Amous Lee is the Executive Director of IP Global, a full service property investment company that helps high-networth clients to strengthen their global real estate portfoilio.
IP Global has helped invest over USD 1.5billion of assets in property across 26 markets worldwide. Headquarters in Hong Kong, IP Global has offices in Kuala Lumpur, Singapore, Shanghai, Dubai, Abu Dhabi, Cape Town, and London.
For more information visit http://www.ipglobal-ltd.com
According to a recent article in the Straits Times, the UK and Australia are two of the most popular destinations for overseas property investments amongst the Singaporeans. The trend here in Brunei is quite similar. Why do you think so many people opt for the UK?
There are a number of factors which make the UK a popular choice amongst foreign investors. Due to rising population, a low tax regime and insulation from the problems in the Eurozone, the UK economy is expected to be Europe’s top economy by 2030.
When comparing the tax structure between the UK and Australia, both income tax and capital gain tax are lower in the UK. Also, there is no exit limitation in the UK. In Australia, only Australians can buy second hand properties which makes the UK more favourable to foreign investors.
Stamp duty is cheaper in the UK than in Australia and bank mortgage interest rates are also cheaper (about 3.75%.)
What is the outlook of the UK’s economy and property market amidst the hefty drop in the international oil price?
This has not been an issue for the UK property market as most investors looking into investing there, can take advantage of the weak sterling now. And this presents a great opportunity, given the capital appreciation in many areas in the UK.
One of the major obstacles in the UK is the affordability of property. Give us an overview of the property prices in the UK compared to Australia and Singapore.
The housing prices in prime Central London has appreciated over the last few years and some have even exceeded their value prior to the 2008 economic crisis. But there are still many areas that have remained affordable and are good value for foreign investors. For example, some properties in parts of Zone 1, south side of the bank, the regeneration area in Zone 4 or 5 in London are priced at about GBP 450 psf.
In Manchester, the 2nd financial capital in England, there are still properties valued at around GBP 300 psf. Compared to Singapore, the UK does not have any special stamp duty and seller stamp duty. It also does not have restrictions in resale to foreign investors like Australia. Therefore, overall, the UK appears to be so much easier to invest in and out.
What kind of rental yield can we expect? And give us a picture of property capital appreciation in the UK.
Foreign investors can expect a 3% to 6% gross rental yield depending on the location. Average UK house prices will rise 3.5% in 2015 and cumulative growth in UK prices will total 18.2% in the five years to the end of 2019 according to Knight Frank report
What are some of the rules and regulations that overseas investors need to know about when investing in a UK property?
Investors need to know about the following factors -:
Leasehold: Most of the UK properties are on leasehold title. Investor needs to consider how many years of leasehold the project offers. A 999 year leasehold would be the best but in general there are a wide range of leasehold titles but it is advisable to keep it above 90 years.
Mortgage: Not all projects in the UK can apply for a mortgage. It depends on the location and loan size. Normally London Zone 1 and 2 projects can get a higher LTV.
Building Warranty: If you purchase a newly built property, it is likely to have a 10-year building warranty covering structural defects and protect your initial 10% interest payment.
Furnishings: If investors intend to rent out the unit, it is common in the UK that the Landlord has to provide the furniture for the tenant Management Agent: It is better to appoint a Management Agent to help with rental and the management of the unit. The Agent will usually charge between 12% – 14% of the monthly rental.
Where should one consider, when investing in property the UK?
London is a prime location. It is a trophy asset and safe method of capital preservation. (Generally Zone 1 & prime Zone 2 location Regeneration areas with major transport improvements like Crossrail Areas, close to the business district or to reputable schools.
Manchester is another up and coming city and investors should consider it for the following reasons -: Manchester ‘Airport City‘ – will create 16,000 new jobs and will have direct flights to China. It is the UK’s second financial centre after London. And is also a renowned Media and Education hub.