By Richard Bradstock, Special to Gulf News

Overseas real estate picks are proving easy

Multiple UK cities figure prominently and Chicago’s got what it takes

Published: 14:01 March 22, 2017

By Richard Bradstock, Special to Gulf News

 

As part of a survey conducted last year, over 500 members of the public shared with us why they would invest in property and the response was typical. Themes of stability, reliability, diversification and low correlation with other major asset classes were raised.

Evidence shows that these attitudes are global. After a shaky 2016, marked by the fallout from Brexit and the US presidential election, we look at the trends that will likely dominate global this year.

The big picture: investors look above the fray of global political and economic risk

The knee-jerk reactions seen in 2016 now appear to be behind us. Major stock exchanges have long bounced back following the shocks and there seems to be a strong sense of business as usual. The recent IMF World Economic Outlook update showcased the broad consensus of forecasts suggesting that 2017 will be a year of “modest growth”.

Yet ongoing global economic and political uncertainty means these broad predictions come with a very clear health warning. Will Chinese rebalancing be managed successfully? Will consumer markets remain resilient?

Is the US about to start shredding its trade agreements? In light of these potential issues, it’s not difficult to imagine situations where investors are left exposed across multiple asset classes.

In our view, it is important to understand that balanced portfolios are fortified with assets that are above the fray. This explains why property, particularly residential property, is expected to remain a key investment theme in 2017. It also helps to understand why markets in the UK, US, Australia and Germany require special focus.

Brexit and beyond

After the UK voted to leave the EU, the British pound tumbled dramatically, causing residential property to become around 20 per cent cheaper for dollar-pegged foreign investors. Because of this, investors from the GCC and Asia are casting an eye over the UK market with renewed enthusiasm, recognising it as “the same old safe haven as ever — but cheaper”.

Investors are well placed to capitalise on this opportunity. Investors from the Middle East have been putting their money in the UK property market for a long time, and the appeal of British brick-and-mortar has become more pronounced after becoming far more affordable for dollar-pegged investors.

In recent years, Manchester and Liverpool have become some of the best cities in the UK for property investment. Manchester is one of the strongest buy-to-let cities in the UK. Not only are 63 per cent of households renting (24 per cent above the UK average), but in the extended city centre four out of five apartments are rented.

Reflecting the strong demand for rental properties- rental growth of 20.5 per cent is expected between 2017-21.

In Liverpool, property demand remains strong, with a 6 per cent price growth seen during June to September 2016. Demand is likely to rise further as the population of Liverpool is predicted to grow from 83,000 to 1.6 million by 2040.

As the UK begins the process of formal departure from the EU, a process likely to take around two years, the fundamentals that have long made UK property investment popular with GCC investors remain firmly in place, providing an attractive opportunity for long term investors to ride out any short term volatility.

Key markets to invest in 2017

Well-known for its striking architecture, Chicago is also one of the largest US cities. A hidden gem in the real estate world, the windy city is expected to be a key US property investment market through 2017. The city has the sixth highest GDP among world cities and is diversified across a variety of markets that include finance, technology, telecommunications and transportation.

Since July 2013, average condo prices have risen 16.2 per cent, while average prices at IP Global’s most recent Chicago project have risen 5-6 per cent since February 2015. These figures are extremely encouraging for potential investors.

Germany is also on our list of top investment destinations for 2017. A joint report from PwC and Urban Land Institute ranked Berlin as the No. 1 city in Europe for investment and development prospects. Strong economic growth and increasing population continue to underpin the German capital’s reputation as one of Europe’s prime destinations for residential property investment.

With a 40 per cent housing supply deficit, 400,000 new residents expected by 2030 and the opening of the Berlin Brandenburg Airport scheduled for 2018, the near term outlook for Berlin’s property market looks extremely promising

20 MAR 2017

Brexit described as “first world problem”, as Chinese buyers and institutions continue to pour money into Britain’s real estate sector.

ummary:

• Chinese property investors are forecast to continue spending heavily in the UK, attracted by its status as a safe-haven location
• 44% of the value of property deals announced between 2012 and the end of the first half of 2016 were made by Chinese buyers
• The strength of UK property has not been dented following last year’s EU referendum, with the chief executive of a Chinese equity firm describing Brexit as a “first-world problem”

British real estate remains one of the strongest safe-haven assets available to the global investor community.

And its most vested international buyers are set to continue moving money to the UK.

For Chinese private and institutional investors, UK property is the most bought, and most highly sought, overseas investment. According to the Financial Times, 44% of the value of property deals announced between 2012 and the end of the first half of 2016 came from Chinese buyers.

Investors in the Far East are attracted by UK real estate’s renowned ability to grow returns, and its low correlation to equity and gilt performance.

Chinese buyers regard Britain as a safe destination for their money. Analysis from accountancy firm Grant Thornton found that in just 12 months in 2015, the top 20 Chinese-owned businesses that operate in the UK saw revenues soar by 174%.

While 2016’s Brexit vote has caused a degree of uncertainty for the country’s economy, the appeal of acquiring British assets has not diminished in the eyes of China’s biggest investors.

Private equity fund PGC CapitalChinese plans to invest £600m in property and business parks in the UK over the next five years. The institution’s Chief Executive, Denise Li, told the Financial Times that while some economists in the UK and Europe see the vote to leave the EU as “huge”, she said “back home in China, we see this as a ‘first-world problem’”.

Brexit has, though, made UK real estate more affordable for investors from China and around the world, after the pound fell to a 31-year low against the dollar. But many buyers are aware of sterling’s reputation as one of the strongest global currencies, which could prompt a renewed surge in investment before the pound regains its losses over the next few years.

10 MAR, 2017 by Rupert Smith

Private Landlords have already been feeling like they have had ten rounds in the ring with Mike Tyson or being current…Tony Bellew for that matter!

The referee thankfully did not score against the investor yesterday and thankfully the budget did not include any further measures to make the life of the investor more harrowing.

Investors must be aware of the change in legislation coming into force next month with the abolishment of mortgage interest rate relief.

Many fear that rents will soar over the long term and the government will be forced to backtrack over time.
Over 20 areas in the UK have already seen the average rent paid for a residential property grow in excess of 3% over the last year. These findings highlight the growing affordability crisis facing the 4.3m tenants in the UK, and follow the government commitments outlined in last week’s Housing White Paper to create a fair and better-served private rented sector……now that’s an article in its own right!

Statistics suggest that by 2025 more people in the UK will rent rather than own property much like the rest of Europe
The analysis suggests these 20 areas, where rental growth is reaching unsustainable levels, should now be the prioritised focus for government, developers and landlords. The current pace of growth means a tenant in Luton (the area with the fastest growing rents at 6.5%) is now paying an extra £528 over the year on rent, bringing total annual rent paid to £9,354.

With basic economics in mind… there are more “bottoms than there are seats” and the rental market is very very strong, demand outstrips supply etc etc surely property prices will remain strong? The debate continues…

Complete RPI Ltd, a UK specialist, have maintained a 98% occupancy across their portfolio for the past three years UK nationwide which makes interesting reading.

Post-Brexit, changes and new report reveal that currency shifts are driving a fresh wave of property buyers based in the Middle and Far East taking advantage of a significant “discount” in UK real estate, this combined with the uncertainty of new leadership and insecure financial markets make UK real estate still a very safe bet for the wary investor.

By Andrea Wong, 13 March 2017

The Chancellor’s Spring Budget was a rather low-key affair to say the least. It was a statement that was met by disappointment by people up and down the country, most notably property investors, due to lack of mention of the housing market. One thing that the Chancellor did announce though is that there would be a rise in income tax for self-employers despite a pledge not to raise taxes, causing concern for landlords today.

Last month, the government published the document known as a White Paper which strategised a Brexit plan with emphasis fixing the ‘housing crisis’ and building houses with more affordable rent. Many believed that this handed Chancellor of the Exchequer Philip Hammond with the perfect opportunity to expand on the housing plans issued by the government and address the issues that the market faced. Further to this, it was hoped that he would reverse George Osborne’s implementation of the 3% stamp duty levy for property investors in 2016, even though that additional tax has not slowed the market down or deterred investors.

With no mention of the housing market, investors can rest assured that no new taxes or charges will be levied on them, and that the market remains firmly open to investment. Furthermore, another factor which remains unchanged is that tenant demand in the UK is extremely high and, with more people than ever before entering the private rental market, high quality buy-to-let accommodation will continue to be a very popular and lucrative investment for a long time to come.

The Chancellor’s maiden Spring Budget did include additional plans to distribute economic growth across the country, particularly with regard to the development of the Northern Powerhouse. He is aiming to improve different areas with huge investments in infrastructure, healthcare and education to benefit people living in the Northern regions. According to recent JLL reports, the economic outlook for the Northern cities looks bright, with Manchester City Centre considered the number one market for capital value growth prospects over the next few years.

Whilst the Chancellor failed to discuss the housing market directly, the previously mentioned Government White Paper document shed light on the situation. There seems to be a real focus on fixing the issue, as well as an acceptance that homeownership is now less common due to high-rise prices. In response to the White paper, Green Party member, Sian Berry was full of optimism: “I’m pleased to see the Government is at last catching up with the real world on renting. We have suffered from years of obsession with homeownership and a long list of failed policies such as ‘Help to Buy’, shared ownership and starter homes”.

With the UK buy-to-let market going from strength to strength and rental accommodation demand high, especially within the regions of the Northern Powerhouse, investors should not be concerned by the relative lack of airtime given to housing in the Budget. Homeownership is out of reach for many ordinary UK families even with extra support from the help-to-buy scheme, paving the way for even more growth in the private rental market to come.

PUBLISHED: 14:26, Tue, Mar 14, 2017

HOUSE PRICES, will they rise or fall after Article 50 is triggered? Prime Minister Teresa May is clear to make the move and begin negotiations to leave the European Union (EU) – but what effect will this have on our housing market.

Express.co.uk spoke exclusively to Will Herrmann, Director of private property developer West Eleven, who explained that any effects will be insignificant – and the welfare of the property market relies on how any leaks throughout the process are received.

“It’s inevitable that Article 50 is going to be triggered and the timetable for it happening has been well documented,” he said.

“Sentiment will change with the success (or not) of the negotiations and how well they presented to the public.”

The property expert believes upmarket areas such as Fulham, with a high French population, will flourish but that most other areas of the UK won’t prosper as a result of the Brexit news.

What will Brexit do for the British housing market? Will house prices be lower or higher?

House prices rise slightly post-Brexit according to Will.

He told Express.co.uk exclusively: “I think prices will stay flat with possibly some very modest increases but the breaking effect on price rises and the cause of the slowdown in transactions in the market is more caused by other factors such as Stamp Duty Land Tax (SDLT).”

“As far as London is concerned, I think that the effects of Brexit are largely priced into the market,” the expert claimed.

“There were large corrections in Chelsea and Fulham immediately after the referendum and these areas now appear to have turned a corner.”

Will many people continue to buy from overseas?

There will continue to be more overseas buyers in Britain, especially from China, Will said.

“The effect of the devaluation of the pound has led to an opportunity for overseas buyers.

“Globally, Chinese and other far Eastern buyers want to save their money protected by a strong democracy, judiciary and property laws.”

Thanks to the poor state of the Euro there will be more investment from buyers closer to home to – who will be looking for stability in a more reliable market.

“The Euro looks set for a continuing period of instability too. These factors continue to make UK property appealing,” Will explained.

Will it be cheaper or more expensive to rent?

Renting will also become yet more expensive after Brexit.

“This is a function of the general seizure in the property market – as transaction volume sales slow, more people are renting,” Will explained.

“This is combined with a lack of supply and increased costs to landlords.”

“The entire effect of Brexit is of course unknown, but the UK is a huge market place in its own right and a global trading nation. I would expect the effects in the housing market to be relatively insignificant compared the other headwinds it faces.”

The pound is falling since the Prime Minister was given the go ahead by Parliament to trigger Article 50.

9th March 2017

Modest growth is continuing in the UK property market but the outlook is less positive in London than the rest of the country, according to the latest report from chartered surveyors.

Some 24% have seen a rise rather than a fall in prices over the past three months and the North West was seen to have performed particularly well with a net balance of 64% reporting rising prices.

However, central London bucked the growth trend with 62% of respondents saying that prices had fallen rather than risen during the same period.

But it is in the private rented sector that the biggest change is likely with the report from the Royal Institution of Chartered Surveyors (RICS) saying that rents are predicted to rise by in excess of 20% over the next five years

Overall sales volumes were broadly unchanged for the third month in succession and new buyer enquiries were again flat and have now failed to see any meaningful growth since November 2016. The pace at which new instructions are dwindling appears to be particularly acute in the North West of England and the West Midlands.

Near term expectations remain positive but point to a relatively modest rise in activity in the months to come. The headline price balance came in at +24% in February, unchanged from a downwardly revised figure of +24% in January.

However, surveyors have now reported a fall rather than a rise in London prices for a full year with most of this activity concentrated in the inner boroughs. However, sales activity appears to have picked up in London after nearly a year of negative to flat growth.

Tight supply conditions across a majority of the regions coupled with stable sales activity has led to a further erosion of available stock for sale, with the average stock per surveyor just shy of a record low. Indeed, respondents across most parts of the UK continue to highlight in their comments the supply shortage to be very dominant feature of the market at present.

Wales and Northern Ireland reported the strongest expected improvements, followed by Scotland and the North West of England.

In the lettings market, tenant demand rose for the third consecutive month as 15% more respondents noted an increase rather than a fall on a non-seasonally adjusted basis. But growth in demand is more modest than a year ago when 29% more respondents reported an increase.

The flow of new landlord instructions, however, reportedly deteriorated, with a net balance of -10% the weakest reading in over two years. The report says that this negative trend is likely to persist over at least the next couple of months as changes to mortgage interest tax relief start to take effect in April.

As such, rent expectations remain in firmly positive territory with a net balance of +24% in February. Looking ahead over the next 12 months, survey respondents forecast rents to rise by a further 2.7% and to accelerate to an average 4.4% per annum over the next five years.

However, the London rental market continues to be an exception with surveyors reporting weak tenant demand along with negative near term rental expectations.

Jill Treanor and Rowena Mason

Wednesday 8 March 2017 16.51 GMT

Budget 2017: key points at a glance

Growth

• Forecast of 2% growth for 2017, up from 1.4%.
• In 2018, growth forecast to be 1.6%, then 1.7% in 2019, 1.9% in 2020, and 2% in 2021.
• Previous forecasts were 1.4% for 2017, 1.7% for 2018, 2.1% in 2019, 2.1% in 2020 and 2% for 2021.

Rowena Mason, deputy political editor: Philip Hammond looks satisfied to be announcing higher growth than previously forecast – a rare experience for chancellors in recent years. It defies the predictions of gloom by remain supporters before the Brexit vote, although the effects of leaving the EU are yet to be felt.

Borrowing

• £51.7bn in 2016-17, £58.3bn in 2017-18, £40.8bn in 2018-19, £21.4bn in 2019-20 and then £20.6bn in 2020-21, and £16.8bn in 2021-22.
• In November, borrowing was forecast at £59bn in 2017-18, £46.5bn in 2018-19, £22bn in 2019-20, £21bn in 2020-21 and £17.2bn in 2021-22.
• Hopes of a surplus by the end of the decade already abandoned.

RM: Again, Hammond is able to deliver better news than previously forecast on borrowing. He stresses that this will not be used as a reason to spend more, signalling there will be no easing off on austerity. The chancellor moves on to a few digs at the opposition for ‘recklessly’ wanting to borrow more, carrying on George Osborne’s strategy of trying to paint Labour as fiscally irresponsible.

Small business tax

• For businesses below VAT registration threshold, delay by a year the introduction of quarterly reporting at a cost of £280m.

RM: Hammond says this is a sign he is listening to the voice of business, unlike Labour, and shoehorns in a joke about the ‘last Labour government’ of Blair and Brown being called that for a reason.

Business rates

Three measures for England: a cap so rates rise by no more than £50 a month for small businesses losing their rate relief, pubs to get a £1,000 discount on business rates of less than £100,000 rateable value (90% of pubs) and a £300m fund for discretionary relief for local authorities. This amounts to a £435m cut.

RM: Inevitably, Hammond has had to take action to calm down the backlash against changes to business rates, given the outcry among Conservative MPs, small companies and the rightwing press. Cheers from the Tory benches suggest they will be satisfied by the concessions.

Tax avoidance

• £820m of tax avoidance measures.
• VAT on roaming telecoms outside the EU.
• New financial penalty for professionals who create schemes defeated by HMRC.
• Stop businesses converting capital losses into trading losses.

RM: Crackdowns on tax avoidance have become a budget staple to boost the exchequer’s coffers. This is another attempt to stop unfairness in the tax system, with added penalties on accountants who help people to try to dodge their liabilities.

Self-employment

• Less tax paid by self-employed people will cost the taxpayer £5bn this year.
• An investigation into tax treatment is being conducted by Matthew Taylor of RSA.
• Treasury to raise £145m from increasing national insurance contributions of some self-employed people.

RM: Hammond has had to go into a very lengthy explanation justifying this on the grounds of improving fairness in tax levels between the employed and self-employed. This has the potential to be controversial with some traditional Conservative supporters, who are likely to see it as an assault on entrepreneurialism and an unwanted rise in a personal tax.

Tax-free dividend allowance

Cut from £5,000 to £2,000 from April 2018.

RM: This is another change that may annoy traditional Conservatives, but will please those who have long thought it unfair that shareholders can gain tax advantages by taking earnings through dividends rather than a salary.

Duties

• Sugar tax set at 18p and 24p per litre for the main and higher bands (more than 5g of sugar per 100ml and more than 8g per 100ml respectively).
• Freezing vehicle excise duty for hauliers and HGVs.
• New minimum excise duty on cigarettes.
• No changes to duties on alcohol and tobacco.

RM: The traditional ‘sin taxes’ on booze and cigarettes are not rising, but a new one is being introduced in the form of the sugar tax. It is one of the few flagship policies of David Cameron continued by May.

‘National living wage’

Rises to £7.50 an hour in April.

RM: This is merely confirmation of what Hammond said in last November’s autumn statement. It is a rise, but not enough to meet the target of £9 an hour by 2020 on its current trajectory.

Personal tax allowances

As expected, £11,500 for basic rate taxpayers.

RM: This is a continuation of the Conservative-Liberal Democrat coalition government’s trend of raising the personal allowance to reduce income tax paid for all but the very highest earners. Originally it was taking the very lowest paid out of tax altogether, but critics argue that a better way to do that now would be to raise the national insurance threshold instead, bringing it in line with the income tax threshold.

Savers

The promised NS&I three-year bond paying 2.2% will be available from April on savings up to £3,000.

RM: This is simply confirmation of an autumn statement measure, which appears to be a bit of filler in the speech rather than a new announcement.

Women

• £20m fund to combat violence against girls.
• £5m for ‘returnships’ – helping people back into work after a career break.
• £5m for projects to celebrate the 1918 Representation of the People Act.

RM: Hammond’s announcement prompted a lighthearted dig at May for already announcing two out of the three measures on Mumsnet on Tuesday night. She managed a bit of banter in return, retorting: “It is International Women’s Day.”

Consumers

Green paper on protecting consumers to be published.

RM: This is as expected, with few details in the speech, with the government once again channelling Ed Miliband, who hit out at ‘rip-off Britain’ in the previous parliament.

Training

• £300m for 1,000 new PhD placements.
• £270m for disruptive technologies such as robotics and driverless vehicles (the ‘industrial strategy challenge fund’).
• A £16m 5G tech hub.

RM: A big theme of the Treasury under Hammond has been improving training opportunities in science and technology. The sums involved are not huge, but Hammond has repeatedly signalled there will be few big giveaways in this budget.

Education

• White paper to be published.
• Funding of £320m for 110 new free schools to take the total to 500.
• Free school transport extended to children receiving free school meals at selective schools.
• £216m invested in school maintenance.

RM: This measure was widely trailed in Tuesday’s papers, with a focus on May’s decision to allow the new free schools to be selective grammar schools. It will be fiercely opposed by Labour and the other opposition parties.

Careers

• Introduction of T-levels – technical qualifications, an alternative to A-levels – for 16- to 19-year-olds.
• £40m for pilots on lifelong learning projects.

RM: This was also widely trailed by the Treasury as part of its focus on increasing the status of technical education.

Local government

• Midlands engine strategy to be published.
• £690m competition for local authorities to tackle urban congestion.

RM: This is a development of George Osborne’s ‘northern powerhouse’ strategy attempting to spread prosperity beyond the south-east. May has slightly shifted the focus to make sure all regions are targeted with an active industrial policy and the Midlands engine appears to be the latest plank of this plan.

Scotland, Wales and Northern Ireland

• £350m for the Scottish government.
• £200m for the Welsh government.
• £120m for the Northern Ireland executive.

RM: May has placed a huge emphasis on keeping the union together. The sums involved are sizeable, but hardly a gamechanger to quell the clamour for a second independence referendum among SNP supporters.

Social care

• £2bn over the next three years for England.
• Green paper on social care funding to be published later this year.

RM: This is a fairly dramatic climbdown for Hammond, who was severely criticised after the autumn statement for barely mentioning the NHS or social care crisis. In the ensuing debate, he repeatedly insisted there was no need for a bailout of the social care system. But the pressure from Tory councils, NHS chiefs and backbenchers has obviously proved too great.

NHS

• £325m of capital for the first of the new sustainability and transformation plans (STPs), intended to improve healthcare.
• £100m for 100 onsite GP treatment centres in A&Es in England.
• Hammond promises announcement of multi-year capital programme later in the year.

RM: The £100m injection into the NHS is a small amount compared with what medical chiefs say is needed. However, allocating money for a specific reform fits with No 10’s strategy of asking the health service to work more efficiently.

   2 March 2017

By Will Dunn

The architect of the “Northern powerhouse” on why we should start thinking about the TransPennine Express like the London Underground.

One of the chairs in George Osborne’s office has money on it. Not a lot of money – it looks to be about £2.30 – but the sight of it stops us before we sit down. “Must have fallen out of someone’s pocket,” says Osborne before, ever the taxman, he scoops up the coins and transfers them to a nearby table. It is very difficult to watch the man who was until June in charge of the world’s fourth-largest economy fiddling with two quid in coins without observing that the former Chancellor has been forced, just lately, to deal with a spectacular amount of change.

“When I left Downing Street in July,” he says, “I had a choice about what I wanted to do with my political energy. Of all the initiatives that I did in government, I don’t think anything has caught on and developed a life of its own as much as the Northern Powerhouse.”

Osborne is a northern MP, of course, albeit for a constituency in which former members of the Bullingdon Club are likely to feel at home. A Barclays survey in 2003 found that Tatton was the wealthiest area in England in terms of disposable income. The constituency’s largest town, Wilmslow, has the UK’s busiest Aston Martin dealership and more millionaires per capita than anywhere in the UK outside of Mayfair. Alderley Edge has an average house price of £589,000. On the other side of the Peak District is Barnsley, where the average house price is £126,000.

“It’s a very comfortable part of the world,” Osborne concedes, “because people are in work, and the area is on the up, and there is a beautiful natural environment around it. It’s an interesting community, because there’s also a constant pressure on things like housing, making sure people can afford to live in the area they grew up in. There are serious pockets of deprivation in the constituency. In many ways, I think it’s very representative of Middle Britain.”

But does Tatton represent the North? “The North is not one homogenous community. You can go from the wildest, remotest countryside, the Yorkshire Dales and the North Yorkshire Moors, to deprived inner-city communities in Liverpool, to some of the most successful manufacturing centres and financial centres in Britain, whether it’s hedge funds in Leeds or aerospace factories in Lancashire. The North is not different from any other part of the country, except that it does have a shared feeling that it is the north of England, a shared geographic identity, and a shared connection to an industrial past. And I think, a shared sense that sometimes it has been neglected, and London dominates – that feeling, by the way, you would get in other parts of Britain as well, but it’s one of the things I’m trying to address.”

Are there not more important divisions in British society than north and south? The gap between rich and poor increased dramatically under both Labour and Conservative governments, with incomes rising by 64 per cent for the top fifth of earners while the bottom fifth lost 57 per cent. The intergenerational gap, too, is becoming a chasm; now, for the first time in British history, a pension pays more than a job.

Osborne says it is “a trap… to say that there are no really serious geographic differences in Britain, [that] it’s all between deprived communities and better-off communities. I think then, you miss a broader point, which is, in the modern global economy, very big cities are becoming absolutely dominant. That’s not necessarily what you would have expected. You might have thought that the internet and the ability to work from home, cities would become less important. That’s not the evidence – all around the world, growth is clustering around big cities. People want to be together, spark off each other, create innovation together. And Britain only has one global city – London. It is probably the most successful of all the global cities, and I think it’s of enormous benefit to the whole country that, located on these islands is this great global city, but it does create quite an imbalance in the economy, which obviously has been growing over the decades.”