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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.

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

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.

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

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

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

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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

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

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The Malaysian Investor & UK’s New Buy-to-Let Policies

Good news for Buy-to-let Investors

British housing prices have risen sharply in the last two years, thanks to record low interest rates, an under supply of property (vs. demand), and a strong employment market. Thus, annual rental returns are attractive, which bodes well for the buy-to-let investor.

There are nearly 2 million private landlords in Britain, owning almost 20% of homes, and the positive environment has only added to the appeal of buy-to-let property, also known as rental property.

However, the government is taking steps to cool the market in a bid to protect the interests of potential first-home buyers by introducing new tax rates on buy-to-let property. In a budget statement in November last year, Chancellor George Osborne announced that buy-to-let investors will have to pay a 3 percentage point higher rate of stamp duty than residential buyers due effective from April this year. Meanwhile, come 2017, landlords’ abilities to deduct mortgage interest from rental income before working out a tax liability, will be phased away. All this on top of a predicted rise in Bank rates.

Some doomsayers are anticipating an extreme downturn in the property market, suggesting that investors purchasing mortgaged rental properties today are set to lose money within 5 years. There are also suggestions that potential buyers could turn into sellers, flooding the market with additional supply and slamming the growth of the rental property sector into reverse.

What do these measures mean for the Malaysian Investor?

It appears that the new cooling measures will mainly affect UK residents, as the presumptions are that UK landlords fall within the 40%++ tax bracket.

Foreign investors, i.e. Malaysian investors do not earn salaries in the UK, which means they naturally fall within the lowest tax bracket to begin with, i.e 20% tax for income below £31,865 p.a. Additionally, Malaysian investors have an extra £10,000 as an annual tax-free exemption on rental income. This means that the Malaysian investor will hit the 40% tax bracket and therefore start experiencing some differences only upon earning £41,865 p.a. in rental income.

Assuming a nett yield (after deduction of all expenses) of 4% for rental properties, the Malaysian investor would need to own investment properties worth more than £1,000,000 before he/she hits the 40% bracket. Currently, as most London properties are only raking in 1% – 2% yield, the reality is that you would need to have £2,000,000 to £4,000,000 worth of properties before you hit the 40% tax bracket.

In other words, you won’t feel the pinch unless you are ultra-rich

Meanwhile, the removal of mortgage interest in tax deduction will affect investors buying rental properties in their personal names. In order to get around that, more individuals are resorting to buying rental property under a company structure.

Under the new measure, landlords will not be able to deduct mortgage interest from their rental income before it is assessed for tax but will instead get a flat-rate 20% tax credit. This means those paying higher-rate tax will lose half of their relief, while some others will be moved up into this bracket and so see their tax bill soar.

As such, using a company structure means interest, which is classed as a business expense, can still be deducted. Corporation tax would also apply which would reduce a higher-rate taxpayer’s rate from 40% to 20%.

(Remember, unless you own properties worth £2,000,000 – £4,000,000, you would be hard-pressed to hit the 40% income tax bracket. Mostly, Malaysian investors are within the 20% bracket which means the removal of mortgage interest in tax deduction will not apply, as they automatically get a 20% tax credit under the law. Again, only the ultra-rich are affected).

Student Property Investors

Student property investors are not affected as mortgages are typically not offered for that investment type.

According to CSI Prop spokesperson Virata Thaivasigamony, these latest measures are part of a populist stance as Britain gears up for the elections.

“The biggest domestic issue is the affordability of housing in the UK and how it has affected first-time house buyers. Landlords, especially foreign landlords, are blamed for the hike in house prices. These housing measures seem like a political move,” says Virata, adding that heavier restrictions would have been imposed on the investor if the market were headed for a collapse.

“In the Autumn Statement, George Osborne also announced a 40% interest-free help-to-buy loan for first-time house buyers. This shows that he isn’t really trying to cool down a market that is on the verge of a crash, rather, it gives mileage to his political cause by appealing to the interests of new British home buyers.

“If you look at the fundamentals, it is clear that the UK has a shortage of housing due to low levels of construction since the recession in 2008. This has choked housing supply, causing house prices to inflate. And while building of homes is picking up now, it takes time before that translates into sufficient homes.

“Overall, UK house prices won’t crash. The government will certainly be taking more measures like Singapore, Hong Kong and Malaysia to slow down the market to orchestrate a soft landing because if the markets crash, everyone is affected.”

What about the London property market, specifically?

“London has always been deemed as the international safe haven, which is why foreigners tend to diversify their wealth in London. Because of that, it’s hard for property in London to crash either. The prices have gone up steadily in the recent past, but I foresee a plateau (in prices) and, in the meantime, areas like East London — previously previously seen as undesirable — will experience major construction and subsequent price growth due to gentrification,” Virata adds.

“Ultimately, life goes on. Look at Australia: it got hit with 3% stamp duties last year, which hasn’t really slowed down the foreign purchaser. But it certainly has made the locals feel good that their government is doing something for them…”

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 Property Outlook 2016

UK property outlook 2016. London at sunset. Credit: wikipedia

Summary:

  • Overall positive outlook across the UK, but central London growth subdued.
  • Growth in the Northern cities due to governmental initiative and overall affordability amid high growth
  • Student property remains a good investment option given structural under-supply

The year started on a bleak note, no thanks to the current global economic climate. On the property front, the beginning of 2016 in the UK was headlined by policies to be imposed by the Chancellor on home-owners and landlords,such as future tax and stamp duty increases, and the abolition of mortgage income relief in 2017 – all this on top of predictions of a rise in Bank Rates, prompting doomsayers to predict an extreme downturn in the property market with projections stretching to 2021.

Read how the rates increase affects the Malaysian investor here

But, let’s not get ahead of ourselves. Forecasts are essential in helping the investor strategize, but it is crucial to take a closer look and weigh the predictions against the facts and what we already know:

Raising taxes and other rates are usually measures used by the government to protect the welfare of its house-buying citizens by preventing skyrocketing property prices and overarching speculation resulting from uncontrolled property-buying by wealthy local and foreign investors. The CGT in Singapore and Hong Kong and the RPGT in Malaysia, as well as FIRB taxes and stamp duty hike in Australia are a good example. We’re not saying you should ignore it; we’re just saying it’s not a deal-breaker.

To illustrate, a survey by the Council of Mortgage Lenders found that despite the negative outlook, landlords are confident that they will be able to absorb the impact of tax changes while over 80% are confident they won’t have to raise rents in order to cope.

As for all that talk on Bank Rate increases: the trend for pushing forward forecasts for the rate rise into the future has been going on since rates were cut in 2009; the prediction keeps getting pushed back in the end.

Currently, Bank Rates stand at 0.5%; the prediction for a rise was set for Dec 2016 or Jan 2017 following the first rate rise in the US in 9 years, last December. But with the global economic gloom of 2016 and comments of the Monetary Policy Committee (MPC) along with dramatic market movements, money markets imply that the first increase is poised for Aug 2019. Bank of England chief economist Andy Haldane said last year that the case for UK raising interest rates was “some way from being made” and that negative rates may still be needed.


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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Investing in York: What the Experts Say

York is a quaint and picturesque city which has become a hot spot for property investment.

MENTION York and the first thing that comes to mind are cobbled streets, Georgian townhouses and medieval property steeped in Roman influence. Pretty. Idyllic. Serene.

But there’s more to York than mere charm. Property experts have touted York as the top rental cash cow in the UK — and it’s on paper, folks!

Investing in York?

CBRE released a report highlighting alternative cities for rental property investment (fig 1), and York is top on the list. Savills published a report of top 10 UK capital growth hotspots for 2015 – 2016 (fig 2) and York sits on top of the list – again .

Savills’ Top 10 Cities Capital Growth Hotspots 2015 – 2-16 Credit: Select Property
CBRE Top 5 Cities for Buy-to-let

The report cites that rental prices in York increased by a whopping 26% over 1 year, which is 7% more than the anywhere else in the UK (including London). Demand from students, who flocked to both of York’s universities (University of York and York St Johns University), and young professionals drove up monthly rents to £901pcm.

Why is York a Sought-After Market?

There is an excess of 21,000 students in York, but only 1,200 dedicated student beds available. York is experiencing a critical undersupply of student accommodation, which is why rental rates are rising and demand for student property is soaring.

This clearly supports our belief that London, while still presenting good capital growth (and particularly attractive for the cash-rich foreign investor), is overpriced and unable to provide the kind of rental yields that cities further afield are offering.

York’s housing supply is also limited by its natural beauty, national heritage and rich historic importance, thus making it a very sought-after market, and CBRE expects to see continued population growth there.

In summary:

  • York has been named as the UK’s highest performing property market & the best place to make a buy-to-let investment (rental property investment)
  • There is limited supply and strong demand for property from young professionals and students
  • Rents increased by 26% last year to £901pcm – 7% more than anywhere else in the UK
  • Average house price growth: 3% to £228,907

Video credit: Select Property Group

Basically, if you want short-term liquidity and rental income, York is another fabulous option for the savvy investor. What investment opportunities are there in York? Find out here.

More Reading:

  1. Buy-to-let Investors Should Forget London and Head to York
  2. The 5 Best Cities for Rental Growth
  3. Property Investment: The Superstar Agents Who Put Buyers First
  4. London House Prices Most Overvalued, Says UBS
  5. Investment by Degrees: The Growing Market for University Pads

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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Time to Invest in Manchester

Planning to invest in Manchester? The £800m NOMA scheme near Manchester city centre spans 20 acres and when completed will feature four million square feet of offices, homes, shops and leisure amenities.The first phase of the project is a £100m headquarters for The Co-operative Group. NOMA will be developed over a period of 10-15 years.

EVERYONE loves London and wants to live in London. That’s understandable: after all, London is one of the world’s most historical cities and the capital of the world’s greatest empires of all time. It is also a cultural epicentre and one of the most exciting places in the world.

But #DidYouKnow that Manchester has been named by the Economic Intelligence Unit (EIU) as the best UK city to live insurpassing London – for the second year running?

Manchester has now become the UK’s powerhouse city – its fastest-growing to date, and the largest economic area outside of London with £56 billion gross value added (GVA) whilst London’s annual residential rent growth slows down with property prices hitting an affordability ceiling.

We are firm believers that the time has come to invest in Manchester. And here’s why:

 

3 REASONS TO INVEST IN MANCHESTER

1. Higher rental returns than London

With its population rising at three times the pace of the national average and exceptional transport links, Manchester is now the UK’s number one city for property investment. Average rental yields are 2.78% higher than the highest yielding London borough of Newham thanks to sustained demand for rental accommodation and one of the lowest levels of housing stock in the country.

According to Savills’ Matt Oakley, Manchester has the highest number of graduate retentions of any city in the UK. In 2014, Knight Frank’s Rental Revolution report states that rental return growth in Manchester increased by 5.27% – 13 times faster than yields in London.

Manchester has experienced capital growth of 21% in the last 18 months, with growing population and shrinking property supply forecast to drive property prices up by 22.2% over the next 3 years.

2. Government investments amounting to billions of pounds

The UK government plans to build an economic powerhouse in the north of England, with the creation of enterprise zones with favourable tax conditions and devolved local government powers designed to encourage investment.

To date, a £1 billion expansion of Manchester’s airport has been announced, which will drive an additional 10 million passengers annually, while connecting Manchester to more destinations around the world. Meanwhile, the construction of the HS2, the high-speed rail, will cut the journey time from Manchester to London to only one hour

3. Strong demand for short-term rental

The relocation of the BBC, ITV and Co-Op Bank headquarters to Manchester and the growth of NOMA reaffirm Manchester’s economic growth in the UK. As more corporations move their headquarters to Manchester, there will be positive job growth in the region, thus leading to a greater requirement for both long term and short term housing.

Manchester clocked the highest demand for property and accommodation with a short-term rental in the UK in June 2015.  About 43% of letting agents reported a significant increase in interest among prospective tenants in the region.

Manchester records about 10.3 million staying visits each year, with occupancy levels at hotels in the city hitting record levels in May 2015. This demand for short term accommodation has placed a strain on the already limited number of hotels and apartments in the city, particularly as more traveling business executives look for such accommodation types as the city continues to expand economically.

If you are looking for a viable investment in the UK, it’s time to start looking to Manchester. This city, with its huge student population and growing workforce, is definitely the place to plonk your pounds and pennies.

Call us at 03-2162 2260 or 016-228 8691 or 016-228 9150 for a chat. Our advice is free but valuable.

Additional reading:

  1. George Osborne intervenes to bring Chinese Premier & Investment into Manchester
  2. Chinese Agree Investments in Manchester
  3. PM Pushes China Investment in Manchester
  4. Manchester Rising as an Investment City

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