On a recent cloudy Saturday afternoon, CSI Prop hosted yet another exciting and fun Investor Club event, honouring the King of Fruits and the pride of all Malaysians: a Durian Party in recognition of the favourite season of the year!
The party, held at DurianBB Park KL, was a smashing success. The place was packed with investors and their family members who arrived in excited anticipation of the durian spread. As the theme suggests, this day was all about indulging in durian and its greatness.
On the menu were sweet, pulpy, mouth-watering varieties of durians and delicacies made out of durian such as pies and tarts. Other tropical fruits like mangosteens, nangka and rambutans were also served alongside multi-flavoured ice-creams and fresh coconut juice.
The party kick started with a free flow of durian to every table where investors, alongside their family and friends, relished in the variety of durians, ranging from the mildest-tasting to the rich and creamy Musang King.
Ever the affable host, CSI Prop Director, Virata Thaivasigamony fleeted from table to table to greet and chat with guests. He then gave his welcome speech, where he shared about his own investment journey and some informative insights on the UK property and investment market.
Sam Lee of Capricorn Financial Consultancy and our guest speaker from the UK, spoke about the current state of the mortgage market, the various financing terms available and the lending criteria for property investment in the UK.
Switching gears, we had a short and sweet session on how to pick and sample durians according to its intensity of taste, courtesy of DurianBB Park’s Stella Heong. For example, did you know that the Musang King is the strongest-tasting durian and should be eaten last? Neither did we. Stella also shared that durian and mangosteen, being the ‘fruit couple’, should always be eaten together so that the heat from the durian can be neutralized by the juicy mangosteen.
What’s a party without games? Investors were invited to participate in a durian-tasting game and stand a chance to bring home a free durian. Our investor, Mr Alex Goh, was the winner, guessing correctly in just a matter of minutes!
The durian party was clearly a hit, judging by how quickly more than 200kg of durian were consumed (on top of other fruits and pastries!) and the gleeful smiles on the faces of our guests. The evening closed with our guests receiving a goodie bag of durian snacks.
Missed out on the last Investor Club event? Stay tuned for our next one in Q4 and wait for your invitation via email!
The CSI Prop Investor Club is open to all clients of CSI Prop. It is a platform for knowledge, fun and networking and is a realisation of our core values of Knowledge, Service and Having Fun.
By Lydia Devadas Michael
Additions and edits by Vivienne Pal
UK rents are expected to increase by 15% over the next 5 years, according to research by the Royal Institution of Chartered Surveyors (RICS).
The survey observed that smaller landlords were quitting the buy-to-let sector, affecting supply. “A reduced pipeline of supply will gradually feed through to higher rents,” RICS Chief Economist Simon Rubinsohn said.
Meanwhile, the supply of rental property in the UK continues to fall. In 2017, buy-to-let properties were sold at a rate of only 3,800 a month, leading to the first drop in the number of homes available to rent in 18 years, according to the latest report from the Ministry of Housing.
In total, the number of privately rented homes in England fell by 46,000 last year — the largest reduction since 1988.
The drop is attributed to the UK Government’s recent tax measures which, among others, increased stamp duty and reduced landlord relief claims against mortgage interest. The stamp duty changes have made it more expensive to purchase a buy-to-let property, and tax relief is set to drop further yearly until the 2020-21 tax year.
These changes have made it less profitable for UK landlords, especially those on a mortgage, to rent out their properties. House prices have also grown faster than rents, prompting many landlords to exit the sector. Trade association UK Finance highlighted a 19% fall in new mortgages approved for buy-to-let homes in the UK.
Demand continues to rise, and rents are expected to spiral over the next few years. This points the way towards the purpose-built rental sector as a replacement for the traditional buy-to-let properties, which are often older houses on the outskirts of city centres, geared toward owner-occupiers.
Developing cities in the UK regions like Manchester, Birmingham and Liverpool are growing quickly, and properties in the city centre offer access to business opportunities, employment, and entertainment demanded by a modern working lifestyle.
While interest rates remain low, investors looking towards the UK can thus take advantage of the shortage in supply for rental properties, investing in prime locations in developing cities where the demand is the highest.
Manchester, Liverpool and Birmingham are the best places to invest in the UK. Click on the hyperlinks embedded into the cities if you want to learn more. If you are interested to explore investing in regional UK property for high returns, don’t hesitate to give us a call at +65 3163 8343 (Singapore), +603 2162 2260 (Malaysia), or email us at firstname.lastname@example.org!
Manchester has chalked up yet another feather in its cap. The northern city now ranks among the world’s top 10 most popular cities for global investment, according to IBM’s latest Annual Report on Global Location Trends.
The report, IBM’s eleventh, tracked the movement of investment flows and its impact on economic growth around the world. This latest accolade adds credence to Manchester’s track record as one of the fastest-growing cities in the UK.
Along with Liverpool, Manchester attracted 68 foreign direct investment (FDI) projects in 2017, beating other global cities like Toronto and Barcelona. Specialisms in cyber security, FinTech and advanced materials helped the city bring the largest number of investments into the UK, second to London.
The report echoes the EY Attractiveness Survey UK 2017/18 which ranked Manchester as the most successful city to attract FDI outside London. Manchester also retained its place as the UK’s Most Liveable City in the Economist Intelligence Unit’s 2018 Global Liveability Ranking.
The UK is currently placed fifth in the list of the worlds’ most influential FDI destinations. Britain was also ranked fifth for FDI job creation, with 51,500 new jobs born out of these global investments. Manchester and Liverpool jointly created 7,000 jobs last year.
Tim Newns, Chief Executive of MIDAS, Manchester’s inward investment agency, said: “This report once again confirms Manchester as a globally significant business destination and, together with Liverpool, illustrates the potential of the Northern Powerhouse.
“Greater Manchester is ambitious, visionary and passionate about the future. Billions of pounds are being invested to create inspiring, connected business environments that support innovation and reflect future needs, and ensure that the region continues to be a draw for the world’s most innovative companies and biggest brands.
“Talent is one of the key attractors for global businesses and with student retention figures at an all-time high in Manchester, it is creating an even more compelling case for investment.”
In August, Booking.com, the world’s third largest e-commerce company announced a £100 million investment into a new global HQ in Manchester, with online health and beauty retailer The Hut Group (THG) also announcing plans to move into MediaCityUK.
This weekend, learn how you can invest £75K & GET BACK £190K in 5 YEARS with the POWER OF LEVERAGE! Come for the EXCLUSIVE WORLD LAUNCH of an iconic new residential development in the Manchester city centre – THE CROWN On Manchester’s Skyline. Call +60162288691 to book your seats now!
One of the latest movies to hit the cinema, Crazy Rich Asians, features the members of the wealthy Young family, who are termed “not just rich, but crazy-rich”. As the story goes, the family made their fortune through investing in property.
Yes, property is tangible and finite – there’s only so much of it on this planet, so it will always be in demand. But some places are better than others. As any seasoned property investor will tell you, location is perhaps the most important thing to consider for the best returns.
In Singapore, house prices as a whole have dropped 5% since 2011. Some areas have been hit more heavily than others. One of the worst hit was Sentosa Cove, where average prices were down by almost 30% from their 2011 highs.
Residential property on the island city remains highly regulated, and a string of cooling measures by the Government this February put a halt on the short run of growth since last year. In Q3 2018 prices went up by 0.5%, compared to the 3.4% rise in Q2.
Other than the slowdown in growth, an additional hit on property investment in Singapore is that local and foreign buyers now have to pay an extra 5% in stamp duty, further reducing returns.
Right now local property investment appears to be giving less-than-stellar returns. So, if not in Singapore, where then can Singaporeans looking to be crazy-rich put their money?
Currently the exchange rate for the pound sterling is at S$1.81 to £1 (15 Oct). Prior to the 2007 Financial Crisis, the exchange rate hovered at around S$3 to £1.
This means that essentially, the UK is on sale for Singaporeans — at a 40% discount — compared to a decade ago!
The UK is also facing its biggest ever housing shortfall — in England alone, there is a total backlog of almost 4 million homes.
Research by Heriot-Watt University shows England must build 340,000 homes per year until 2031 to meet demand — a figure significantly higher than the government’s estimates.
This shortfall in housing is not new, and multiple failures of the UK Government to spur the house-building industry have caused prices to soar. House prices in the UK grew 32.28% over the past 5 years, and a whopping 323.58% over the past 25 years!
CBRE Research predicts house prices to continue to rise. For the next 3 years, house price growth is estimated to increase by 17.1%, while rental is expected to grow by 21%.
Regional cities in the UK are great places to invest in real estate, as their frenzied pace of development continues, compared to the over-saturated market of London.
These British regional cities have shown the most promising growth: over the past 12 months since June, Manchester clinched top spot at 7.4%, followed by Liverpool at 7.2%, and Birmingham at 6.8%. Compared to these, the capital only managed a dismal 0.7%.
As long as supply is unable to keep up with demand, prices will continue to rise. For the foreseeable future, England’s shortfall in housing is not going to be solved soon, and Singaporeans can take advantage of the currency rate and purchase UK real estate —at adiscount!
Are you looking to invest in UK real estate? Don’t hesitate to give us a call at 65-3163 8343 (Singapore), 03-2162 2260 (Malaysia), or email us at email@example.com!
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
***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!
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 UK property 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
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 £2000
*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
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 solicitors. Together 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.
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 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%.
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 £12,500 (as per 2019/20), 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.
You pay 20% tax on the first £50,000 of your income, after deducting any personal allowance.
For example, if you have the standard personal allowance of £12,500, you pay 20% tax on the next £37,500 of your income. If you do not have any personal allowance, you are taxed at 20% on the first £50,000 of your income.
For the the portion from £50,001 to £150,000, you pay 40%, and for the portion above £150,000, you pay 45%.
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.
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 £12,000 for CGT (as per 2019/20).
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.
For residential property, CGT is taxed at 18% on your gain if your total taxable income is £50,000 and below, or 28% if more:
Jason sells 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, has a total taxable gain of £32,600.
Since his total taxable income is less than £50,000, he will be taxed on his gain at the CGT rate of 18%. This will come up to a tax of £5,868, or 2.13% of the apartment’s sale price.
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 firstname.lastname@example.org!
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.
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.
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.”
There isa 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 email@example.com!
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).
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.
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
Population growth in city centre (2002-2015)
Jobs growth in city centre (1998-2015)
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!
Clearly, cities in the Northwest received high capital gains over the last 12 months, yet there is still much room for growth.
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
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:
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.
SELLING THROUGH A COMPANY
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).
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.
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.
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.
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.
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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.