXA Business Insurance found the improvements most sought after by tenants were enhanced energy efficiency, through tools such as insulation, newer boilers or double-glazing.

Ultimately, it will result in cheaper heating and better quality of homes for tenants. However, at a time of consistent government change, increasing ambiguity and various tax increases, the proposed cost of changes at £2,500 per property is going to put further pressure on landlords, especially those outside the prime rental markets in London and the South East,” said Cox.

For detailed information about the new regulation, read: www.rla.org.uk/landlord/guides/minimum-energy-efficiency-standards.shtml

By Ian Choong

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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