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
Rank
City
Population growth in city centre (2002-2015)
Jobs growth in city centre (1998-2015)
1
Manchester
149%
84%
2
Leeds
151%
34%
3
Birmingham
162%
30%
4
Liverpool
181%
27%
5
Milton Keynes
110%
52%
6
Bristol
86%
41%
7
Newcastle
112%
29%
8
Cardiff
86%
19%
9
Brighton
38%
31%
10
Norwich
57%
16%
20
London
22%
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
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.
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
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.
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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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:
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.
A significant change to the landlord licensing scheme is the exemption of licensing for smaller HMOs. If you are a landlord renting out your premises in the UK to multiple occupants and have been exempt from licensing all this while, you may want to pay attention to the latest changes in legislation.
Since its implementation in the UK some 8 years ago, the landlord licensing scheme has brought changes to the UK housing market, affecting landlords across the country.
Landlord licensing, also known as selective licensing, sets out to ensure that landlords are “fit or proper persons” and that buildings for rent are fit for occupation — all with the intention of raising standards and improve the rental market.
Recently, the UK government released new guidance affecting landlords of houses in multiple occupations (HMOs). The overhaul will take effect on 1 October.
Due to their shared facilities, HMOs often offer cheaper accommodations to students, migrant workers, and young professionals looking for cheaper rental housing.
The new guidance in the landlord licensing scheme is aimed at tackling overcrowding and ensuring all landlords’ properties reach minimum standards.
One of the most significant additions in the landlord licensing scheme is that the previous rules exempting smaller HMOs from licensing, will be removed. Other mandatory changes in selective licensing for HMOs below:
Part 1 of changes – minimum room size
The Mandatory Conditions of Licences 2018 according to Schedule 4 of the Housing Act 2004, introduces new conditions of minimum sleeping room sizes as follows:
Not less than 6.51 square meters for one person over 10 years old;
Not less than 10.22 square meters for two persons over 10 years old;
Not less than 4.64 square meters for children under 10 years old.
Rooms that do not fulfill the minimum requirement are not allowed to be used as sleeping accommodation. Those who abuse the regulations will be charged a penalty of up to £30,000.
Part 2 of changes – waste disposal
The government also set out new guidances related to waste disposal, given that waste generation by HMOs is higher than standard households due to the high number of occupants.
All the above new amendments will take effect in cities in which the landlord licensing scheme applies, for instance, London, Liverpool, Nottingham City, Leicester City, and few regions in Manchester.
We published an article on the landlord licensing scheme on our blog last November. Landlords should keep abreast of regulations affecting them or risk being penalised by the UK government. To find out about the scheme in general, take a look at first blog here: https://csiprop.com/landlord-licensing/. CSI Prop looks forward to continously keeping our readers and investors updated on the latest happenings in the Australian and UK housing markets. For a detailed list of the changes to HMOs, scroll down to the sources below.
A bullish property market ahead for Birmingham (Img source: BirminghamLive)
Birmingham was once called ‘the first manufacturing town in the world’ and was the strategic heart of manufacturing Britain in the 20th century.
The rise of the city in the immediate years after World War 2 led to fears at the top that it was becoming too powerful at the expense of the rest of the country. The government moved some 200 industrial firms and projects out of the region to other parts of the country, which dealt a devastating blow to the Brummie economy.
The once-great city fell into a steep decline in the 1970s, and unemployment rose from zero to close to 20%. In just a couple of decades, Birmingham transformed from the manufacturing powerhouse of a fast-growing Britain to a symbol of failure.
Today, however, paints a very different picture.
All Eyes on Birmingham
The city is currently enjoying a burst of economic success, owing its change in fortune to a pro-development attitude by the Labour-run council and a well-judged government decision to press ahead with important transport infrastructure.
Birmingham’s Big City Plan, announced in 2010, sets out a development masterplan that aims to expand the city core by 25%. This will add £2.1bn yearly to the city’s economy.
As part of the plan, £4bn in transport improvements have been announced to transform road and rail links in the city. Birmingham is the first stop on the High Speed Rail (HS2) coming from London, which will put the city’s more than 1.1 million people within under an hour’s journey of the capital, when it is ready in 2026.
As it is, Birmingham is the most popular destination for people moving from London. More than 6,000 people left London for Birmingham last year, according to the Office for National Statistics (ONS), and it looks like the HS2 will continue to inspire this exodus in the coming years. The second, third and fourth most popular destinations were all within 80km of London.
Birmingham is the most popular destination for people moving from London (Img: BBC)
Businesses are also relocating from London to Birmingham. HSBC’s new head office for its retail and business lending operation, is due to open in July 2018. The bank’s move brings with it more than 1,000 of its existing London staff, and will employ some 2,000 people when it opens.
Deutsche Bank has also expanded its operations in Birmingham, with a total of 1,500 employees in front and back office capacities.
Property Market Outlook for Birmingham
The average house in Birmingham costs £162,701, just over a third of London’s average at £478,853. Office rents in Birmingham are also about a third of those in the capital.
Little wonder, then, that many Londoners and businesses operating in the capital are choosing to move to Birmingham.
Nevertheless, as with other parts of Britain, the supply of housing in this Brummie city hasn’t quite kept pace with demand, charting a potential shortfall of some 30,000 homes.
The deputy leader of Birmingham City Council, Ian Ward said: “Our expanding population means that we need to provide around 80,000 new homes by 2031 and our urban area does not have enough space. If we don’t explore other options we will have a shortfall of 30,000 homes.”
Supply of land is scarce and constrained by the greenbelt, which is a legally protected green area surrounding the city, and not allowed to be used for development.
With the shortfall in housing, rental demand is growing due to an ever-increasing affordability gap for the city’s young population trying to get on the ladder.
JLL predicts an increase in build-to-rent housing with a shift of focus from price towards quality and location. They forecast prime values to hit £500 p.s.f. by 2020 with performance being strongest in the city centre.
Compared to London, Birmingham is still currently 60% cheaper for a new-build project, suggesting significant upside potential.
Investors can look at new-build apartments like Arden Gate in the city centre as a great option for investment. This development has an attractive location, being only a few minutes’ walk from the central transport hub of New Street Station, which has just undergone a £600m renovation. It is close to entertainment and shopping centres and major businesses, including the HSBC head office.
In a 2017 survey, PwC ranked Birmingham as the highest performing UK city, ahead of Manchester, Edinburgh and London.
Regional chairman of PwC in the Midlands, Matt Hammond said, “This may be, in part, due to the big improvements in the city’s infrastructure, including the continuing development of HS2, the extended tram lines and the halo effect created by the redevelopment of New Street Station and the opening of Grand Central.”
Real estate consultancy Knight Frank predicts 19.7% rental growth by 2021, and 23.5% house price growth by 2022, further building investors’ confidence that Birmingham is a high growth market with a promising potential for high returns.
What are your thoughts about the city of Birmingham? Drop us a comment below. If you are interested in Birmingham’s investment potential for high returns, don’t hesitate to give us a call at 3163 8343 (Singapore), 03-2162 2260 (Malaysia), or email us at info@csiprop.com!
CRYPTOCURRENCY: BANE OR BOON? Despite being declared legal tender in many countries across the globe, cryptocurrency continues to draw an equal measure of flak and fealty.
BREAKING NEWS: Yesterday, Bithumb, a South Korea-based cryptocurrency exchange announced the suspension of its deposit and withdrawal services after $35m worth of cryptocurrencies were stolen by hackers.
Bithumb is one of the busiest exchanges for virtual coins in the world and the second local exchange targeted by hackers in just over a week. The news sent ripples through the market with Bitcoin and Ethereum recording price falls, according to CoinDesk, a news site specialising in digital currencies.
Cryptocurrency: A Precarious Medium
This is not the first nosedive in the cryptocurrency world. Digital currencies — like the stock market — are highly reactive, recording multiple tumbles in recent history.
The price of Bitcoin, the world’s best known digital currency, has been tracking a downward spiral since the start of 2018, plummeting heavily from the Dec 2017 price of $18,960 to $6,762 at time of publication.
The price of Bitcoin, the world’s best known digital currency, has been tracking a downward spiral since the start of 2018, plummeting heavily from the Dec 2017 price of $18,960 to $6,762 . Source: CoinDesk & South China Morning Post
Still, cryptocurrency has risen from obscurity and is now legal tender in many countries across the globe. And, it continues to draw flak and fealty in equal measure.
Good:
The inherent nature of cryptocurrency and the world of blockchain ensures no possibility of double-spend as the system is built to be irreversible and transparent to the peers within its ecosystem. Cryptocurrency has also been touted as the hottest investment opportunity currently available. The potential rewards (and risks) are huge; its value can fluctuate by as much as a few hundred dollars in a single day and, potentially, one can either make (or lose) a lot of money in a short period of time. One can also trade in it, purchase goods with it, earn money from it (through mining), and it is recognised as a form of payment in some jurisdictions.
Cryptocurrency: how does it work? Image credit: Blockgeeks
Bad:
Cryptocurrencies are high-risk investments and, as such, their market value is highly volatile, fluctuating like no other asset’s. It’s easy to lose (or make) a tremendous amount of money in a day. Cryptocurrencies are not backed by a central bank/organisation, and are therefore unregulated to a certain extent. It is subject to price manipulation. Its security is questionable, as clearly demonstrated in yesterday’s Bithumb heist, as well as incidences of hacking in the past. Perhaps the biggest theft in the short history of cryptocurrency happened in 2014, when more than $450m in bitcoins disappeared from customers’ accounts in the Mt Gox exchange in Tokyo.
Rat Poison Squared
This year, Google, Facebook and Twitter announced a crackdown on cryptocurrency ads on their sites in a move to protect investors from fraud.
Bank of England Governor Mike Carney has been highly critical of cryptocurrency while Bill Gates has gone on record about betting against cryptocurrency, describing it as a “kind of pure ‘greater fool theory’ type of investment.”
More famously, Warren Buffet, in yet another rail against digital currency, described Bitcoin as “rat poison squared” and that it’s “creating nothing”.
“When you’re buying non-productive assets, all you’re counting on is the next person is going to pay you more because they’re even more excited about another next person coming along,” Buffet said in an interview with CNBC.
BitMex CEO Arthur Hayes, however, is unfazed by Bitcoin’s volatility, predicting that the cryptocurrency will hit $50,000 by the end of the year.
Cryptocurrency may well be the investment of the decade with incredible returns, agrees Virata Thaivasigamony of CSI Prop, a property investment consultancy with offices in Kuala Lumpur and Singapore.
“But it needs to approached with a combination of care and sheer ballsiness,” he adds.
“Investment is a very personal matter. For me, cryptocurrency pales in comparison with something tangible like property investment. Real estate has more stability, proving time and again to be a hedge against inflation and a great asset for diversification. Investing in real estate traditionally outperforms most asset classes in risk-adjusted returns. When compared to bitcoin, it is unequivocally the safer investment.”
As inflation rises, so, too, do rents and housing values. In an inflationary environment, real estate assets react proportionally to inflation. And real estate has incredible tax benefits and cash flow incentives.
Ultimately, investing in cryptocurrency — as with all other investments — is a gamble. A question to ask yourself before embarking on any investment is: how risk-averse are you?
We are colossal fans of property investment (duh!) and we make no apologies for it. Still, we remain curious about the many other types of investments out there and would love to hear your thoughts in the comment box below. If you’re a die-hard property investment fan like us, and are thinking of expanding your UK and Australia property portfolio, hit us up: we’ve got some good stuff for you.
Conventional wisdom, especially among Asians, dictates that you should invest in property. CSI PROP takes a closer look at investing in the Singapore property market and compares it to property in other markets overseas.
Property in Singapore is prohibitively priced
Being a tiny island surrounded by water on all sides with not much space available for construction, the only way to build is up — creating the familiar high-rise skyline of Singapore.
With the severe lack of land, it is no surprise that property prices in Singapore are one of the highest in the region — the second highest in Asia after Hong Kong, according to S&P Global Ratings.
The prohibitively high prices of property raises the bar for investors, only allowing for the more affluent section of the population, with ample capital, to invest in the market.
The Prime Minister of Malaysia, Mahathir Mohamad had announced recently that the Kuala Lumpur to Singapore High Speed Rail development will be postponed until further notice.
Following this announcement, envisioned property price growth for the Jurong area in Singapore and the Iskandar region in Johor is unlikely to materialize, much to the dismay of investors.
Government intervention has, so far, kept housing price growth in Singapore in check. A report by S&P Global Ratings found that cooling measures and an accommodative monetary policy have helped to control house price inflation.
Until recently, that is. Despite warnings from the government, house prices in Singapore surged by 9.1% over the past year, after nearly four years of price declines.
This led the government to pull the brakes on the property market yet again. Its most recent cooling measures — possibly the 12th, to date — have been the strongest seen in the island nation in five years.
The government has now slapped an additional 5% stamp duty on property purchases for individual home buyers and tightened limits for housing loans.
First-time buyers who are Singaporeans or permanent residents are exempt from the increase.
Foreigners/foreign investors now pay 20% on stamp duty compared to 15% previously, whilst entities will have to pay 20%, an addition of 10% to previous rates. An extra 5% acquisition tax has also been imposed on developers buying land to build residential properties, which can only translate to an increase in property prices for the buyer in the end.
The government also tightened loan-to-value (LTV) limits by 5% for all housing loans, ostensibly in a move to make property-flipping more prohibitive
Following the government’s drastic measures, new private home sales are expected to reduce by 15% to 20% year-on-year for the whole of 2018, reported Singapore Business Review.
As it stands, developers have already sold 41.7% less private residential units (654) than the previous month, according to the Urban Redevelopment Authority.
Developers volumes were 20.2% below the year before.
The recent action by the Government to control inflation may be good news to home buyers, but from an investment perspective, capital gains from investing in Singapore property may be lacking compared to investments elsewhere.
Poor rental yields
Singapore’s rental market remains in the doldrums, despite signs of a property market recovery from last year.
Property prices do not always have a direct relationship with rentals. Singapore’s rental market is very much driven by foreign demand, given that over 80% of Singaporeans own a HDB flat.
Overall gross rental yields for non-landed private homes from January 2017 to January 2018 hovered just around 3.2% — the lowest in a decade.
The weak rental market deflates returns on investment in Singapore property, lessening its attraction for investors. Stamp duties, property tax, legal fees and agent commissions further cut into profits.
In Singapore, residential property that you own, but are not physically living in (whether rented out or vacant) is taxed from 10% to 20% depending on the house value. Commercial properties have a flat tax rate of 10%.
In June, rentals for private condos and apartments in Singapore fell 0.2% per cent, while HDB rents fell 0.8% per cent in June from the previous month, with volumes continuing to decline as well, according to real estate portal SRX Property.
The rental income that you are able to earn from local property will be impacted by the high property tax, putting a damper on returns.
The United Kingdom
With less-than-stellar returns in Singapore property, it is no wonder that many investors are looking beyond its shores to overseas markets like the United Kingdom and Australia, which can be far more lucrative.
The UK currently faces a severe shortage of homes — in England itself, there is a backlog of 3.91 million homes, according to research by Heriot-Watt University.
The high demand and low supply for housing in the United Kingdom has driven capital growth. Local economies in the regional cities are booming due to initiatives like the Northern Powerhouse, which bring regeneration and infrastructure improvements to England’s North.
Cities in the Northern Powerhouse like Manchester have recorded price growth of an amazing 12.7% last year, with Liverpool following closely behind at 10.8%. This is an indication of the potential that these cities have to offer for the savvy investor.
Singapore currently holds the title of being one of the largest institutional investors in student property in UK and beyond, in recent years. Mapletree and GIC had spent a combined S$2.15 billion on student housing in the UK in 2016, in cities like Leicester, Birmingham, Nottingham, Oxford, Edinburgh, Manchester and Lincoln.
Just this month, Centurion Corp bought a student housing property in the British city of Manchester for S$33.66 million.
Australia
Australia faces a similar dilemma to the UK, with the last decade of construction failing to keep up with the country’s record population growth.
Melbourne, in particular, is one of the fastest growing cities Down Under. This city is slated to overtake Sydney as Australia’s most populous city according to the Australian Bureau of Statistics (ABS).
The Urban Development Institute of Australia warned last year that Melbourne could have a shortfall of 50,000 houses by 2020.
Commsec Senior Economist Ryan Felsman commented, “if you look at Melbourne there’s 120,000 people moving to it per annum, but only 75,000 houses being built.”
Whilst the 5 Australian capitals collectively experienced a 0.7% drop in capital growth for the 12 months leading up to May 2018, property in Melbourne performed beyond expectations, growing by 3.3%.
Singaporeans are putting money into Australia. Last year, Cushman & Wakefield reported that Singapore overtook China as the largest source of foreign capital for Australian commercial real estate, as the Chinese government tightened restrictions on overseas investments for its citizens.
Investments into Australia from Singapore quadrupled from about $1bn in 2010 to an excess of $4bn in 2017.
Alice Tan, Knight Frank Singapore director of consultancy and research commented, “Australia has been a popular overseas property destination for Singaporeans, especially for the recent two generations,”
“It continues to maintain its appeal as evident from recent survey findings from Knight Frank’s 2018 Wealth Report, where Australia ranked second on the list of top five destinations where Singapore Ultra High Net Worth Individuals (UHNWIs) plan to buy prime property in 2018,”
“Australia’s economic resilience, adaptability and 26-year record of steady growth provide a safe, low-risk environment in which to invest and do business,” she added.
Cushman & Wakefield regional director for capital markets in the Asia-Pacific region, Priyaranjan Kumar added: “Outside of Singapore, Australia and UK boast two of the most transparent and stable property markets globally for Singapore investors who are largely very institutional in their approach to investments.”
Savvy investors can jump on the foreign property investment bandwagon and take advantage of the supply-demand imbalance in countries like Australia and the UK for more rewarding returns on their investments.
What are your thoughts about investing in the Singapore property market? Drop us a comment below. If you’re interested to tap into the attractive potential that overseas markets have to offer, don’t hesitate to give us a call at 3163 8343 (Singapore), 03-2162 2260 (Malaysia), or email us at info@csiprop.com!
Birmingham is a fast developing city, supercharged by regeneration and transport improvements (Source: Paradise Birmingham)
Two-thirds of buyers still work in the capital, and transport links are what enable them to live away from London. Larger homes are cheaper to find away from the capital, and, with improvements to the public transport networks, many prefer the larger living space, despite having to take a longer commute to work.
Migration out of London is at its highest ever level. The number of Londoners in their 30s leaving the capital has risen by 27% over the past 5 years, according to the Office for National Statistics (ONS).
Unsurprisingly, the most popular destinations for these leavers are concentrated around London’s commuter belt.
Savills data shows that 14% of all their new home buyers across the UK were moving from London in the last 3 years, with 39% of them upsizing to a larger property. Between 2015 and 2017, the average new build home bought by a Londoner was 14% larger than a home bought by someone moving from elsewhere.
Two-thirds of buyers still work in the capital, and transport links are what enable them to live away from London. Larger homes are cheaper to find away from the capital, and many prefer the larger living space, despite having to take a longer commute to work.
Transport improvements trigger higher demand
Transport has a key role to play in the delivery of new homes. As people look to move to a new area, a transport hub can fuel residential demand and, consequently, house price growth.
Train stations that have seen the largest increase in passenger use over the last two years are those that have seen larger volumes of new homes delivered. Areas such as these have, on average, seen house price growth that is 5% higher than neighbouring areas over the past five years.
As people continue to move out of London, improvements to infrastructure can provide an opportunity for developers to take advantage of the demand for new homes in commuter locations.
Commuter belt hotspots
Over the past 2 years, stations that saw the largest increase in passenger use were those within a 19- to 39-minute journey from a central London terminal. These are also the markets which have seen the largest increase in secondhand sale prices over the past five years – an average of 44% against the average for England and Wales of 20%.
Some of the highest increases in passenger use were in lower-value locations in the Home Counties such as Ebbsfleet, Apsley and Luton – areas on the cusp of higher-value ones. As affordability in the capital becomes more stretched, we expect these up-and-coming locations to remain popular with London movers, particularly if they are located on new or improving lines such as HS1 or the Midland mainline.
Train stations with highest increase of passengers over the past 2 years likely have affected house price growth in their areas (Source: Savills Research)
Beyond the commuter belt
Hotspots beyond traditional London commuter locations have already benefited from infrastructure improvements.
The upgrade of Birmingham New Street, for example, has seen a 33% increase in passenger use since 2015, while house prices within 2km of the station have increased by 44% over the past five years.
Ahead of High Speed Rail 2 (HS2) at Curzon Street station, there has been significant investment in the regeneration of Birmingham city centre. This has fuelled commercial investment from companies such as Deutsche Bank and HSBC, and has helped to support residential demand and subsequent house price growth.
This is also rippling out into markets surrounding Birmingham. Rugby, Coventry and Long Buckby have all seen an increase in commuters of between 18% and 19% while house prices have increased by 35%, 46% and 67% respectively over the past five years.
New residential developments in the city are attractive to investors as a result. One example is Arden Gate which is located in the prime city central area. These luxury apartments are only a few minutes away from the central New Street train station, close to entertainment, shopping centres, and major businesses, including the HSBC HQ. Currently the developer is offering a 6% rental assurance for the first 12 months. Prices start from £182,950, with up to 70% financing available.
Up in the Northern Powerhouse, Transport for the North (TfN) which became England’s first sub-national transport body in April revealed a £70bn 30-year plan that includes the Northern Powerhouse Rail. Under the plan, new lines and upgraded existing lines will be linked to the HS2, increasing connectivity between the North’s largest cities and enhancing opportunities for both workers and investors alike.
The ripple is taking effect for, as a direct consequence, Manchester’s Piccadilly station and its surrounding areas will be overhauled. This could be the start of a series of more overhauls across the Northern Powerhouse.
Outlook
The ripple effect of Londoners moving to the commuter belt is expected to gain momentum. Occupiers searching for more space are likely to bring London’s equity with them and will be targeting markets with the quickest links to the capital. These include established prime locations and up-and-coming areas which are more affordable than its surroundings.
This ripple effect will be expected to move beyond London’s commuter zone to markets in the Midlands and the North. House prices there have risen more in line with wages, and therefore remain more affordable. The most capacity for growth will likely be there over the next few years.
The strong local economy and infrastructure investment will remain catalysts for residential demand and house price growth. The £1.7 billion Transforming Cities Fund will provide funding for improved connectivity in areas such as Greater Manchester, Cambridgeshire, the West Midlands and Liverpool City Region.
What do you think about transport improvements driving house prices? Drop us a comment below. If you’re interested to take advantage of transport improvements in the pipeline, and invest in property in the UK regional cities, don’t hesitate to give us a call at 03-2162 2260, or email us at info@csiprop.com.