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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

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2015 Statistics: Best Buy-to-Let Investment in the UK

The ringgit has plunged. You’ve been saving diligently but the value of your savings is a fraction of what it once was. So you’ve decided to take matters into your own hands – you are investing in rental property to hedge against the ringgit (and get something back for your investment!).

Best Buy-to-let Investments in the UK

Congratulations! A wise decision, indeed.  But, where to invest?

Back to basics: invest in property located in countries/locations with

  1. stronger currency
  2. stronger economy
  3. job growth
  4. education opportunities

This help increases the value and ‘rentability’ of a property.

For most landlords with one or two properties, the key to success is capital growth. If the property you invest in grows in value, you will increase your total profits.

One market that has remained a haven for property investors is the UK. But, as London property prices soar higher and yields go lower, property in cities outside London are now showing great yield potential. The Brits, themselves, are beginning to look outwards of London as well. These places, really, are where you should put your money.

If you haven’t done your homework yet, take a look at HSBC’s annual research on rental yields around Britain. Their data show that Manchester is leading the pack on rental yields. The report has listed several profitable locations for investment.

London-lovers, don’t worry… HSBC has done a survey on rental yields in the various pockets of London, too. Read more here: http://bit.ly/1J5P4co


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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Student Property: Where in the UK?

Lifestyle: While centrally located digs matter to university students,  facilities like quality living space, high-speed bandwidth and communal sections that encourage optimum interaction are now highly ranked, too.

Where in the UK to invest?

If there’s one thing that has UK Inc. stamped all over, it’s Britain’s world-class education. Yep, British universities are in rip-roaring health as eager beavers continue to cram the hallowed halls of renowned UK institutions, while other industries suffer.

Knight Frank and Savills have both reported that student property now stands as the fastest-growing property sector in the UK, with demand consistently exceeding supply. Indeed. There are some 2.3 million students (and counting) in the UK now, and the number of international students is predicted to rise by 20% – 30% in the next 5 years according to the Department for Business, Innovation and Skills in 2013. These are amazing times for investment!

It is, however, crucial to invest wisely.

Putting your money in any old property located within minutes from a city area, isn’t the way to go. You won’t get great returns investing in student digs in townships where unknown universities are located. Conversely, it is cities like Birmingham, Bristol, Exeter, Liverpool, Manchester, Newcastle and Sheffield that have been touted as the best places to invest in UK student property. One common thread shared between these cities is that they each serve as the location for a Russell Group University. As a rule, universities that rise rapidly in the UK league tables attract higher enrolment, thus creating greater demand for accommodation. Ergo, the more renowned the university, the stronger the rental market.

Cambridge university students, for instance, are brainy and make formidable cash cows. The university is constantly expanding; the city population is expected to increase by more than 20 per cent in the next 10 years, driving the student rental sector in the area to boom. Newcastle is another example. The Higher Education Statistics Agency (HESA) has ranked Newcastle University (another Russell Group Uni) as5th in employability, top 12 for research power in science and engineering and 8th for medical research power. It is also one of the largest universities in the whole of UK with more than 31,000 students from 130 countries.

It is also prudent to invest in student accommodation built by credible developers that have vast experience in the business.  At the risk of being repetitive, we prefer developers that build where top universities are located, and with enough monetary clout to develop on a site that’s mere minutes’ walk away from universities, city centres and amenities – i.e. where demand is highest.

Purpose Built Student Accommodation

Which is why Purpose Built Student Accommodation (PBSA) has been increasing in popularity.As global, regional and virtual boundaries continue to blur, students want to remain connected. In this hurry-up world, they want to have anything and be anywhere, instantly. Research shows that students have become more discerning, and want to be treated like true customers. Thus, while prime locations matter, facilities like quality living space, high-speed bandwidth and communal sections that encourage optimum interaction are now highly ranked, too.

This bodes well for the mass investor market. PBSAs – formerly the domain of institutional investors – is now the focus of the smart individual investor because, with the right developer, the rewards are enormous. VITA Student, the luxury student accommodation development arm of UK’s renowned Select Property Group, has had 10 years’ experience in the market, with their projects fetching annual rental yields of up to 10% and guaranteed returns of minimum 7% for five years.

Thank you for reading this article, Student Property: Where In The UK? Please share it by using the social media buttons below.

Further Reading:


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 Inc.

UK Inc

TALK about the United Kingdom or England – in any language and to anyone – and you’d be hard pressed to find a clueless response. More than any country in the world, including the United States of America, the UK has succeeded in stamping its mark in the global arena in more ways imaginable.

Even the Union Jack has become a trademark (!) – as a motif on t-shirts, on the covers of mobile phones and other mobile devices, on bags and as key chains. Some supermarkets have even taken to branding some of their shelves with UK-imported items!

With world class education, retail, fashion, food, the English Premier League, music, the UK has made its home in the hearts of global citizenry, including Malaysians.

Some trivia here – as of October last year, there are about 70,000 Malaysians living in the UK, including students, according to the Malaysian High Commissioner to the United Kingdom, Datuk Seri Zakaria Sulong.

In 2012-2013, the number of international students going to study in the UK still surpassed the 300,000 mark – this despite stricter visa restrictions imposed by the Home Office.

Zooming in closer to home, the number of Malaysians studying UK qualifications currently hovers around the 50,000 mark. Meanwhile, the number of Malaysian students studying tertiary courses in the UK is at a staggering 14,500 in 2013, making Malaysia one of the largest overseas student groups in the UK, and making the UK the country with the second most number of Malaysian students.

With the high number of international students in the UK and insufficient accommodation catering to demand, UK student property has become a profitable venture for investment. With people become more affluent, there is even a demand for more luxurious student accommodation. This would include features like a fully-equipped gym, yoga/Pilates studios, 24-hour concierge, more spacious rooms, etc (yes, seriously!)

What does UK Inc. mean to you? Is it Manchester United or Liverpool? TopShop or Karen Millen?Marks & Spencer or Tesco or Waitrose? LSE, Oxford University or the University of Kent? Or is it the beautiful landscapes of Canterbury and Scotland, the historical cities of London and Bath, or the incredible sounds of the Beatles, Arctic Monkeys and Mumford & Sons?

Share with us your views and comments below. You may also share this UK Inc. article using the social buttons.

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