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Billion Dollar Whale

One billion dollars.

Few can truly grasp the magnitude of that sum of money. But we could try and give you a rough idea in property terms!

With $1 billion, you can get 4585 homes in Manchester at a cost of £166,000* per home. With a rental yield of 5.90% p.a.** and annual capital growth of 7.4% p.a.*, that $1 billion can get you total returns of £2 billion*** in 7.5 years!

*Hometrack, June 2018
**Private Finance
***Total value of asset + 7.4% capital growth + 5.90% annual rental yields over 7.5 years.

Now that’s a whale of an investment! Why just blow it all away when you can put it into a growth asset and double your investment!

Got $1 billion to spare and fancy blowing it on some property? Give us a shout! Or let us know in the comment box below what you would spend your money on! 

By Vivienne Pal

Sources

  • https://www.hometrack.com/uk/insight/uk-cities-house-price-index/june-2018-cities-index/
  • https://www.thisismoney.co.uk/money/buytolet/article-5315623/Where-invest-buy-let-2018.html

 

 

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A Guide to the UK Property Purchase Cycle

You’ve thought long and hard, and have decided to invest in UK property. What happens next? This article will guide you through the different stages of the investment process.

It starts with choosing a property that fits your budget and investment goals and appointing an agency that can take you through the purchase process. Unless you don’t mind the hassle of traveling to and from the UK to deal directly with the developer/seller, a good agency will help you select developers carefully, i.e those with a good track record of completing projects on time.

It is important that your agent works closely with the developers, facilitating communication from the developer to you, and vice versa.

1: Property Reservation

Documents and payments to reserve a UK property with CSI Prop

We recommend investments based on your goals and budget, and once you have decided on the property for investment, you will need to sign Reservation Forms and a Solicitors Appointment Letter.

Several payments are required at this stage:

  • Reservation Deposit*: approx £5,000 (forms part of the purchase price, non-refundable)
  • Administration Fees:  £800
  • Legal Fees*:  Between £700 to £1500

    *Payment can vary depending on project/developer/solicitor

CSI Prop works closely with a panel of recognised solicitors in the UK. We’re happy to recommend our panel, but you may use solicitors of your own choosing.

Before proceeding with the contracts to purchase your property, your solicitor will activate the Anti-Money-Laundering process.

 2: Anti-Money-Laundering Checks

Anti-Money-Laundering documents that will need to be submitted

The Anti-Money-Laundering process is a very important part of buying UK property, and is done by your solicitor on behalf of the UK Government to ensure that your purchase funds are not related to suspected money-laundering and terrorism links. Your solicitor will ask for proof of your identity, residential address, availability of funds and its sources.

3: Exchange of Contracts & 1st Payment

Once you have completed the Anti-Money-Laundering process, you will need to sign the Sale and Purchase Agreement. This is normally done within 28 days of your solicitors receiving the contract from the seller’s solicitorsTogether with this Agreement, you will make your first payment to the developer via your solicitors. This amount varies from one developer to another.

Progress payments apply for some projects, e.g. UK commercial student property, and the timelines for these payments will be stipulated in the Agreement.

4: Financing

You may apply for financing while purchasing UK residential property with a value in excess of £100,000. Application for financing can be done 3 to 6 months before settlement, and the banks will assess your financing position and eligibility. Documents which are typically required by the bank include:

  • 3 to 6 months salary slips
  • 3 to 6 months bank statements
  • Income Tax Return Form

There are typically no application and processing fees to finance your property. However, the legal fees can incur up to 1.5% of the value of your property. There are several banks in Malaysia and internationally that offer financing. Please get in touch with us to find out more.

5: Final Settlement & Stamp Duties

When your property is nearing completion, the developer will send a Completion Notice to your solicitors. You will need to make full payment for the property at this stage, which is also known as the final settlement, and pay any applicable stamp duties to HM Revenue & Customs (HMRC).

Stamp duty is a percentage of the property price, which varies based on the value of the property, and whether it is categorized as residential or commercial (e.g. UK commercial student property or care homes).

CSI Prop can recommend a tax agency to assist with filing and paying the tax on your behalf. Otherwise, you can file the return and pay the taxes yourself.

Stamp Duty for UK Residential Property

You will be entitled to stamp duty rebates if this is your first or only residential property purchase globally. Most investors already own a house, hence the following stamp duty rates will apply:

Stamp Duty for Individuals Owning Multiple Houses

Stamp Duty for UK Commercial Property

For commercial property, you don’t pay any stamp duty 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%.

Buying Commercial Property as an Individual

 6: Property Management 

When you exchanged contracts with the developer, you may have signed an agreement to hire a letting agent. You may also have chosen to manage the property yourself.

The letting agent will ensure your property is well-maintained, taking care of all expenses involved, and collecting the rental on your behalf.

Note that a condition applies when buying UK property with a rental assurance (such as UK commercial student property). Buyers will have to use the letting agent prescribed by the developer for the whole duration of the assurance period to qualify for the rental assurance.

7: Rental Income

You will need to pay income tax to the UK Government once your property starts generating rental income.

We can recommend a qualified professional in the UK to manage your taxes. You may also file your rental income taxes to HMRC through self-assessment (using form NRL1). 

You may be eligible for the standard personal allowance if it is included in the double-taxation agreement between the UK and the country you live in. This is the amount of income you don’t have to pay tax on every year. For example, Malaysians qualify for this allowance but Singaporeans do not.

You get a standard personal allowance of £11,850, unless your income is £100,000 or above. The allowance decreases incrementally (see table below) if your income is above £100,000. Your personal allowance can vary if you apply for Marriage Allowance or Blind Person’s Allowance.

Personal Allowance for UK Income Tax

 

If you have the standard personal allowance of £11,850, you pay 20% tax on the next £34,500 of your income. If you do not have any personal allowance, you are taxed at 20% up to £46,350 of your income. For the the portion from £46,351 to £150,000, you pay 40%, and for the portion above £150,000, you pay 45%.

UK Income Tax Bands

8: Property Resale/Exit

Should you choose to sell off your property, we can recommend a property agent and solicitor to assist you.

The agent’s commission rates, your advertising budget, and exclusivity will be decided by you and the agent. The agent will provide an appraisal of the property indicating how much they expect to sell the property for, and tell you how they plan to market your property.  Agents normally charge between 2% and 3% of the sale price of residential property, whilst the resale of commercial student property can cost up to 5% of the sale price due to the smaller price quantum of the property. This rate can be negotiated.

The solicitor’s fees will start from approximately £2,000, depending on the value of your property.

Take note that, unlike stocks, property is not a liquid asset, and you should always expect that it will take some time for the property to be sold.

The sale of UK property is subject to Capital Gains Tax (CGT).

 

Capital Gains Tax (CGT)

Capital Gains Tax (CGT) is paid on any gains you make when you dispose of your property.

CGT is currently only applicable to residential property. Commercial property such as student property and care homes will be subject to CGT from April 2019.

Your taxable gain is the difference in price between the purchase and sale of your house, after taking away any allowable expenses and your personal allowance (if selling as an individual).

All non-UK residents get an annual personal allowance of £11,700 for CGT.

Allowable expenses include the stamp duty paid upon the purchase of the property, agent fees and legal fees incurred during the purchase or sale, and payments for valuations made on the property.

CGT is taxed at 18% if your taxable gain is £46,350 or less, or 28% if more:

UK Capital Gains Tax (CGT) Rate

Example:

Jason sold his apartment for £275,000. He had previously bought it for £200,000, giving him a total cash gain of £75,000.

Jason must report the sale to HMRC, complete a full CGT computation and pay any CGT within 30 days of transfer.

Jason’s expenses come up to £30,400, and after deducting his personal allowance, he has a total taxable gain of £32,900.

Jason’s taxable gain is less than £46,350, so his CGT rate is 18%, and this will come up to a tax of £5,922, or 2.15% of the apartment’s sale price.

Example of Capital Gains Tax calculation

 

Click here for more guides on property investment, and please subscribe to our website notifications to get the latest updates! Leave us a comment below if you have any thoughts or questions on our article.

If you are interested to explore investing in UK property for high returns, or if you need us to refer you to a good tax firm in the UK, don’t hesitate to give us a call at (65) 3163 8343 (Singapore), 03-2162 2260 (Malaysia), or email us at info@csiprop.com!

Disclaimer: This guide is an outline of CSI Prop’s purchase process, which may differ from other consultancies. 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. You should also seek advice based on your particular circumstances from independent advisors and planners.

By Ian Choong
Edited by Vivienne Pal

Sources:

  • Adams & Moore Ltd
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100 Days On, Is there Hope in Pakatan Harapan?

Today marks Pakatan Harapan’s 100th day in power since the political earthquake that shook Malaysia — the 14th General Election.

The pressing question is whether the nascent government has delivered on its word and lived up to the expectations of Malaysian voters thus far.

The last three months for Pakatan has been like a walk on the proverbial tightrope, with the coalition struggling to deal with the threat of bailing investors and a sovereign downgrade, and a national fiscal debt that has turned out to be more critical than expected.

A survey carried out by the Merdeka Centre earlier this month (August 2018), found that Malaysian citizens were largely satisfied with Pakatan Harapan ministers, but with some concerns about the economy, and racial and religious rights.

As part of its election manifesto, the government had pledged to deliver 10 promises in 100 days, but not all of these promises have been fulfilled.

Tun Dr Mahathir Mohamad, the Prime Minister, said that the reason behind the government’s inability to fulfil the 10 promises was because they had to prioritise other important matters.  

“The government’s focus is not only on the 10 promises in 100 days, the government has a lot of work to do and this includes ‘cleaning up’ the government which was tainted with corrupt practices and abuse of power during the past administration,” he said.

Harapan Tracker, a website which monitors the government’s performance, gave Pakatan a score of 45%, a cumulative average from its two scores of “the letter of the promise” (30%) and “the spirit of the promise” (60%).

 

Housing Not Part of 100-day Pledge

The housing sector, in particular, was not included in Pakatan’s list of 100-day promises. 

Many Malaysians are concerned about housing, and rightly so. There has been a glut of high-end residential property and a scarcity of affordable housing in the country —  an imbalance that has caused many Malaysians, especially those from the bottom 40% of income earners (B40), to be unable to afford their own homes.

Pakatan’s 10 pledges to be achieved in 100 days

Dr Carmelo Ferlito, an economist with the Institute for Democracy and Economic Affairs (Ideas) said the spectacular growth of the high-end property segment was ignited by rising profit expectations, growing demand and easy credit conditions.

“The mix of elements generated a bubble which reached its peak between 2012 and 2013.”

Zuraida Kamaruddin, the new Housing Minister, has embarked on a consolidation of all affordable housing projects under the Ministry in an effort to streamline the building of affordable homes. Certain projects like the 1Malaysia Housing Programme (PR1MA) were previously placed under the Prime Minister’s Department.

The new National Affordable Housing Council is expected to begin its work this month (August 2018) once papers regarding its set-up are finalised by the Cabinet. The council will monitor the construction of affordable housing, coordinate databases and implement a self-renting scheme for the B40 and M40 (middle 40% of income earners) groups nationwide.

Ms Zuraida also plans to set up a one-stop online platform for affordable housing that would enable buyers to submit an application online, and find out their approval status within days.

In an effort to further bring down the price of housing in Malaysia, Finance Minister Lim Guan Eng announced that building materials and construction services will be exempted from the upcoming Sales and Service Tax (SST). The SST is set to kick in on Sept 1.

Under the previous Goods and Services Tax (GST) regime, building materials and construction services were subjected to a 6% tax. However, players in the construction industry are not optimistic that the tax exemption will impact house prices significantly.

Datuk Steve Chong, chairman of the Real Estate and Housing Developers’ Association (Rehda) in Johor, thinks that the exemption is insufficient to bring down the prices of homes.

“We believe that the savings is too small to be passed on to homebuyers which will not in any way translate to a significantly lower price for homes in future,” he said.

Malaysian Institute of Architects (PAM) president Ezumi Ismail added that raw materials only accounted for less than a third of the total development cost, and other factors contributed to high housing prices.

“The rest … would consist of the cost to purchase the land and other compliance charges that come with the building the houses or units. SST may reduce the house prices but it may not be much.

“Some projects require the developers to construct basic infrastructure and facilities that are supposed to be built by utility companies. The added cost would then be (pushed) back (to) the consumers. It would be better if the authorities come up with a building master plan that could address these issues,” he added.

A new National Housing Policy is expected to be announced in September with a considerable number of changes, one of which includes the rental-tenancy market.

The rising supply of residential properties, particularly condominium and apartment units, has caused rentals to continue to drop in Kuala Lumpur.

Previndran Singhe, CEO of Zerin Properties said, “It is a tenant market right now as they have plenty of choices. There have been drops in rental in KL, generally around 10%.”

“Some owners have to reduce their rents because their units are already old and they will not be able to compete (with newer properties) if they don’t upgrade their homes.”

 

Silver Lining

There is a silver lining in sight. Yet, it may be a long while before housing issues are fully addressed in the country. Until then, what stands to remain is the loftiness of house prices in prime areas like the Klang Valley and Penang — and to a certain extent, Johor Bahru —  which will impact not just first home buyers, but also local property investors.

With economists slashing economic growth forecasts due to weak economic data (ahead of Bank Negara Malaysia’s release of GDP 2Q2018 figures), and potentially more fiscal tremors ahead, a single 5-year term may not be enough for the government to make the changes it wants to.

Investors should continue to maintain a wait-and-see stance before embarking on investment-related decisions in the local property market or, alternatively, look beyond Malaysian shores. Virata T of CSI Prop says that investors can still get good returns on properties in countries abroad.

“With rental yields dropping locally, investors wanting to invest in property could look overseas to get better returns on investments. There is a rising interest among Malaysian investors for this type of investment,” he said. 

“Up-and-coming cities in countries with a stable economy like the UK and Australia, are particularly attractive as they provide good returns while reducing investors’ exposure to economic risk.”

What do you think of Pakatan’s performance so far?  Leave us a comment below!

If you are curious about investing overseas and the returns you can obtain thanks to low vacancy rates, call (+65) 3163 8343 (Singapore), 016-228 8691/ 9150 (Malaysia), or email us at info@csiprop.com!

By Ian Choong
Additions & Edits by Vivienne Pal 

Sources:

  • https://www.thestar.com.my/news/nation/2018/08/15/merdeka-centre-august-poll-show-voters-happy-with-pakatan-leaders/
  • https://www.thestar.com.my/news/nation/2018/08/17/pakatan-govt-needs-to-make-good-on-its-promises/
  • https://harapantracker.polimeter.org/
  • https://www.nst.com.my/news/nation/2018/07/392262/pm-concedes-government-not-able-realise-10-promises-100-days
  • http://www.theedgemarkets.com/article/housing-and-local-govt-ministry-set-online-platform-govt-affordable-housing
  • https://www.thestar.com.my/business/business-news/2018/07/25/changes-in-national-housing-policy-to-be-unveiled-in-september/
  • https://www.thestar.com.my/news/nation/2018/08/12/guan-eng-construction-services-building-material-costs-exempted-from-sst/
  • https://www.malaymail.com/s/1662133/johor-developers-sst-exemption-wont-impact-homebuyers
  • https://www.malaymail.com/s/1661951/sst-wont-mean-much-cheaper-homes-says-architect-group
  • http://www.thesundaily.my/news/2018/06/12/national-affordable-housing-council-begin-work-august
  • https://www.edgeprop.my/content/1407669/new-national-housing-policy-rakyat-december
  • https://www.thestar.com.my/business/business-news/2018/07/25/review-on-housing-policy-next-month-says-minister/
  • http://www.thesundaily.my/news/2018/08/16/kl-rental-drops-rising-supply
  • http://www.theedgemarkets.com/article/hlib-cimb-research-slash-msia-2q18-gdp-growth-forecasts-amid-weaker-data
  • Featured image: malaysianaccess.com
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UK Interest Rates Increase on Economic Growth

The Bank of England raised interest rates for the second time in under a year. What does this signal and how will it affect the UK housing market?

The Bank of England (BOE) has raised interest rates to 0.75%.

The hike was the second since the 2008 financial crisis. Last November it rose to 0.5% from 0.25%, the first time in almost a decade.

The BOE Monetary Policy Committee, which decides interest rates, voted unanimously for an increase in rates following positive economic growth and an encouraging labour market.

BOE Governor Mark Carney told reporters that economic growth rebounded in the second quarter, after a slight slowdown at the start of the year.

The bank’s forecasts show that consumer price rises could reach 2.2% in 2019 and 2.1% in 2020.

The BOE is likely to increase rates further if its forecasts prove right. Any future rise in rates, however, is likely to be at a gradual pace and to a limited extent.

This points to continued stability in the real estate market.

Andrew Burrell, JLL EMEA Head of Forecasting, says: “The (rate) rise has been largely priced in and is not expected to have major impact on real estate markets.” He observes that there will be more pressure on yields from market rates eventually.

Despite the rate hike, returns from real estate continue to remain attractive when compared to other asset classes.

Working in favour of the UK real estate market is the employment rate and stable consumer confidence, as well as the OECD predictions of global GDP growth at 3.8% for this year.

Sterling set to rise?

The falling pound dropped to its lowest level against the euro in nearly a year last week on 9 Aug, but edged higher against the Euro to 1.12 this week (as of 16 Aug).

Sterling’s fall against the Euro and the Dollar (Source: BBC)

Stabilization of the pound could be due to the rate hike, which usually pushes up its value, and news reports detailing the potential for a concession being put on the table by the EU in the ongoing round of Brexit negotiations.

Some member states are reportedly ready to allow Britain to remain in the single market for goods while opting out of the free movement of persons. The trade-off is that the UK replicates all new EU environmental, social and customs rules in addition to those set out in Theresa May’s Chequers proposal.

This marks the first major divergence between the European Council, which is made up of leaders from member states and the European Commission. The concessions will be discussed at a meeting of leaders from both sides in Salzburg this September.

The currently weak pound provides foreign investors with a window of opportunity to buy into UK property and obtain good returns.

Jeremy Stretch, head of FX strategy at Canadian Imperial Bank of Commerce said the pound typically underperformed during the August holiday period. CIBC had tracked the pound’s performance on a monthly basis over the last 15 years.

Following this trend, foreign investors who are interested in UK property may want to consider entering the market now before the pound starts to rise again.

By Ian Choong
Edited by Vivienne Pal 

Sources:

 

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Could Birmingham be the next London?

As the world progresses into a new era and populations grow, cities, too, will evolve, transforming from nondescript outer suburbs into big capital cities, like Manchester, Liverpool, Birmingham – even Kuala Lumpur. Infrastructural growth is the main catalyst for the changes that attract migrants, causing an increment in population numbers. Thus, small cities become capital cities.

In the UK, some of the most exciting cities today in terms of population, job and infrastructural growth are Birmingham, Liverpool and Manchester.

Research compiled by Centre for Cities cites Birmingham as the second fastest growing city after Liverpool from 2002 – 2015, increasing from 9,800 to 25,800 people — 7 times faster than London over the same period. This is impressive, given how London had completely eclipsed Birmingham in the past. How the tides have changed!

Knight Frank reports that the number of people living in Birmingham will rise by 171,000 to a total of 1.3 million people by 2039, especially with the expansion of the HS2 high-speed rail line being built in central Birmingham and nearby Solihull, followed by other regeneration projects.  A sweet enticement to new investors indeed.

Birmingham: One of the Best Performing Cities in England & Wales

In the face of this renaissance, this booming city, also fondly known as “The City of A Thousand Trades” maintains its status as the heartland for British industry. The growth of the motor car as well as manufacturing continues to support the industrial sector in England and Wales,  creating more job opportunities and attracting more people — many of whom have relocated from London.

Between 1998 and 2015, job growth in Birmingham hit 30%, representing around 30,600 jobs in total.

       Biggest Growth in City Centre Population & Jobs in England and Wales

RankCityPopulation growth in city centre (2002-2015)Jobs growth in city centre (1998-2015)
1Manchester149%84%
2Leeds151%34%
3Birmingham162%30%
4Liverpool181%27%
5Milton Keynes110%52%
6Bristol86%41%
7Newcastle112%29%
8Cardiff86%19%
9Brighton38%31%
10Norwich57%16%
20London22%71%

Source: BirminghamLive

However, despite the massive development and job growth, Birmingham is facing a shortage of housing. Between 2011 and 2016, only an estimated 8,000 new houses were built, whereas the actual demand was around 20,000.

The latest data by Hometrack shows that Birmingham is at the third place of house price growth in England, after Manchester and Liverpool, whilst London remains at the bottom.

Manchester clinched top spot at 7.4% growth, followed by Liverpool at 7.2%, and Birmingham at 6.8%. London stayed somewhat flat at only 0.7%.

The average price in Birmingham was at £161,200, slightly lower than Manchester at £166,100, and Liverpool, at £121,900.While price growth in London has been static, house prices there are more than double the national average at £494,800!

Source: Hometrack

Clearly, cities in the Northwest received high capital gains over the last 12 months, yet there is still much room for growth.

Source: Hometrack

The outlook for the housing market in Birmingham appears rosy, thanks to its economic growth thus far.

The region’s strong performance is mainly attributed to its manufacturing sector. In 2016, manufacturing made up 11% of employment in Birmingham, compared to the average for UK cities of 8.8%.

Due to costly house prices, as well as lesser employment opportunities, many Londoners, especially millennials, are relocating to Birmingham, and the other booming cities of Manchester and, Liverpool .

Ultimately, urban regeneration has played a vital part in these cities’ transformations, influencing the movement of millennials towards greater opportunities such as education, jobs and employment options.

Savvy investors are starting to see the opportunities in store for Birmingham. Are you an investor? Are you thinking of making your money work for you? Then you don’t want to miss out. Call us at 03-2162 2260 or (65) 3163 8343.

By Noorasikin Ali
Additions & Edits by Vivienne Pal

Sources:

Image source:

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Investment Vehicles: Disposing Of Your UK Property

Investors have the option of purchasing property as an individual or via an investment vehicle, such as through a company. Different taxes apply at different stages of owning a property — when you buy it, whilst you own it, and when you dispose of it.

In Part 1, we covered the taxes that are applicable at the purchase stage of the investment. Part 2 covered the next stage of investment, ie when you have already taken possession of the property. Here in Part 3, we talk about what entails when you dispose of your UK property.

Capital Gains Tax (CGT)

When you sell your home, you may need to pay Capital Gains Tax (CGT) on any gains you make when you dispose of your property.

CGT is currently only applicable to residential property. Commercial property such as student property and care homes will be subject to CGT from April 2019.

Your taxable gain is the difference in price between the purchase and sale of your property, after taking away any allowable expenses and your personal allowance (if selling as an individual).

SELLING AS AN INDIVIDUAL

All non-UK residents get an annual personal allowance of £11,700 for CGT.

Allowable expenses include the stamp duty paid upon the purchase of the property, agent fees and legal fees incurred during the purchase or sale, and payments for valuations made on the property.

CGT is taxed at 18% if your taxable gain is £46,350 or less, or 28% if more:

UK Capital Gains Tax (CGT) Rate

Example:

Jason sold his apartment for £275,000. He had previously bought it for £200,000, giving him a total cash gain of £75,000.

Jason must report the sale to HMRC, complete a full CGT computation and pay any CGT within 30 days of transfer.

Jason’s expenses come up to £30,400, and after deducting his personal allowance, he has a total taxable gain of £32,900.

Jason’s taxable gain is less than £46,350, so his CGT rate is 18%, and this will come up to a tax of £5,922, or 2.15% of the apartment’s sale price.

Example 1: Calculation of CGT

 

SELLING THROUGH A COMPANY

CGT for Companies

 

INHERITANCE TAX
Leaving your property to your heirs

If you are leaving your house to your heirs, you may want to take note of the taxes involved in bequeathing it.

Inheritance Tax will need to be paid on any UK assets you pass on. Currently the tax is at 40% for any amount above £325,000 per individual (what is called the ‘nil-band’ allowance).

UK Inheritance Tax (IHT) Rates

Example:

Andrew owns a house worth £350,000, which is his only UK asset. He leaves the house to his son.

The house’s value exceeds the allowance threshold by £25,000, and the Inheritance Tax on that amount would be £10,000.

The tax is paid by Andrew’s son who inherits the house.

Example 1 of IHT Calculation

You can put estate-planning in place to significantly reduce the tax your heirs will need to pay.

This could be something simple like bringing on a spouse or re-mortgaging your house.

Spouses can inherit their partner’s allowance, effectively doubling their tax-free allowance to £650,000.

Example:

Barry owns a house worth £500,000, which is his only UK asset. He leaves the house to his wife.

There is no IHT for passing on the house to a spouse, so Barry’s wife will not pay any tax. However, Barry’s wife also inherits Barry’s allowance.

When Barry’s wife dies, the son inherits the house. Barry and his wife’s joint allowance is £650,000, which is more than the value of the house, and the son will not need to pay any IHT.

Example 2 of IHT Calculation

An outstanding mortgage can also be tax-deductible against your estate, and will lower the amount of Inheritance Tax charged.

Here are some other ways of estate planning:

  • Using a trust
  • Using a UK company
  • Taking out a life assurance policy not based in the UK

A good tax planner will advise you on your best options, ensuring that your heirs will get the maximum benefit out of what you leave to them.

Click here for more guides on property investment, and please subscribe to our website notifications to get the latest updates! Do leave us a comment below if you have any thoughts on our article.

If you are interested to explore UK Property’s potential for high returns, or if you need us to refer you to a good tax firm in the UK, 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:

  • Adams & Moore Ltd
  • Featured image: YourNewHouse.co.uk
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Investment Vehicles: Owning A UK Property

Investors have the option of purchasing property as an individual or via an investment vehicle, such as through a company. 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, we covered the taxes that are applicable at the purchase stage of the investment. Here in Part 2 of the series, we cover the next stage of your investment, i.e. when you have already taken possession of the property.

Income Tax

If you rent out your home, you may need to pay income tax on any earnings/profit from rent, after deductions or allowable expenses. This may include

  • Interest on loans
  • Repairs and maintenance
  • Ground rent

As a foreigner renting out your property in the UK, you are classed as a non-resident landlord by HM Revenue and Customs.

 

OWNING AS AN INDIVIDUAL

The standard personal allowance is the amount of income you don’t have to pay tax on every year. As a foreign property investor earning rental income in the UK, you qualify for the standard personal allowance if it is included in the double-taxation agreement between the UK and the country you live.

For example, Malaysians who invest in UK property are eligible for this yearly allowance. Singaporeans, however, are not.

You get a standard personal allowance of £11,850, unless your income is £100,000 or above. The allowance decreases incrementally (see table below) if your income is above £100,000.

Your personal allowance can vary if you apply for Marriage Allowance or Blind Person’s Allowance.

Personal Allowance for UK Income Tax


If you have the standard personal allowance of £11,850, you pay 20% tax on the next £34,500 of your income.

If you do not have any personal allowance, you are taxed at 20% up to £46,350 of your income.

For the portion from £46,351 to £150,000, you pay 40%, and for the portion above £150,000, you pay 45%.

UK Income Tax Bands

As a foreign investor, you can file your rental income taxes to HM Revenue & Customs by getting your rental in full and paying through self-assessment (fill in form NRL1).

 

OWNING THROUGH A COMPANY 

If you own property through a company, you will be taxed differently.

Tax liability for owning property via an investment vehicle

 

We hope this has been helpful! Stay tuned for Part 3 of Investment Vehicles: Selling 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 from Property Moose

 

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Manchester Tops House Price Growth in UK

Manchester recorded a 7.0% increase in house price growth compared to London’s dismal 0.4%.

Manchester is England’s top performing city for house price growth, the latest data from Hometrack shows, while London remains on a flatline.

The data comes from the property research firm’s UK Cities House Price index, which tracks housing data across 20 UK cities and regionally.

For house price growth over the last 12 months, Manchester obtained top spot at a cool 7.0% increase followed by Birmingham at 6.5% and Liverpool at 5.9%.

Price growth in London showed no signs of recovery, staying at a stagnant 0.4%.

Across the UK as a whole, prices have gone up by 4.3% over the last 12 months.

Price Growth of UK Cities in last 12 months: Leading cities in the UK that outshine London.

Many cities in the Northwest have posted high capital gains over the average for the last 12 months. Yet, there is still much room for growth, as prices remain low, well under the national average.

The average price in Manchester was at £163,200, Birmingham is at a slightly lower £159,800, and Liverpool, at £118,800.

Comparatively, the average price of a home in Britain is £217,400.

Although price growth in London is stagnant, housing in the capital costs more than double the national average, at a whopping £491,200!

Average Prices in UK Cities: London prices are at stratospheric levels, making high yields and capital gains quite impossible.

Richard Donnell, Insight Director at Hometrack says that the London market is going through a period of price alignment, having posted some very large gains over the past 8 years.

“Over the last 12 months, average prices in London have grown by just under 1%. This is much lower than the annual average growth of 9% over the last 5 years. These averages mask a wide range of house price growth at a sub market level. Actually, house prices are falling across a third of London’s local authority areas.”

Homes in the capital have become unaffordable for many people after years of surging prices, while wage growth remains meagre and lenders apply tougher mortgage criteria.

However, the price gap between regional cities and the capital is narrowing.

Hometrack expects the gap in prices between London and other UK cities to close further over the next two years. This follows a similar pattern from 2002 to 2005 when London house price growth was relatively weak compared with the rest of the country, after a period of surging prices from 1996 to 2000.

Richard says, “We expect house prices to keep rising across regional cities such as Birmingham, Manchester and Edinburgh over the next two to three years. During this time house price growth in London will remain flat, with annual price rises of approximately 0-2%. As a result, the gap between house prices in cities outside of the south-east and house prices in London will continue to contract.”

Price falls in London will reduce the gap between it and regional cities

Manchester and Birmingham are expected to be the first cities to move closer to London prices, with demand for housing likely to be boosted by strong job growth. They are forecast to return towards average prices being around half of those in the capital compared to a third today.

“The level of house price inflation seen in large regional cities during the last peak, between 2000 and 2003, gives a good indication of how much prices may rise this time around. If history is to repeat itself and these cities are to get back to where they were, then prices could increase by as much as 20-25%,” Richard adds.

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By Ian Choong

Sources:

  • https://www.theguardian.com/money/2018/jun/29/london-house-price-growth-at-nine-year-low-amid-edinburgh-and-manchester-spurt
  • https://www.hometrack.com/uk/insight/uk-cities-house-price-index/may-2018-cities-index/
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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 Commercial Care Homes VS 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. Note: Klang Valley prices and rental returns are estimates based on current market conditions.

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