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Britain, a Nation of Renters?

Image credit: http://bit.ly/2eThsCC

Home ownership across England was at its peak in April 2003, when 71% of households owned their homes, but the figure fell to 64% by February this year, according to a new report by the Resolution Foundation thinktank. The report also shows a big slump in home ownership in Greater Manchester and cities in Yorkshire and the West Midlands. This figure is the lowest since 1986, when home ownership levels were on the way up as a result of policies introduced by the Thatcher administration.

Today, the UK is populated by a generation of renters, with the number of UK households renting property having risen from 2.3 million in 2001 to 5.4 million in 2014 according to the Royal Institution of Chartered Surveyors (Rics).

Here are 5 reasons why buy-to-let or rental property will remain crucial in the UK for some time to come:

Savills calculated the cost of buying vs renting a home. Image credit: http://on.ft.com/2eKm5kU

Reason #1: It’s about 20% cheaper to rent a home in the UK on a monthly basis than to buy (Savills)

Renting a home used to be 25% more expensive than owning back in 1996, but in 2007, it became 79% cheaper to rent than buy your own.  When the costs of capital repayments on a mortgage in Year 1 are factored in, costs rise and renting becomes significantly cheaper than buying on a month-to-month basis. In order for a first-time buyer’s monthly costs to be lower than the costs of renting, the purchaser would require, on average, a deposit of at least 39% of the value of the property, according to Savills’ calculations.

Growth in house prices vs wages in the UK as at Jan 2016: While UK house prices increased by 7.9% last year, figures from ONS show that the UK median wage increased by just 1.8%. This suggests that house prices are growing more than four times as fast as median wages. Source: ONS. Image credit: http://bit.ly/1SjLa5f

Reason #2: House prices too high in proportion to wage growth

Despite recent figures from mortgage lenders showing an increase in the number of loans taken out for house purchases (possibly due to low interest rates), the number of homes for sale is close to a record low, and prices continue rising.

A typical home in the UK now costs six times average annual earnings despite slowing house price inflation. According to Nationwide, house prices have risen by 20% over the last three years while wages rose by just 6%.  Meanwhile, prices in the capital are 9.2 times average earnings, while the Royal Institution of Chartered Surveyors (Rics) said 22% more surveyors in London expect sales to fall over the next three months. The last time prices/earnings ratio was so high was in March 2008. A ratio of 4.5 times a borrower’s income is regarded as the maximum that banks and building societies will agree to lend.

Over in Greater Manchester, the proportion of home owners dropped from 72% in April 2003 to 58% this year. According to financial analyst Louise Cooper, the average house price in England in 1986 was £38,000 but today it is £226,000 (Rightmove’s latest report on average asking prices for a home in England and Wales in October 2016 now stands at £309,122). And that over the same period, the average salary had only gone up 2.5 times. “Everyone says it is a London problem. It is not,” said Cooper.

Renting privately is now the norm, according to a PwC report, for those who cannot afford to buy but do not qualify for social housing. By 2025, PwC predicts that 7.2m households will be in rented accommodation, compared with 5.4m today and just 2.3m in 2001. Source: PwC. Image credit: Guardian http://bit.ly/2eTdslz

Reason #3: Private rented sector – biggest provider of rented homes

The private rented sector has taken over from councils and housing associations as the biggest provider of rented homes with prices paid by tenants in Britain increasing by 2.3% in the 12 months to Sept 2016, according to latest official data. The number of households renting from a private landlords stands at 4 million while the number of those renting from a council or housing association stands at 3.7 million. Statistics peg the number of renters in the UK at 5.4 million as at 2014, but Rics predicts that at least 1.8 million more households will be looking to rent rather than buy a home by 2025. An analysis published last year by PwC suggests that 7.2 million households will be in rented accommodation by 2025 compared with 5.4 million in 2015 and 2.3 million in 2001.

According to the English Housing Survey, four in 10 renters in the growing private rented sector do not expect to ever buy a house and of those who do, 44% expect to wait more than five years before they can afford it.

House building has abysmally failed to keep pace with Britain’s population explosion, a crisis that was further exacerbated following the financial crisis that induced a slump in house building as the graph shows the UK annual population change against annual new housing build completions. Data source: ONS. Image source: Market Oracle http://bit.ly/2fBK9Wc

Reason #4: The UK has an undersupply of housing

It is an old refrain, but the UK is facing a critical undersupply of housing even up till today. In late 2015, the BBC published an incriminating article on the shortage of housing in the UK, citing the Labour government’s failure to build 240,000 homes by 2016 — a target set in 2007. The Barker Review of Housing Supply had noted in 2005 that about 250,000 homes needed to be built every year to prevent spiralling house prices and a shortage of affordable homes. The closest the UK got to hitting the target was in 2006/07 when 219,000 homes were built. During the EU Referendum campaign, Brexit-backer Iain Duncan Smith said the UK would need to build 240 houses a day for 20 years to cope with increased demand, a claim that has been substantiated by the BBC. And the consequence of undersupply and high demand? Skyrocketing prices. With house prices at unaffordable rates, the only other option would be to rent.

Trivia 1: #DidYouKnow that for decades after WWII, the UK used to build more than 300,000 new homes a year? Now it’s about half that amount.

Trivia 2: In May 2014, BoE governor Mark Carney complained that housebuilding in the UK was half that of his native Canada despite the UK’s population being twice its size.

Home ownership is clearly declining among those within the younger age group. This is caused by a number of reasons including affordability and, increasingly, preference (lifestyle).

Reason #5: Lifestyle – the increasing preference for renting vs buying

While for some it is an economic choice, more are choosing to rent their homes over buying due to lifestyle. This shift is being prompted by younger workers today, also known as the Gen-Y demographic who are setting down later in life and changing jobs and careers with more regularity than their parents. This generation are marrying and having children later in life, allowing them the freedom to move as they want and when they want.

A research conducted by AXA discovered that less than 50% of the research participants are renting because they cannot afford it compared to the 67% in a study performed in 2013. The research revealed that many enjoy the freedom and flexibility of being mortgage-free. Thus the idea of being tied down to a mortgage and a single location is preventative for a workforce that wants to remain transient.

Conclusion

Owning property for rental in the UK is a good investment. It is important, however, to be aware of the costs involved and to be prudent about where you should invest in buy-to-let in order to maximise your returns.

CSI Prop proudly promotes international investment property with high yields at low risk. Our portfolio comprises residential and purpose-built student property in cities across the United Kingdom (London, Luton, Manchester, Liverpool, Newcastle, York, Glasgow, Scotland; Sheffield, etc); Australia (Melbourne, Perth, Brisbane) and Thailand (Bangkok). Our projects are concentrated in high-growth areas with great educational, infrastructural and job growth potentials. We aspire to make a difference in the lives of our clients by helping them achieve their investment goals through strong market research backed by third party experts and due diligence. 

Disclaimer: CSI Prop does not provide tax & legal advice and accepts no liability. Readers are encouraged to consult a qualified tax or legal advisor for a thorough review.

Need advice or clarification? Call us for more information and/or to find out about our projects! Hotline: 03-2162 2260

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Emerging Trends 80 Days After Brexit

Some 80 days have passed. What are the trends that have emerged in the property scene? Image credit: http://bit.ly/2cumEgw

It has been 2. 5 months since Brexit. By the end of Sept, the government will start to think steps to invoke Article 50, the ‘divorce process’ that will trigger the UK’s departure from the EU. The property market was among the sectors hit hardest by the referendum, with seven commercial property funds freezing trading within weeks, Reuters reports. However, some trends have emerged that allow for a better observation of the property sector, namely:

  • UK property market players and investors are still confident about the future prospects of the market. Regional cities like Manchester & Liverpool continue to outperform London
  • Alternative/specialist property like UK student property/purpose built student accommodation (PBSA) and hotels gained greater traction among investors due to its long leases and liquid returns
  • Private rental sector remains significant as housing supply unable to keep up with demand

 

  1. Future prospects of the market looks good. Regional cities like Manchester & Liverpool outperform London

Indeed, the first post-Brexit updates from property companies indicated greater caution. However, property auctioneers Network Auctions said that in the months since Brexit, little has changed in terms of investor confidence. There has emerged conditions favourable to investors such as the low inflation and low interest rate. Overseas investors are also taking advantage of the low pound.

New data shows that the UK’s housing market, despite having slowed down, is showing signs of healthy activity and resilience.

Using data representative of 90% of properties in the UK’s market, it was observed that the total number of properties had risen on 8th August compared to 22nd June with 866,179 properties were for sale across the UK before the vote.  Readings on 8th August shows this number increased by 1.7% on the market, but with less properties under offer (decrease of 4.3%) versus pre-Brexit.

The average asking price for a UK property also rose by £1,040 from £240,470 on 25th July to £241,510 in August while the average asking price for all properties for sale on the market had increased by 3% to an average value of £247,026 in the same period.

The latest Hometrack UK Cities House Price Index reveals that amid the annual rate of house price inflation slowing down by 9.5% in July after 12 months of higher growth across 20 cities in the UK, this is not the case in the large regional cities in the north of England and Scotland. The rate of annual house price growth in the Manchester, Liverpool, Leeds, Birmingham and Nottingham continues to rise by 7% – 8%.

 

  1. Increased interest in alternative/specialist property sectors e.g. UK student property (PBSA)

Reuters reports that property investors are are now favouring alternative property such as student property (PBSA), hotels and hospitals. Alternatives accounted for 16% of the total UK property investment in July — an increase from 13% in Q2.

Office and retail total returns fell 3.7% and 3.2% respectively in July while returns from alternative assets were down by only 1.4% in recent months, said CBRE Group Inc. Additionally, CBRE also observed rental growth for alternative assets while traditional property assets saw none.

Alternatives have gained traction due to their long leases and steady tenants, and tend to be less risky and more defensive, compared to traditional commercial property like office and retail spaces.

The PBSA sector demonstrated its comparative resilience during the global financial crisis, showcasing its strong fundamentals. Earlier this month, the A-levels results announcement showed some 424,000 students receive confirmed places in their respective universities, with the number of EU students increasing by 11% to 26,800 despite fears. Note: the UK is not dependent on EU students who represent only around 6% of full-time students.

The sector will continue to remain resilient, with demand for well-located student housing schemes remaining strong,  as structural undersupply underpins rental growth (JLL UK Student Housing Quarterly Bulletin 2016 Q2 Review).

 

iii. Private rental sector significant as housing supply unable to keep up with demand

The proportion of private tenants rose from 11% in 2003 to 19% last year. In Greater Manchester, it rose from 6% to 20% over the same period.

Much has contributed to the private rental sector, such as the relative unaffordability of house prices which corresponds with an acute shortage in housing supply and social housing. The fall in home ownership, according to data from non-profit organisation Resolution Foundation, is at a 30-year low, and corresponded with the rise in renting from private landlords.

Following the Brexit vote, the rental market remains steady as rents, supply and tenant demand did not significantly change in July. The latest monthly report released by the Association of Residential Letting Agents (ARLA) found that whilst just 12% of agents reported a dip in rent, a staggering three quarters (77%) saw no change in rental costs.

In a similar fashion, the supply of properties and demand for housing remained unchanged immediately after the vote as two-thirds (67%) of ARLA members reported no change in supply, and a further 64% reported no change in the number of prospective tenants looking for properties.

However, a shadow of ambiguity still hangs over the rental market as nearly half (45%) of letting agents witnessed uncertainty from landlords looking to let properties. Fewer entrants to the rental market could put further pressure on rents, as supply falls short of the substantial demand from tenants.

Looking forward, with the current lack of housing to buy, it does appear that the rental sector is going to remain significant for a while.

CSI Prop proudly promotes international investment property with high yields at low risk. Our portfolio comprises residential and purpose-built student property in cities across the United Kingdom (London, Luton, Manchester, Liverpool, Newcastle, York, Glasgow, Scotland; Sheffield, etc); Australia (Melbourne, Perth, Brisbane) and Thailand (Bangkok). Our projects are concentrated in high-growth areas with great educational, infrastructural and job growth potentials. We aspire to make a difference in the lives of our clients by helping them achieve their investment goals through strong market research backed by third party experts and due diligence. 

Disclaimer: CSI Prop does not provide tax & legal advice and accepts no liability. Readers are encouraged to consult a qualified tax or legal advisor for a thorough review.

Need advice or clarification? Call us for more information and/or to find out about our projects! Hotline: 03-2162 2260

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London’s City in the East

If you’ve been wandering around London recently, here’s one thing you would’ve probably noticed: the city is moving eastwards. Thanks, in part, to the London Olympics, the population is booming in east London with growth projections of a further 600,000 in the next 15 years. Today, more Londoners live to the east of the Tower Bridge than west of the city as a wave of regeneration sweeps the area.

Amazingly, east London – which encompasses Canary Wharf (London’s financial centre today) and the London Docklands – was once considered undesirable! It is now one of the city’s most eclectic spots, populated by finance sector workers; the design, digital and creative communities; and families. Transport for London has unveiled proposals for 13 new river crossings, most of which is in East London, beefing up the existing transport network which includes Crossrail links and the DLR.

A snapshot of numbers and plans in East London, courtesy of the London Mayor’s office.

According to Jones Lang Lasalle, property prices in East London for the year to Q1 2016 has shown a 7% growth compared to the city centre’s 1.3%. The chart below illustrates the price growth in various areas of London city.

During a recent trip, we explored East London by car, DLR/Tube and on foot. Signs of regenerative work are visible, particularly on the DLR and Tube rides from the heart of the city to the Excel International Convention Centre at the Royal Victoria Dock (travel time: 40 mins). A drive in the opposite direction on our return journey took about 40 mins in clear traffic – very similar to the time taken to drive/ride the LRT from Kelana Jaya to KLCC.

Canning Town: Signs of regeneration in East London are visible from the DLR.

Shadwell is also a place to watch. Walking from Limehouse Marina to Tower Bridge, we noticed this industrial area has seen an injection of residential developments along the main thoroughfare.

Telford Homes’ The Junction is currently under construction along the main thoroughfare of Shadwell.

London’s Docklands area, which includes the Limehouse Basin, Royal Victoria Dock, The Royal Albert Dock and Silverton Quays are transforming, too. The Royal Docks is set to be East London’s next first-time buyer hotspot with plans for 24,000 homes and 60,000 jobs to be created in the area. The Royal Albert Dock, particularly, will become London’s centre for Asian business thanks to the development of the Asian Business Port, creating 20,000 jobs, and generating £6bn to the London economy.

Construction of residences are still ongoing around the Royal Victoria Dock neighbourhood.

We spent some time at the Royal Victoria Dock, one of London’s fast-growing areas (Zone 3), which looks extremely promising.

The waterfront at Royal Victoria Dock is a fabulous place for the neighbouring community with wide pedestrian walks and spaces, beautiful apartments and greens.

The first of the royal docks, the Royal Victoria Dock has undergone massive regeneration and is extremely accessible by the Emirates Air Line (cable car), DLR, Underground and forthcoming Crossrail.

The Emirates Air Line is an attractive feature at the Royal Victoria Dock.

Residents living within the area enjoy access to the Thames waterfront and great quality of life minutes from the city centre, Canary Wharf, the O2 Arena, the forthcoming Asian Business Park and London Airport.

The O2 and cable cars can be seen from the Royal Victoria Dock waterfront.

The surrounding areas of Custom Excel is well established, with several hotels and waterfront residential apartments co-existing peacefully with the convention centre and commercial developments.

 

The DLR stops right in front of Excel London Convention Centre. Hop on and you’re in the heart of London in about 40 minutes – just about the time it takes to ride the LRT from Kelana Jaya to KLCC!

The forthcoming Crossrail will be a major game changer. Aside from increasing property values along the route, the Crossrail, which will also run through Canary Wharf and East London, will improve connectivity within the city. Travel time will be more efficient as the Crossrail connects Reading to Shenfield while Crossrail 2 runs from Broxbourne to Epsom.

The area is indeed looking up. With improved transport links and gentrification arising from infrastructural investments worth billions, East London is a place to watch.

To know what the government is doing for East London: http://bit.ly/2bY8G9w

East London’s post-Olympics boom towns: http://bit.ly/1SaQYNV

Numbers: Canning Town & Newham areas: http://bit.ly/1SaQYNV

CSI Prop proudly promotes international investment property with high yields at low risk. Our portfolio comprises residential and purpose-built student property in cities across the United Kingdom (London, Luton, Manchester, Liverpool, Newcastle, York, Glasgow, Scotland; Sheffield, etc); Australia (Melbourne, Perth, Brisbane) and Thailand (Bangkok). Our projects are concentrated in high-growth areas with great educational, infrastructural and job growth potentials. We aspire to make a difference in the lives of our clients by helping them achieve their investment goals through strong market research backed by third party experts and due diligence. 

Disclaimer: CSI Prop does not provide tax & legal advice and accepts no liability. Readers are encouraged to consult a qualified tax or legal advisor for a thorough review.

Need advice or clarification? Call us for more information and/or to find out about our projects! Hotline: 03-2162 2260

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Property Purchase Tax in UK Relatively Low

While Europe levies some of the highest property purchase taxes in the world, the UK has a relatively low property purchase tax.

Europe levies some of the highest taxes on the purchase of prime property, charging an average 4% in taxes on a purchase of US$1 million (equivalent £765,000), according to a new study released by UHY, an international accounting and consultancy network.

UHY says that major European economies including France (5.1%), Germany (5.0%), and Spain (8%) levy high property purchase taxes, while Belgium ranks the highest at a whopping 11.3% for real estate worth £765,000.

The United Kingdom, meanwhile, sports a relatively low property purchase tax at 3.5%. UK’s property purchase tax is lower than the European average (3.8%) and higher than the global average by only 0.2%. UK’s property purchase tax is also lower than Australia (4.8%), Pakistan (6.0%), India (5.0%) and Croatia (5.0%).

The low property purchase tax is a blessing for high-performing countries like the UK, which has an acute under supply of housing. Low property purchase tax also helps spur inward investment from foreign investors.

UHY says that although high property tax is an attractive source of revenue for governments, it could discourage labour market mobility and valuable overseas investment. Higher property purchase taxes also puts a strain on domestic buyers, who may not actually be particularly wealthy, given house price inflation in some locations over the last decade or two.

Article originally published at http://bit.ly/2a7XAyF

CSI Prop proudly promotes international investment property with high yields at low risk. Our portfolio comprises residential and purpose-built student property in cities across the United Kingdom (London, Luton, Manchester, Liverpool, Newcastle, York, Glasgow, Scotland; Sheffield, etc); Australia (Melbourne, Perth, Brisbane) and Thailand (Bangkok). Our projects are concentrated in high-growth areas with great educational, infrastructural and job growth potentials. We aspire to make a difference in the lives of our clients by helping them achieve their investment goals through strong market research backed by third party experts and due diligence. 

Disclaimer: CSI Prop does not provide tax & legal advice and accepts no liability. Readers are encouraged to consult a qualified tax or legal advisor for a thorough review.

Need advice or clarification? Call us for more information and/or to find out about our projects! Hotline: 03-2162 2260

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Brexit: UK Property Outlook

Brexit: the UK has left the building. What is the UK property outlook post-Brexit? Image credit: http://bit.ly/29vbXHr

In a surprisingly historic and shocking move, the United Kingdom (UK) voted to leave the European Union (EU) on June 23rd, throwing the global community and stock markets into a furor. But what next? How will Brexit impact the economic and political climate? As expected, plenty of conjecture has surfaced through the cracks. Our research team at CSI Prop cuts through the noise of speculation and presents an unbiased view of what the future holds for the UK economy and residential property market.

Political and financial uncertainty is affirmative, but nothing drastic as the world waits for Article 50 to kick off

As we had correctly predicted in our Brexit FAQ published before the Referendum, Brexit has caused uncertainty, resulting in a tumble in the pound. The housing market has slowed down, but not at any rate worth panicking over. With David Cameron’s resignation, Theresa May has been elected into office as new Prime Minister. Only after this can the government call for Article 50 to take effect.

Britain’s exit is not immediate

The Article 50 process, crudely put, is a divorce. It sets out the exit process for countries wanting to leave the EU, but because it is vague, member states need to enter into negotiations to thrash out the terms of any deal. A two-year window will begin immediately after Article 50 is invoked; this is when Britain will negotiate plans for its relationship with the EU, post-Brexit. The topics to be broached are wide and the terms of a deal will require the unanimous agreement of all 28 member states. This could take more than two years. In the meantime, Britain is still bound by the obligations and responsibilities of its membership with the EU.

Opportunity abounds amid risks

The immediate issues facing the UK is political rather than economic. As such, the political uncertainty could affect the economic climate. The UK government will try to mitigate disruptions and bring certainty to the financial markets as best as it can. Interest rates will likely remain lower for longer. In the short term, the uncertainty of UK’s future relationship with the EU will affect trade and consumer confidence, but this is unlikely to drag out into a blown-out recession as predicted by some naysayers. In short, the UK’s economy is in good health and will ride out the storm.

Ultimately, UK is home to 60 million wealthy consumers and a high-skilled workforce — something that will remain attractive to multinational companies across the globe. Coca-Cola and BMW will still want to access a market this big; skill-based employers such as PwC and Google will always want to access such a large pool of talent (source: Knight Frank).

Higher buying power for overseas investors as pound value falls. Pound to ringgit ratio equivalent to exchange rates after the last financial crisis in 2008.

While investment sentiment will be affected, UK will remain an attractive property investment destination. It looks increasingly likely that investment will be led by Asian and US investors.  With the fall in the pound, London – the most expensive property investment location in the UK – has become more affordable and overseas buyers now have significantly higher buying power. The media is rife with reports of shrewd investors seizing this sterling opportunity to invest in the market. Knight Frank reports that the sale of prime London real estate increased by 38% a week after Brexit!

At the time of publication, the pound to ringgit value stands at £1: RM5.18 representing a 14% drop. More significantly, the value of the pound against the US dollar has dropped to a 31-year low, at £1: US$1.28.

MYR-USD-to-GBP-ratio-csiprop.com
The devaluation of the pound is at a 31-year low against the USD and back within the 2008 rates against the MYR. Overseas investors now have a significantly increased buying power.

People looking to do business in the UK now have a more level playing field with the abolishment of EU red tape, making London an attractive place to invest again.

House prices to rise in the medium term

UK-housing-market-remain-strong-in-bad-times-csiprop
The UK housing market has performed well, rallying even in spite of the recessions over the years.

A general short-term slowdown in the housing market is expected. Developments that have not yet begun could be delayed pending more clarity. The slowdown in the residential market may be a good thing for first-time buyers as property becomes more affordable.

However, the fact remains that the inherent undersupply of housing in the UK will continue to underpin the market. The above chart demonstrates the growth in the UK housing market through the years even during the recessions. The general housing shortage means that prices should rise in the medium to long term as reticence by developers to commit to new builds, will make it harder for the government to achieve its target of building new homes by 2020. This will push house prices up and the cost of renting will rise across many parts of UK as demand from tenants increases whilst new housing supply falls.

Student property to remain resilient

UK student property proved its resilience by outperforming other assets  in weathering the past economic downturn. We are confident that it will ride the Brexit wave well as demand for higher education in the UK is unlikely to be directly affected due to (i) a more attractive exchange rate because of the drop in the pound for international students; (ii) unlikely change in domestic demand for higher education. Knight Frank anticipates that EU students may be required to pay full international rates, but noted that they only represent around 6% of the total full-time student population in the UK. The acute undersupply in purpose built student accommodation in the UK will continue to uphold market values.

UK economy to withstand the challenge

The UK has long been a global superpower with London as the world’s financial, education and cultural centre – even before it became a member of the EU. London will work towards negotiating its own treaties with the world and terms of exit with the EU. We see London’s position as the world’s financial centre wavering in the short term, but will regain its strength once the dust settles.

UK education will continue to hold its stead; we don’t foresee anyone waking up and saying, “I’m not going to study in the London School of Economics because the UK is no longer part of the EU.”

Summary

That Brexit has caused uncertainty in the housing and economic market, is undeniable. There are risks and opportunities, but the UK economy looks set to prevail. The business world will adapt and Britain’s policies and the flexible economy will help it right itself around. While there will be a slowdown in the housing market, this will only be in the short term as the lack of housing supply will not change overnight. Given the substantial shortage of housing across the UK, the residential housing market will remain a good investment in the long term even as student accommodation remains resilient.

Ultimately, Brexit has probably presented one of the best opportunities to invest in a UK property. In the long term, taking advantage of the current market will allow you to reap strong returns once the UK economy picks up again.

—-

CSI Prop proudly promotes international investment property with high yields at low risk. Our portfolio comprises residential and purpose-built student property in cities across the United Kingdom (London, Luton, Manchester, Liverpool, Newcastle, York, Glasgow, Scotland; Sheffield, etc); Australia (Melbourne, Perth, Brisbane) and Thailand (Bangkok). Our projects are concentrated in high-growth areas with great educational, infrastructural and job growth potentials. We aspire to make a difference in the lives of our clients by helping them achieve their investment goals through strong market research backed by third party experts and due diligence. 

Disclaimer: CSI Prop does not provide tax & legal advice and accepts no liability. Readers are encouraged to consult a qualified tax or legal advisor for a thorough review.

Need advice or clarification? Call us for more information and/or to find out about our projects! Hotline: 03-2162 2260

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Press Release – Silver Lining Behind Brexit for Malaysian Investors

For Immediate Release

Silver Lining Behind Brexit for Malaysian Investors

European Referendum holds many advantages for Malaysian investors

Brexit-silver-lining-malaysian-investors-csiprop.com
The European Referendum holds many advantages for Malaysian investors. Image taken from: http://bit.ly/1U8K0dS

Investors of UK property can take comfort that there is a silver lining behind the impending European Referendum.

In the weeks leading up to Brexit, investors have been waiting with bated breath to see the outcome of the referendum on the UK economic and investments market should Britain exit the European Union (EU). Negative speculation has been rife with investors taking a wait and see approach, resulting in subdued demand in the property market especially in London.

For CSI Prop spokesperson Virata Thaivasigamony, however, Brexit offers a number of advantages to investors.

“True, the market has been subdued because of uncertainty leading up to the referendum. However, the Brexit uncertainty presents great buying opportunities especially for buyers from countries with weak exchange rates, for example, Malaysia. In this short term, there are amazing gains for investors as the weaker pound has worked to our advantage,” he said, adding that Britain has always enjoyed a strong and stable economy while London has been a leading global financial centre even before the EU was formed.

Cornerstone International is a leading real estate consultancy marketing foreign real estate to Malaysian investors. The company is based in Kuala Lumpur.

Research by JLL has revealed that some 58% of investors were on the hunt for opportunistic investments, with a number of Asia-based investors looking to capitalize on the weaker pound and slower property market.

While acknowledging that London will take a hit in the event of a Brexit, Virata is confident that the UK will regain its economic and political strength in due course.

“If Brexit occurs, there will be a period of uncertainty and the pound will take a beating. As a result, the UK will be ‘on sale’. Again this is advantageous to investors, particularly those investing in UK student property because UK education will remain strong regardless of Brexit. Malaysians and other foreigners including those from the EU will not stop sending their children to study in the UK – people still want a degree from a UK university,” he added.

The UK’s university system is oversubscribed with 7.3 applications from overseas for each EU student accepted in 2015 and 7.9 for each place accepted by a non-EU student. With demand in purpose built student accommodation superseding supply, the student accommodation market will be more resilient to Brexit than other commercial property even as the demand for UK education remains unabated.

A JLL survey had revealed that a significant number of UK investors remained confident of the student accommodation sector.

“Eventually the uncertainty from Britain’s exit will level off as London makes its own treaties with other countries. London will get back on its feet, and the pound will strengthen again, offering great returns to savvy investors who had taken advantage of the weaker pound. Irrespective of what happens on June 23rd, UK will remain a safe haven for investors,” said Virata, adding that UK is facing a general undersupply in housing.

Conversely, Virata foresees a rapid strengthening of the British currency if Britain chooses to remain in the EU, again benefiting savvy investors who had chosen to take advantage of the weaker pound.

Malaysia is the third largest investor to the UK and Australia property markets in 2014 and 2015, with Singapore and China in first and second place, respectively.

-ends.

CSI Prop proudly promotes international investment property with high yields at low risk. Our portfolio comprises residential and purpose-built student property in cities across the United Kingdom (London, Luton, Manchester, Liverpool, Newcastle, York, Glasgow, Scotland; Sheffield, etc); Australia (Melbourne, Perth, Brisbane) and Thailand (Bangkok). Our projects are concentrated in high-growth areas with great educational, infrastructural and job growth potentials. We aspire to make a difference in the lives of our clients by helping them achieve their investment goals through strong market research backed by third party experts and due diligence. 

Disclaimer: CSI Prop does not provide tax & legal advice and accepts no liability. Readers are encouraged to consult a qualified tax or legal advisor for a thorough review.

Need advice or clarification? Call us for more information and/or to find out about our projects! Hotline: 03-2162 2260

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Gen-Y: The Future of the UK Property Market

Part 1 of our Manchester series underscores research highlighting Manchester as the UK’s no. 1 property investment hotspot in the next 10 years. In Part 2, we discuss why Manchester is poised to have the strongest rental market in the UK.


Video credit: Select Property Group

According to Savills, demand for rented accommodation has increased by 17,500 households per month over the past decade to 2014. This demand for rented homes is set to rise by more than 1 million households over the next 5 years.

The private rented sector in Manchester is slated to boom with over 10,000 new build-to-rent units are due to be built over the next few years. This is due largely to the Mancunian city’s largest concentration of young working adults, i.e. the Generation Y.

7 Reasons Why Generation Y is the Future of the UK’s Property Market – Select Property Group

  • They do not want to be tied down with long-term mortgages
  • Career-focused; they stay in roles for shorter lengths of time as they progress later in life
  • Prefer to live in dense, diverse urban villages
  • Demand ceaseless access to technology and fast-paced information
  • Professional and educated with a good work-life balance
  • Value practical amenities that make living easier
  • No expectation to own a property – success is defined in other ways

#DidYouKnow that Manchester is home to over 60% more 25- to 29-year-olds than the national average? (source: Manchester Property Guide 2015)

Manchester has the youngest working demographic in the whole of the UK.

Why is Manchester the Fasting Growing Generation Y City

  • The city’s population is rising quicker than any city outside of London and 2.85 million people will live there by 2025 – 89% of this new population is Generation Y.
  • It means over 60% more 25 to 29-year-olds live in Manchester than the UK average. This Generation Y market accounts for 22% of Manchester’s overall total population, almost 4 times the national average
  • A huge 85% of people living in Manchester city centre now privately rent and 70% of the population is classed as BINKY – Big Income, No Kids Yet
  • 58% of graduates from the Greater Manchester universities enter employment in the local area. That’s almost 20,000 new workers a year. Every year.
  • Aspirational and career-focused young people are naturally drawn 70,000 new jobs will be available to them over the next decade.
  • City targets state Manchester needs 4,000 new units a year to house its rapidly growing Generation Y market. Only 1,417 annual units are set for delivery over the next eight years. Two-thirds of this supply is still subject to planning.

This post is originally published by Select Property Group.

CSI Prop proudly promotes international investment property with high yields at low risk. Our portfolio comprises residential and purpose-built student property in cities across the United Kingdom (London, Luton, Manchester, Liverpool, Newcastle, York, Glasgow, Scotland; Sheffield, etc); Australia (Melbourne, Perth, Brisbane) and Thailand (Bangkok). Our projects are concentrated in high-growth areas with great educational, infrastructural and job growth potentials. We aspire to make a difference in the lives of our clients by helping them achieve their investment goals through strong market research backed by third party experts and due diligence. 

Disclaimer: CSI Prop does not provide tax & legal advice and accepts no liability. Readers are encouraged to consult a qualified tax or legal advisor for a thorough review.

Need advice or clarification? Call us for more information and/or to find out about our projects! Hotline: 03-2162 2260

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Manchester: Best Property Investment Yields

In Part 1 of our Manchester series, we discuss the facts & figures that make Manchester THE top city for investment in the UK. The numbers don’t lie.
Photo credit: Select Property Group

The investment landscape in the UK is changing. The focus has moved from London as the go-to destination for investment and the UK’s largest economic gains, to Manchester.

With the highest yields and critical undersupply of housing in the Northern Powerhouse on the back of significant investments by the government, Manchester’s growth is just beginning. Today, Manchester is at the top of the league in annual rental increases in the UK and, with a rapidly expanding population comprising greatly of the youngest demographics in the country, Manchester is the best place for property investment.

In fact, property advisor JLL has predicted that house prices in Manchester will increase by 26.4% in the next 5 years, with 5.5% growth over the course of 2016.

Trust the facts. Here are 10 reasons why you should invest in Manchester:

Manchester has secured £8.2 billion of investment over the past decade, more than Birmingham’s £6.5 billion or Glasgow’s £5.3 billion – CBRE, Jan 2016

2  HSBC ranked Manchester as the UK’s no. 1 city for property investment yields in 2015, thanks to average annual returns of 8% – HSBC, 2015

3  Since 2010, average annual yields in Manchester have risen by 6.02%, the highest in the UK. In comparison, yields in London rose by just 4.71% during this period

4  Manchester named as UK’s top property investment hotspot in the next decade – House Simple

5  Manchester is a young community, with over 60% more 25- to 29-year-olds living there than the national average. These people need rental accommodation – Manchester Property Guide 2015

6  Manchester has a higher job growth rate than London, recording a 47% increase job advertisements in April 2015 alone compared to 42% in London. 70,000 new jobs will be created by Greater Manchester’s financial and professional services sector by 2025 – CV Library & BNY Mellon

7  Manchester was named the best UK city to live in for the second consecutive year – EIU Global Liveability Survey 2015

8  Manchester’s population expected to grow by 125,000 to 2.87 million in the next decade – ONS

9  With the redevelopment of transport systems, more than 15 million people can reach the city in less than 45 minutes by 2025 – up from 7 million currently – BNY Mellon

10  Greater Manchester to get its own directly-elected mayor, with the region receiving £1 billion worth of devolved powers from the UK government. This will enable Manchester to hold new freedoms to better control its own budgets and will be able to dictate which areas need the most investment on a regional level.

In Part 2 of our Manchester series, we explore the influx of Generation Y in the city and how it contributes to greater demand for rental housing. Stay tuned!

CSI Prop proudly promotes international investment property with high yields at low risk. Our portfolio comprises residential and purpose-built student property in cities across the United Kingdom (London, Luton, Manchester, Liverpool, Newcastle, York, Glasgow, Scotland; Sheffield, etc); Australia (Melbourne, Perth, Brisbane) and Thailand (Bangkok). Our projects are concentrated in high-growth areas with great educational, infrastructural and job growth potentials. We aspire to make a difference in the lives of our clients by helping them achieve their investment goals through strong market research backed by third party experts and due diligence. 

Disclaimer: CSI Prop does not provide tax & legal advice and accepts no liability. Readers are encouraged to consult a qualified tax or legal advisor for a thorough review.

Need advice or clarification? Call us for more information and/or to find out about our projects! Hotline: 03-2162 2260

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Brexit and the Foreign Property Investor

Photo credit: http://www.catholicherald.co.uk/

The looming Brexit referendum is sending property investors into a bit of a worry whirl. What are the implications?

Come June 23, UK citizens will vote on whether the nation should withdraw from the European Union. While there is still time before that happens, the uncertainty is a cause for concern across all industries in the UK. Here’s a Brexit FAQ specially for investors looking to invest in property in the UK.

What is Brexit?

Brexit refers to the campaign for a British Exit from the European Union, to end control by Brussels and give Britain the freedom to manage its own affairs. The referendum takes place on June 23. Currently, both factions are almost equally matched, with the pro-Europeans slightly ahead.

What are the general economic implications of the current lead-up to Brexit on the UK?

Clearly, the uncertainty has directly affected the market, resulting in, among others, (i) the drop of the British pound, (ii) the slide of share prices (iii) some major international investors withholding from committing to luxury property until after the referendum, (iv) some contracts exchanged on UK deals being conditional on a vote to remain, and (v) softening of business confidence.

What if UK exits the EU?

There is uncertainty over what would happen if the UK withdraws from the EU as Brexit is a future hypothetical event and largely lacks definition. In the short-term after the exit, we foresee a period of uncertainty as new terms of engagement with Europe are worked out. The UK economy may suffer in that short-term, but we are confident that it will right itself in time. The British pound will also weaken in the short term, but rise soon enough once the market acclimatizes to the situation.

How will UK and London’s global standing be impacted by Brexit?

The UK was a global economic superpower and London one of the world’s strongest financial centres even before it became part of the EU. We are confident the UK will eventually find its footing again should it exit the EU. Reports have also shown that investors are generally more positive about the longer term state of a UK out of Europe.

Will Brexit affect housing in the UK?

There is no serious economic analysis to suggest that all trade with the EU would cease in the event of Brexit. The most immediate and significant slowdown in investment would be pre- and potentially post-Brexit, due to uncertainty of the former and instability of the latter.

The value of the pound will likely diminish in the short term and there is risk of a sharp change in interest rates which could cause the housing market to soften. However, the UK is already facing a shortage in housing now, which won’t change in the event of a Brexit.

The possibility of dropping prices or a cheaper pound allows some investors to take advantage of less competitive processes as the property industry will bounce back in the long term, resulting in higher yields.  For foreign investors, a softer sterling means they can get more for their money, while the immediate instability in the market would mean the chance to invest in property that is highly likely to recover at a later date.

London’s housing market would be impacted significantly, but if you’ve always wanted to buy property in London, this is the time. As explained above, we are confident it will eventually find its footing again as London had always been a financial capital even before it entered the EU.

What if the UK remains in the Euro Zone?

The British pound will strengthen substantially as the market has priced in the uncertainty resulting from Brexit, which has resulted in the weaker currency in recent months.

Conclusion

The Brexit referendum has created a temporary situation of a weak pound which has paved the way for a tremendous buying opportunity for foreign investors compared to early 2015. The current exchange rate is at RM5.50 : £1 compared to RM6.80 : £1 as at late 2015. This is a one-time opportunity for foreign investors to take advantage of the situation.

CSI Prop proudly promotes international investment property with high yields at low risk. Our portfolio comprises residential and purpose-built student property in cities across the United Kingdom (London, Luton, Manchester, Liverpool, Newcastle, York, Glasgow, Scotland; Sheffield, etc); Australia (Melbourne, Perth, Brisbane) and Thailand (Bangkok). Our projects are concentrated in high-growth areas with great educational, infrastructural and job growth potentials. We aspire to make a difference in the lives of our clients by helping them achieve their investment goals through strong market research backed by third party experts and due diligence. 

Disclaimer: CSI Prop does not provide tax & legal advice and accepts no liability. Readers are encouraged to consult a qualified tax or legal advisor for a thorough review.

Need advice or clarification? Call us for more information and/or to find out about our projects! Hotline: 03-2162 2260

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UK Student Property in 2016

Phase II of London Spring Place which launches in Kuala Lumpur end of February. Phase 1 sold out within the year of launch!

UK student property is the strongest investment platform today, surpassing other traditional real estate classes. In 2015, the UK student property sector saw investments to the tune of £6 billion – twice the amount invested in the sector in 2013 and 2014 combined. Experts say the sector is likely to see more investment in the years ahead.

UK Student Property

Formerly reserved for institutional investors, UK student property has become one of the most popular investment vehicles to date in the world of property investment. From a mere £500 million in 2010, direct investments in the sector reached £6 billion in 2015, surpassing the £3 billion in 2013 and 2014 combined. More significantly, this marks an increase of more than 300% over the £1.7 billion invested in 2014 alone.

Is Growth in the Sector Set to Continue?

The answer is yes.

The fact remains that there is still an acute under supply of purpose built student accommodation (PBSA) in the UK due to restrictions in building permissions, a challenging planning environment and the government’s support for housing development. Meanwhile, the number of foreign students continues to rise due to recently abolished restrictions in foreign student numbers, which comprise the traditional mix of new first year students and second- and third-year returners.

To illustrate, the number of foreign students at Britain’s top universities doubled between the 2005/2006 and 2013/2014 academic years. These students tend to come from wealthy families who are able to afford the soaring cost of tuition for non-European Union residents and demand a high-class standard of living. The Higher Education Statistics Agency reported that the number of residents living in private halls more than doubled between 2007 and 2014—from 46,000 to 102,000—a trend predicted to continue. The dramatic upswing has been fuelled by the inability of university-managed accommodation to keep pace with student numbers.

London’s full time student population alone is expected to rise by 50% in the next 10 years, whilst student cities, particularly where there is a Russell Group university, is expected to see dramatic increases in student numbers. EU and non-EU students are the fastest growing segment, bringing a net benefit of £2.3 billion per annum to London’s economy supporting 60,000 jobs in the capital.

But, beyond the fundamentally undersupplied market, one reason for the success of PBSAs is that students have become more discerning, especially in light of increased tuition fees. Unite Group reports that 85 per cent of second year undergraduates are now looking for quality, purpose-built student homes that fulfill all their needs (including peace and quiet and access to night life), and with the CBRE statistics showing that student accommodation generally has occupancy rates of some 99%, it’s easy to see why people put their money into this area of the market.

Conclusion

The structural undersupply in purpose built UK student property has caused prices to skyrocket. Student housing charity Unipol, for example, reported a rent rise of 25% in purpose-built student accommodation between 2010 and 2013 – nearly double the rise in the rental sector as a whole in that period (13%).

Experts predict that student housing will experience a continued strong demand but with significant supply side challenges in London and key student towns. With this demand from students for more luxurious space, coupled with rising student numbers and strained supply, there is certainly potential for all sorts of investors to get top marks for their shareholders and earn strong income and profits from the sector.

Global investment into UK student housing. Source & credit: Savills Research file:///C:/Users/Marketing/Downloads/spotlight–uk-student-housing-2015.pdf

Ultimately it’s not just about what you invest in; it’s also where you invest in. In a recent report in the Property Wire, several student cities were highlighted as the next investment hotspot including Manchester, Liverpool, Birmingham and Brighton. Looking ahead, it is also likely that London will continue to be an attractive city for students from across the UK and around the world. However, there is the risk that prospective students will be put off by the cost of living in the capital (house prices have risen by 46% and private sector rents by 19% over the last five years according to the ONS).

‘So long as demand outstrips supply, upward pressure on both rents and capital values will continue to make the market an attractive proposition for investors, and we don’t expect the market to come off the boil for some time,’ says CBRE head of student housing advisory Jo Winchester.

CSI Prop proudly promotes international investment property with high yields at low risk. Our portfolio comprises residential and purpose-built student property in cities across the United Kingdom (London, Luton, Manchester, Liverpool, Newcastle, York, Glasgow, Scotland; Sheffield, etc); Australia (Melbourne, Perth, Brisbane) and Thailand (Bangkok). Our projects are concentrated in high-growth areas with great educational, infrastructural and job growth potentials. We aspire to make a difference in the lives of our clients by helping them achieve their investment goals through strong market research backed by third party experts and due diligence. 

Disclaimer: CSI Prop does not provide tax & legal advice and accepts no liability. Readers are encouraged to consult a qualified tax or legal advisor for a thorough review.

Need advice or clarification? Call us for more information and/or to find out about our projects! Hotline: 03-2162 2260