This article "It's Not Just Sanctions" (24th March 2014) from the Economist Magazine is worth a read.
High-end London estate agents are starting to worry that rich Russians who have been investing heavily in London in the past decade will look to sell their properties. Prospective buyers will also be put off. These two shifts may hit the prime residential market very hard.
Trevor Abrahmsohn, a London property-market veteran, says he received a call earlier this week from a big Russian client who was looking to sell two properties immediately. It was, he says, “all rather peculiar and abrupt…I don’t know if it was to do with the Ukraine crisis but one has to wonder. We’re waiting to see if it turns into a trend.”
Mr Abrahmsohn runs Glentree International, which does the lion’s share of selling to wealthy foreigners in Hampstead, Finchley and other parts of North London that are traditional hunting grounds for Russians.
The assets of these Russians may be frozen as America had released lists of sanctioned individuals, and these lists target businessmen known to have links with the Russian politicians.
Russian buyers were, in fact, already thinning out before the Ukraine crisis. Mr Abrahmsohn saw 70-80% fewer of them last year than in 2011-12. Activity has remained subdued this year.
Russians Are Becoming Cannier Buyers
There are two main reasons for the decline. Russians are becoming cannier buyers. “The days of gleefully plonking saddlebags of cash on the desk are over,” says Mr Abrahmsohn. “They even scrutinise restaurant bills now.” Some of them suspect that a market correction is overdue.
UK Has Become Less Tax Efficient
Stamp duty has gone up a lot for many buyers, particularly corporate buyers (and many Russians buy through offshore companies, for reasons of tax and confidentiality). Since 2012, foreign corporate buyers have also had to pay capital gains tax.
Possible "Mansion Tax"
Add to this the spectre of a “mansion tax” and a new tax on limited-liability partnerships. A large but unknown number of the 53,000 LLPs registered in Britain are held by East Europeans. Their motives range from the perfectly legitimate, to tax evasion, to the laundering of assets looted from their home countries.
Top Rate of Stamp Duty Kicks In Earlier
In his budget this week, George Osborne extended the pain from the super-rich to the merely rich, lowering from £2m ($3.3m) to £500,000 the threshold at which the top, 15% rate of stamp duty kicks in. The earlier changes in 2012 led to the frequency of sales over £5m dropping by more than 30%, says Mr Abrahmsohn.
Some of the slack in the boroughs in which he operates is being taken up by Kazakhs, Azerbaijanis and Ukrainians who are pulling money out of their home market because they fear further annexation. But he still sees the occasional spectacular purchase by Russians.
Glentree recently brokered a deal for undisclosed Russian interests to buy a £70m cluster of properties on The Bishops Avenue, which is near Hampstead Heath and considered to be one of the world’s swankiest residential addresses. The buyers plan to sell some of the ten houses and hold and refurbish others. The sellers are Middle Eastern. They are said to have bought in the early 1990s for the Saudi royal family, which was looking for a bolt hole to flee to, should Saddam Hussein invade their kingdom.
Impact On Investors
We do not have Zone 1 Prime Central London properties. In earlier blog posts, we showed that rental yields in PCL are very low. Anyway, the entire dynamics of PCL is very different from the rest of London. There are many other factors involved, including all the global flows of money. It is interesting to watch and wonder.
Happy Investing!
Showing posts with label UK property. Show all posts
Showing posts with label UK property. Show all posts
Sunday, May 4, 2014
Friday, April 11, 2014
House price boom ripples out of London, across Britain
An article from the Telegraph reveals that the housing boom was spreading across the country. Property sales in the first three months of 2014 reached a six-year high as the market recovered on a “truly national” scale.
Average House Prices Going Up
Figures from the Office for National Statistics show the average UK house price stands at £254,000, up from £194,000 five years ago. The average London house price is £458,000, up from £301,000 over the same period. Prices are expected to rise by 25 per cent to 30 per cent over the next five years.
Royal Institution of Chartered Surveyors (Rics) has pushed up its forecast for national house price growth this year from six per cent to eight per cent. Its surveyors were most optimistic about price rises in the East Midlands and the North West.
Mr Rubinsohn said he was “hopeful” that there would not be “runaway” growth on the scale experienced in London, where some boroughs have recorded annual increases of 30 per cent, according to Nationwide.
Rise In Registrations of Interest
Rics is also reporting a rise in registrations of interest as new buyers emerge to strengthen demand. The strong market is being driven by “easier credit”, with first-time buyers able to “reap the benefits” and, in some cases, step on to the property ladder with smaller deposits. This has been aided by government schemes such as Help to Buy.
Rapid Growth in Demand Not Matched by Supply
However, the rapid growth in demand is not being matched by supply of either new housing or homes coming to market, Rics warns. A resurgent housing market has reignited debate over the need for a property-related tax, with revenues from stamp duty, inheritance tax and capital gains tax predicted to rocket.
Lib Dem's Mansion Tax
On Wednesday the Liberal Democrats unveiled revised plans for its controversial mansion tax, which would hit tens of thousands of property owners. Danny Alexander, the Chief Secretary to the Treasury, said a charge on properties worth more than £2 million, which is being prepared by Whitehall officials, could be introduced “quickly” after the next election. The tax would slow the rise in property prices and “release a bit of steam” from the top end of the property market, he claimed. A mansion tax is a cherished Liberal Democrat policy and is likely to be at the centre of any future Coalition negotiations.
George Osborne is understood to be sympathetic to a levy on high-value homes but the measures have been resisted by David Cameron. Critics say the policy will hit elderly homeowners whose houses have risen in value but who do not have high incomes.
Up to 82,000 Homes Could be Hit
The Treasury estimated last year that about 55,000 homes were in range for the tax, but a new analysis by the property website Zoopla, also published on Wednesday, calculated that the levy would hit 82,000 homes. The Liberal Democrats originally proposed a one per cent annual surcharge on a property’s value above £2 million, meaning the owner of a £3 million house would pay £10,000 a year.
On Wednesday the Lib Dems rebranded the measures as a “high-value property levy”. Under the new scheme, houses worth more than £2 million will be taxed under bands which could be as wide as £5 million, reducing the scope for appeals. The scheme would contain “safeguards” to protect pensioners with high assets but low incomes.
Analysis
It is strange that a political party like the Liberal Democrats is only focussed on taxing and taxing. Doesn't it miss the point? Nobody seems to be interested to fix the underlying demand and supply problem.
You can see that such a 'mansion tax' could be use to stir up heated passion amongst the working class British, to focus their attention against the rich owners of expensive mansions as well as foreigners. That is UK politics for you.
Average House Prices Going Up
Figures from the Office for National Statistics show the average UK house price stands at £254,000, up from £194,000 five years ago. The average London house price is £458,000, up from £301,000 over the same period. Prices are expected to rise by 25 per cent to 30 per cent over the next five years.
Royal Institution of Chartered Surveyors (Rics) has pushed up its forecast for national house price growth this year from six per cent to eight per cent. Its surveyors were most optimistic about price rises in the East Midlands and the North West.
Mr Rubinsohn said he was “hopeful” that there would not be “runaway” growth on the scale experienced in London, where some boroughs have recorded annual increases of 30 per cent, according to Nationwide.
Rise In Registrations of Interest
Rics is also reporting a rise in registrations of interest as new buyers emerge to strengthen demand. The strong market is being driven by “easier credit”, with first-time buyers able to “reap the benefits” and, in some cases, step on to the property ladder with smaller deposits. This has been aided by government schemes such as Help to Buy.
Rapid Growth in Demand Not Matched by Supply
However, the rapid growth in demand is not being matched by supply of either new housing or homes coming to market, Rics warns. A resurgent housing market has reignited debate over the need for a property-related tax, with revenues from stamp duty, inheritance tax and capital gains tax predicted to rocket.
Lib Dem's Mansion Tax
On Wednesday the Liberal Democrats unveiled revised plans for its controversial mansion tax, which would hit tens of thousands of property owners. Danny Alexander, the Chief Secretary to the Treasury, said a charge on properties worth more than £2 million, which is being prepared by Whitehall officials, could be introduced “quickly” after the next election. The tax would slow the rise in property prices and “release a bit of steam” from the top end of the property market, he claimed. A mansion tax is a cherished Liberal Democrat policy and is likely to be at the centre of any future Coalition negotiations.
George Osborne is understood to be sympathetic to a levy on high-value homes but the measures have been resisted by David Cameron. Critics say the policy will hit elderly homeowners whose houses have risen in value but who do not have high incomes.
Up to 82,000 Homes Could be Hit
The Treasury estimated last year that about 55,000 homes were in range for the tax, but a new analysis by the property website Zoopla, also published on Wednesday, calculated that the levy would hit 82,000 homes. The Liberal Democrats originally proposed a one per cent annual surcharge on a property’s value above £2 million, meaning the owner of a £3 million house would pay £10,000 a year.
On Wednesday the Lib Dems rebranded the measures as a “high-value property levy”. Under the new scheme, houses worth more than £2 million will be taxed under bands which could be as wide as £5 million, reducing the scope for appeals. The scheme would contain “safeguards” to protect pensioners with high assets but low incomes.
Analysis
It is strange that a political party like the Liberal Democrats is only focussed on taxing and taxing. Doesn't it miss the point? Nobody seems to be interested to fix the underlying demand and supply problem.
You can see that such a 'mansion tax' could be use to stir up heated passion amongst the working class British, to focus their attention against the rich owners of expensive mansions as well as foreigners. That is UK politics for you.
Wednesday, April 9, 2014
Elephant Park, Elephant & Castle (Zone 1)
A stunning new development right in Zone 1 called Elephant Park. The advertisement appeared in the Business Times this morning. The website is very attractive.
Theme - Creating Central London's New Green Belt
I love the theme - Creating London's new green heart. London is one of the greenest large metropolitan city in the world, definitely the greenest in Western Europe, with 39% of surface area made up of publicly accessible green space. On this count, Singapore ranks first in the world, with 47% green spaces. Way to go Singapore!!
Location of Elephant Park
It will be built on what was formerly the Heygate Estate. This estate, the long-drawn process of evicting the tenants, the sad stories of 80-something year olds forced to move. All very sad. I blog about this episode here in "Heygate London versus HDB Singapore". We ought not to take our public housing for granted.
For now, let's focus on the upcoming Elephant Park. Location? Within an easy 5 minutes walk to Elephant and Castle Tube station, which is in Zone 1. It is also near the Elephant and Castle rail station.
Looking at the Google Maps snapshot, I have circled the plot for this phase of Elephant Park - South Gardens. You can see that it is just south of Heygate Street.
The Elephant Park project is huge, almost 3,000 homes, and likely to be sold over quite a number of different phases. Lend Lease (the Developer) is now just launching the very first phase, which is South Gardens.
We can expect each phase to get more and more expensive. I think all the different phases would be quite interesting. From a location point of view, the South Gardens isn't the best phase.
There is substantial regeneration going on in the Elephant & Castle area, and this is certainly long overdue. Location-wise, you can't really beat a Zone 1 place. But take note that even now, the Elephant & Castle area is still very run-down. It has long been a neglected area, probably because there is so much social housing.
Evicting the tenants from the former Heygate estate took years. But the Southwark Council is more determined than ever to re-generate the area. Well, if you are pro-Labour, the regeneration would be most objectionable because all the poorer people have now been made to move out of Heygate and there is no way they can afford to stay in London. What's going to happen to them? I don't know.
Pricing
For Zone 1, the pricing looks acceptable, though it is certainly on the higher side of what we had expected. We heard that the early release units are all gone now and the developer will be releasing more units over the Singapore exhibition weekend. (12th and 13th April).
Update - Apparently the developer will not be releasing many units in Asia, because they are under tremendous pressure by the local council not to sell too many units to Asia. Anyway, we don't intend to invest in this project for now.
Do share your views with us on our community forum here.
Check out this development video. Many birds chirping!
Happy Investing!
Important Disclaimer - . The views contained in this blog and blog post are entirely mine. We cannot be made responsible for any investment decisions you may, or may not, take. Nothing in this blog can be construed as professional investment advice, as we are NOT professional investors and we are ill qualified to give you any advice. Read the blog at YOUR own risk
Theme - Creating Central London's New Green Belt
I love the theme - Creating London's new green heart. London is one of the greenest large metropolitan city in the world, definitely the greenest in Western Europe, with 39% of surface area made up of publicly accessible green space. On this count, Singapore ranks first in the world, with 47% green spaces. Way to go Singapore!!
Location of Elephant Park
It will be built on what was formerly the Heygate Estate. This estate, the long-drawn process of evicting the tenants, the sad stories of 80-something year olds forced to move. All very sad. I blog about this episode here in "Heygate London versus HDB Singapore". We ought not to take our public housing for granted.
For now, let's focus on the upcoming Elephant Park. Location? Within an easy 5 minutes walk to Elephant and Castle Tube station, which is in Zone 1. It is also near the Elephant and Castle rail station.
Looking at the Google Maps snapshot, I have circled the plot for this phase of Elephant Park - South Gardens. You can see that it is just south of Heygate Street.
The Elephant Park project is huge, almost 3,000 homes, and likely to be sold over quite a number of different phases. Lend Lease (the Developer) is now just launching the very first phase, which is South Gardens.
We can expect each phase to get more and more expensive. I think all the different phases would be quite interesting. From a location point of view, the South Gardens isn't the best phase.
There is substantial regeneration going on in the Elephant & Castle area, and this is certainly long overdue. Location-wise, you can't really beat a Zone 1 place. But take note that even now, the Elephant & Castle area is still very run-down. It has long been a neglected area, probably because there is so much social housing.
Evicting the tenants from the former Heygate estate took years. But the Southwark Council is more determined than ever to re-generate the area. Well, if you are pro-Labour, the regeneration would be most objectionable because all the poorer people have now been made to move out of Heygate and there is no way they can afford to stay in London. What's going to happen to them? I don't know.
Pricing
For Zone 1, the pricing looks acceptable, though it is certainly on the higher side of what we had expected. We heard that the early release units are all gone now and the developer will be releasing more units over the Singapore exhibition weekend. (12th and 13th April).
Update - Apparently the developer will not be releasing many units in Asia, because they are under tremendous pressure by the local council not to sell too many units to Asia. Anyway, we don't intend to invest in this project for now.
Do share your views with us on our community forum here.
Check out this development video. Many birds chirping!
Important Disclaimer - . The views contained in this blog and blog post are entirely mine. We cannot be made responsible for any investment decisions you may, or may not, take. Nothing in this blog can be construed as professional investment advice, as we are NOT professional investors and we are ill qualified to give you any advice. Read the blog at YOUR own risk
Monday, April 7, 2014
Buying New Builds From the Resale Market
Sophisticated investors should also check out whether there are good deals in the resale market for recently completed new-builts. There may be some owners who have decided to sell, for whatever reasons.
How Recent is Recently Completed?
By recently completed, I am referring to new-builts that are less than a year old. Such apartments would still be very new and still be under the developer's warranty. The fact that they are new buildings and still under warranty gives the purchaser some peace of mind.
Through some simple investigative work, you can find out which are the recent developments through several ways.
1) Go through the websites of the reputable developers and check out the recently completed developments.
2) Go through listings on resale pages, like rightmove.co.uk or zoopla.
3) Go take a walk on google maps, street view, and you may spot developments that are nearly completed or about to complete, in locations that you think have the potential
What If You See A Development You Like?
One Example of a Recently Completed New Built
Recall, we have bought into a development called Brickmakers which is on Cable Street. We found a listing of a one bedder for sale. According to the advertisement, it is a one bedroom apartment on the 3rd floor, with asking price of £425,000. This unit is 484 sq ft, so this translates to £878 psf. Of course, we were happy when we saw this because we had bought similar units for much less.
Cable Street
We are very hopeful with our Brickmakers units. Here is why. Consider this snapshot of the area using Google Maps.
The Brickmakers Apartments are located at the 4-sided orange star, just north of Swedenborg Gardens. Recall my blog post on IJM Land's Royal Mint? That luxury development is located on Royal Mint Street, a mere 5 minute walk west of Brickmakers. I have marked it in a red oval. About a year ago, it was selling for a whopping £1,200 psf. It sold out. Why? That place is a stone's throw away from City of London - you can easily walk to work.
Next, consider the properties on Leman Street, which I have marked out with an orange oval. The properties there all go for at least £1,000 psf, if not more. Apparently, Leman Street is a rather prestigious address.
Then, just south of Cable Street is a development that is soon to be launched, called London Dock by St George's of Berkeley Homes. This will be a very presitigious large-scale development that has the potential to change the entire area! I don't think the prices will be cheap, and I'm waiting for them to launch this development so that I can blog about it!
Happy investing!
How Recent is Recently Completed?
By recently completed, I am referring to new-builts that are less than a year old. Such apartments would still be very new and still be under the developer's warranty. The fact that they are new buildings and still under warranty gives the purchaser some peace of mind.
Through some simple investigative work, you can find out which are the recent developments through several ways.
1) Go through the websites of the reputable developers and check out the recently completed developments.
2) Go through listings on resale pages, like rightmove.co.uk or zoopla.
3) Go take a walk on google maps, street view, and you may spot developments that are nearly completed or about to complete, in locations that you think have the potential
What If You See A Development You Like?
Well, you can contact the sales and marketing agent to find out more information about the development. Given that the development is still very new, the agent would be able to provide all the information, as if you were asking about an off-plan development. Most important for overseas investors would be to verify the status of the warranty.
One Example of a Recently Completed New Built
Recall, we have bought into a development called Brickmakers which is on Cable Street. We found a listing of a one bedder for sale. According to the advertisement, it is a one bedroom apartment on the 3rd floor, with asking price of £425,000. This unit is 484 sq ft, so this translates to £878 psf. Of course, we were happy when we saw this because we had bought similar units for much less.
Cable Street
We are very hopeful with our Brickmakers units. Here is why. Consider this snapshot of the area using Google Maps.
The Brickmakers Apartments are located at the 4-sided orange star, just north of Swedenborg Gardens. Recall my blog post on IJM Land's Royal Mint? That luxury development is located on Royal Mint Street, a mere 5 minute walk west of Brickmakers. I have marked it in a red oval. About a year ago, it was selling for a whopping £1,200 psf. It sold out. Why? That place is a stone's throw away from City of London - you can easily walk to work.
Next, consider the properties on Leman Street, which I have marked out with an orange oval. The properties there all go for at least £1,000 psf, if not more. Apparently, Leman Street is a rather prestigious address.
Then, just south of Cable Street is a development that is soon to be launched, called London Dock by St George's of Berkeley Homes. This will be a very presitigious large-scale development that has the potential to change the entire area! I don't think the prices will be cheap, and I'm waiting for them to launch this development so that I can blog about it!
Happy investing!
The Pulse, Colindale, Fairview Homes (Zone 4)
Colindale has been identified as one of the opportunity areas in the Mayor of London's regeneration plan. According to the london.gov.uk website, Opportunity Areas are London's major source of brownfield land with significant capacity for new housing, commercial and other development linked to existing or potential improvements to public transport accessibility.
Colindale is in Zone 4, and the Tube station is on the Northern Line.
Transport links:
Colindale to King's Cross - 25 minutes
Colindale to Bank - 33 minutes
Let's take a look at the Google Map. Centre of the snapshot is Colindale. The area looks residential. Now, can you see the land being cleared for construction immediately to the left of the station? The plot looks to be of substantial size. What could it be? So, let us investigate further.
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The answer? A development called the Pulse by Fairview New Homes Ltd. Click here for the development's website. (http://pulse-apartments.co.uk/) Fairview is a relatively large UK developer.
While we have not bought from them before, I am certain they will build homes that comply to all relevant legislation and be of acceptable built quality.
Pricing?
The development was launched a while ago. Right now, the cheapest one bed is priced at £260,000 in Block Q. The 2 bedders are starting at £313,000. It looks like they have another phase (Block P) which should be launching soon. Well, at least it is bite-sized, in terms of investment sums.
Their website contains a ton of information about the development and the local area, so I shall leave interested parties to view their website.
Buying Without Developer Coming to Singapore
As I said before, I am no sales agent. However, in the spirit of sharing information, this is one example of a decent-looking development that we can have access to, even though the developer did not come to Singapore.
Happy Investing!
Important Disclaimer - . The views contained in this blog and blog post are entirely mine. We cannot be made responsible for any investment decisions you may, or may not, take. Nothing in this blog can be construed as professional investment advice, as we are NOT professional investors and we are ill qualified to give you any advice. Read the blog at YOUR own risk
Colindale is in Zone 4, and the Tube station is on the Northern Line.
Transport links:
Colindale to King's Cross - 25 minutes
Colindale to Bank - 33 minutes
Let's take a look at the Google Map. Centre of the snapshot is Colindale. The area looks residential. Now, can you see the land being cleared for construction immediately to the left of the station? The plot looks to be of substantial size. What could it be? So, let us investigate further.
The answer? A development called the Pulse by Fairview New Homes Ltd. Click here for the development's website. (http://pulse-apartments.co.uk/) Fairview is a relatively large UK developer.
While we have not bought from them before, I am certain they will build homes that comply to all relevant legislation and be of acceptable built quality.
Pricing?
The development was launched a while ago. Right now, the cheapest one bed is priced at £260,000 in Block Q. The 2 bedders are starting at £313,000. It looks like they have another phase (Block P) which should be launching soon. Well, at least it is bite-sized, in terms of investment sums.
Their website contains a ton of information about the development and the local area, so I shall leave interested parties to view their website.
Buying Without Developer Coming to Singapore
As I said before, I am no sales agent. However, in the spirit of sharing information, this is one example of a decent-looking development that we can have access to, even though the developer did not come to Singapore.
Happy Investing!
Important Disclaimer - . The views contained in this blog and blog post are entirely mine. We cannot be made responsible for any investment decisions you may, or may not, take. Nothing in this blog can be construed as professional investment advice, as we are NOT professional investors and we are ill qualified to give you any advice. Read the blog at YOUR own risk
Friday, April 4, 2014
5 Signs The London Property Bubble Is Reaching Unsustainable Proportions
A thought-provoking blog article by Mr Ed Conway, the Economics Editor of Sky News.
His article is worth a read, though I don't entirely agree with his analysis.
I just put his main bullet points here, including the chart under point 2 which shows that prices across London have indeed shot up tremendously in the past few months.
1. Prices are rising very fast
2. Prices rises are no longer just in “prime” areas
3. Prices are still high in real terms
4. House prices vs earnings are at historic highs
5. Mortgage burden hardly dropped in London
Happy investing!
His article is worth a read, though I don't entirely agree with his analysis.
I just put his main bullet points here, including the chart under point 2 which shows that prices across London have indeed shot up tremendously in the past few months.
1. Prices are rising very fast
2. Prices rises are no longer just in “prime” areas
3. Prices are still high in real terms
4. House prices vs earnings are at historic highs
5. Mortgage burden hardly dropped in London
Happy investing!
International Developers moving into London, UK property
Will international developers raise the bar in London's residential development market? This March 2014 report is worth a read, full report available online for free.
This publication looks at the growing trend of international developers moving into London. This appears to be a rather recent phenomenon. Singaporean buyers would have heard of Oxley Groups first foray into London, via their Royal Docks project. Developers from other countries, especially China, are also moving into the London property market.
London needs new homes. Only 15,000 units were completed last year (2013) while the Greater London Authority suggests demand will be closer to 42,000 per annum over the next decade. Demand way exceeds supply - nobody disputes this.
JLL is confident that the recent entrants into the London Developers' market is not one-off. JLL cites China's Greenland Group, Qatari Diar, Hutchinson Whampoa (see my blog post on Convoys Wharf), Singapore's Oxley, Knight Dragon from Hong Kong and SP Setia of Malaysia. Certain members of the Kwok family also have interests in the Lillie Square, my Earl's Court development.
To quote, "London's lost capacity, and huge volume of undersupply, represents a big opportunity."
The report notes that one of the challenges that international developers face when expanding into London is the lack of scale. London's planning system is a lot more conservative and cautious, compared to where these developers are used to operate.
See the following table for examples of projects by international developers.
Canary Wharf
The report goes into a lot of detail and projects about Canary Wharf. This place has reignited over the past 18 months, following years of inactivity. They have more than 1,200 units under construction. Prices are soaring around the Wharf and the second-hand market is as active now as it's been since the credit crisis. At many developments, prices are 15-20% higher than a year ago, which is staggering.
The dynmics of Canary Wharf housing market have changed too. It is no longer Wharf workers only. Many people move here from West London or South London, attracted by the bright, new build product on offer as well as the lively leisure offerings and great connectivity. There are good restaurants, great shopping, and even escape routes like London City airport. All will get even easier when Crossrail arrives. People love to buy and rent here.
Interview Excerpts - Greendland in London (Page 6)
(GM of Greenland UK, Wenhao Qian)
Greenland Group has only recently entered the UK, with the first project in Wandsworth Town. They are also working on an ultra-high-rise apartment project at Canary Wharf which looks set to become the tallest luxury apartment building in the UK.
Why is Greenland investing in the UK?
London is the financial centre of the world, it is an international city, mature in economic terms, open and accessible and is the most diverse city in Europe. London is also very central in the British economic resurgence. Therefore, London is a milestone on the road of glboal market development for the Greenland Group.
Our thoughts on the Supply in London
Supply is tight, demand is high. What is new now is the entrance of international developers. All this bodes well for the London market - a huge magnet.
From a Singaporean perspective, can you not see that the supply is crazily tight in London?
Think of it this way. The entire Canary Wharf, which is now supposedly so hot, has fewer than 1,300 units in the pipeline. Already, Canary Wharf is one place in London where developers can get planning permission to build high.
A single medium sized condo development in Singapore can easily hit 500 units. Mandarin Gardens (East Coast Park), completed in 1986, has 1,000 units. Commonwealth Tower, just launched, will have a total of 845 units in two 43 storey blocks. The Pinnacle@Duxton, has almost 1,900 units.
The entire pipeline in London Canary Wharf - 1,300 units, and JLL is raving and ranting about it.
Happy investing!
This publication looks at the growing trend of international developers moving into London. This appears to be a rather recent phenomenon. Singaporean buyers would have heard of Oxley Groups first foray into London, via their Royal Docks project. Developers from other countries, especially China, are also moving into the London property market.
London needs new homes. Only 15,000 units were completed last year (2013) while the Greater London Authority suggests demand will be closer to 42,000 per annum over the next decade. Demand way exceeds supply - nobody disputes this.
JLL is confident that the recent entrants into the London Developers' market is not one-off. JLL cites China's Greenland Group, Qatari Diar, Hutchinson Whampoa (see my blog post on Convoys Wharf), Singapore's Oxley, Knight Dragon from Hong Kong and SP Setia of Malaysia. Certain members of the Kwok family also have interests in the Lillie Square, my Earl's Court development.
To quote, "London's lost capacity, and huge volume of undersupply, represents a big opportunity."
The report notes that one of the challenges that international developers face when expanding into London is the lack of scale. London's planning system is a lot more conservative and cautious, compared to where these developers are used to operate.
See the following table for examples of projects by international developers.
Canary Wharf
The report goes into a lot of detail and projects about Canary Wharf. This place has reignited over the past 18 months, following years of inactivity. They have more than 1,200 units under construction. Prices are soaring around the Wharf and the second-hand market is as active now as it's been since the credit crisis. At many developments, prices are 15-20% higher than a year ago, which is staggering.
The dynmics of Canary Wharf housing market have changed too. It is no longer Wharf workers only. Many people move here from West London or South London, attracted by the bright, new build product on offer as well as the lively leisure offerings and great connectivity. There are good restaurants, great shopping, and even escape routes like London City airport. All will get even easier when Crossrail arrives. People love to buy and rent here.
Interview Excerpts - Greendland in London (Page 6)
(GM of Greenland UK, Wenhao Qian)
Greenland Group has only recently entered the UK, with the first project in Wandsworth Town. They are also working on an ultra-high-rise apartment project at Canary Wharf which looks set to become the tallest luxury apartment building in the UK.
Why is Greenland investing in the UK?
London is the financial centre of the world, it is an international city, mature in economic terms, open and accessible and is the most diverse city in Europe. London is also very central in the British economic resurgence. Therefore, London is a milestone on the road of glboal market development for the Greenland Group.
Our thoughts on the Supply in London
Supply is tight, demand is high. What is new now is the entrance of international developers. All this bodes well for the London market - a huge magnet.
From a Singaporean perspective, can you not see that the supply is crazily tight in London?
Think of it this way. The entire Canary Wharf, which is now supposedly so hot, has fewer than 1,300 units in the pipeline. Already, Canary Wharf is one place in London where developers can get planning permission to build high.
A single medium sized condo development in Singapore can easily hit 500 units. Mandarin Gardens (East Coast Park), completed in 1986, has 1,000 units. Commonwealth Tower, just launched, will have a total of 845 units in two 43 storey blocks. The Pinnacle@Duxton, has almost 1,900 units.
The entire pipeline in London Canary Wharf - 1,300 units, and JLL is raving and ranting about it.
 |
| Commonwealth Tower - 845 units, just like that |
Thursday, April 3, 2014
Queens Park Place, NW6, London UK
A very interesting development in what looks to be a pretty good location, right next to Queens Park Tube (Zone 2). The developer, Londonnewcastle, has set up a pretty website for this development of only 116 apartments.
Londonnewcastle Developer
They call themselves Central London luxury residential developer. More information on their past projects can be found on their website. Before this, I was not aware of this developer.
Queens Park Place NW6
The development's website is worth a look. I find it very classy and informative. It talks about a secret revealed. What secret?
Queens Park
The secret is the location - Queens Park. This is a traditional North London residential area (Zone 2) that is rather posh. Many houses here that sell for millions of pounds. Up till now, it is not well known to overseas investors, perhaps because this area is already very well established and not many opportunities for new builds in recent years.
The development will have 3 L-shaped buildings. See the artist's impression from the website. Property is due for completion in Spring 2016.
As usual, we turn to google maps for an overview of the area. I marked out the site on the map. The building is bordered by Salusbury Road, Albert Road and the railway line. It has 3 blocks running the length of Albert road, with green courtyards between them. Note that there would be some noise from the rail, however, the development comes with double glazing. That said, it would be better to get a unit nearer to Albert Road.
I took a virtual walk down Albert Road and I did notice many new builds. I'm not sure which developments are those. Maybe you want to check it out. Bear in mind that there is no regeneration story in this area, as far as I'm aware.
On Google Maps, I have zoomed out a bit more. You can see Queen's Park Tube in the middle of the map. Queen's Park (a large Victorian Park) is within easy walking distance from this development. It is a 12 ha park, opened to public since 1887. The park even has a pitch and putt golf course.
Queens Park Station (Travel Card Zone 2) is served by both London Underground and London Overground. All platforms are on the surface.
London Underground
London Paddington (see blog post on Paddington Exchange) is 7 minutes away on the Bakerloo Line. Morning peak, 2-3 minutes. At night, 4 minute frequency. Don't underestimate the frequency of the Tube, though sometimes they go on strike. Bakerloo line is the only Underground line serving this station.
London Overground
The London Overground is a rail network that serves a large part of Greater London. It was only established in 2007, and has 83 stations on six lines. Queens Park is on the Watford DC Line. It is 3 stops to London Euston. Journey time is 14 minutes, however, the trains are not as frequent. (every 20 minutes)
Pricing
This development doesn't come cheap. You are looking at £750 to £900 psf. However, this is still significantly cheaper than Paddington Exchange and you are just 7 minutes away on the very frequent Bakerloo line. This development will also benefit from the Crossrail coming to Paddington.
Happy investing.
Important Disclaimer - . The views contained in this blog and blog post are entirely mine. We cannot be made responsible for any investment decisions you may, or may not, take. Nothing in this blog can be construed as professional investment advice, as we are NOT professional investors and we are ill qualified to give you any advice. Read the blog at YOUR own risk
Londonnewcastle Developer
They call themselves Central London luxury residential developer. More information on their past projects can be found on their website. Before this, I was not aware of this developer.
Queens Park Place NW6
The development's website is worth a look. I find it very classy and informative. It talks about a secret revealed. What secret?
Queens Park
The development will have 3 L-shaped buildings. See the artist's impression from the website. Property is due for completion in Spring 2016.
As usual, we turn to google maps for an overview of the area. I marked out the site on the map. The building is bordered by Salusbury Road, Albert Road and the railway line. It has 3 blocks running the length of Albert road, with green courtyards between them. Note that there would be some noise from the rail, however, the development comes with double glazing. That said, it would be better to get a unit nearer to Albert Road.
I took a virtual walk down Albert Road and I did notice many new builds. I'm not sure which developments are those. Maybe you want to check it out. Bear in mind that there is no regeneration story in this area, as far as I'm aware.
On Google Maps, I have zoomed out a bit more. You can see Queen's Park Tube in the middle of the map. Queen's Park (a large Victorian Park) is within easy walking distance from this development. It is a 12 ha park, opened to public since 1887. The park even has a pitch and putt golf course.
London Underground
London Paddington (see blog post on Paddington Exchange) is 7 minutes away on the Bakerloo Line. Morning peak, 2-3 minutes. At night, 4 minute frequency. Don't underestimate the frequency of the Tube, though sometimes they go on strike. Bakerloo line is the only Underground line serving this station.
London Overground
The London Overground is a rail network that serves a large part of Greater London. It was only established in 2007, and has 83 stations on six lines. Queens Park is on the Watford DC Line. It is 3 stops to London Euston. Journey time is 14 minutes, however, the trains are not as frequent. (every 20 minutes)
Pricing
This development doesn't come cheap. You are looking at £750 to £900 psf. However, this is still significantly cheaper than Paddington Exchange and you are just 7 minutes away on the very frequent Bakerloo line. This development will also benefit from the Crossrail coming to Paddington.
Happy investing.
Important Disclaimer - . The views contained in this blog and blog post are entirely mine. We cannot be made responsible for any investment decisions you may, or may not, take. Nothing in this blog can be construed as professional investment advice, as we are NOT professional investors and we are ill qualified to give you any advice. Read the blog at YOUR own risk
Wednesday, April 2, 2014
Paddington Exchange, London, Zone 1
One of our trusted property agents told us that this is the BEST project they have had for some time. The Developer is Taylor Wimpey.
Property agents - you always have to take their claims with a pinch of salt. But this agent has proved herself to be reliable in terms of recommendations. Our properties bought through her have done very well.
So, when she said this is the BEST project they have had for some time, we took a closer look. So, what's the deal with this Zone 1 project?
London Paddington Station National Rail
First looks, very interesting indeed. Location-wise, excellent. The project is a 5 minute walk to London Paddington station.
Something about Paddington Bear you said?
No, the historic and very central London Paddingtion Station, Zone 1. The station is the terminus for many services, e.g. from Reading, Bristol, Oxford and for inner-and-outer suburban services. More than 35 million use the National Rail through this station annually.
London Paddington has 14 Terminal Platforms. It is also the London Terminus for the dedicated Heathrow Express - a mere 15 minutes to Heathrow. And that is just the National Rail & Heathrow Express.
London Paddington Station Underground (aka Tube)
London Paddington is served by four London Underground lines through two separate stations. The Circle, Bakerloo and District lines have a combined station to the south of the main line station, and the Hammersmith & City and Circle lines have a sub-surface staiton to the north. Circle line services go through both stations as part of a spiral route. (Circle, remember?)
Furthermore, many commuters just take a short walk to Lancaster Gate Tube station for the Central Line. This will get them to the City or the West End, and is usually faster than other routes. In total, the London Underground served more than 46 million out of London Paddington.
Ok, very good so far. This place must be very central, and it is.
Crossrail - the icing on the cake
Compared to other Zone 1 builds, this place will get Crossrail. Yes, I hear your wows.
Examples of Centrality
Heard of Bayswater? Ok, maybe not. What about the famous Duck? Yes, go to Bayswater for the Duck. From Paddington, 1 stop to Bayswater, just one.
Imperial College - the Circle Line takes you to South Kensington in 5 stops.
UCL - Hammersmith Line takes you to Euston Square in 4 stops.
Not very convenient to LSE. (London School of Economics) at the moment. However, once Crossrail comes online, it is literally 3 stops to LSE with just one change. Crossrail power.
OK, you got my attention now. What's the Damage? Obviously, a BEST project like this won't come cheap. If it did, something must be wrong right?
Prices
You are looking at GBP 1,400 to 1,500 psf. E.g. a one Bedroom on the 5th floor, 888 sq ft (rather big) - abt 1.25 Mil GBP.
Well, obviously this is not an every man's property. This is right smack in Central London, premier location, high-class property. It doesn't suit us, as we have explained in our other blog posts. Anyway, for all practical purposes, we can't afford this.
However, this does not mean that the property is no good. In fact, I would venture to say that if I had the million odd pounds to spare, I would seriously look at this property as a long-term investment. (Usual disclaimers apply)
Do share your views on my community forum here.
Property agents - you always have to take their claims with a pinch of salt. But this agent has proved herself to be reliable in terms of recommendations. Our properties bought through her have done very well.
So, when she said this is the BEST project they have had for some time, we took a closer look. So, what's the deal with this Zone 1 project?
London Paddington Station National Rail
First looks, very interesting indeed. Location-wise, excellent. The project is a 5 minute walk to London Paddington station.
Something about Paddington Bear you said?
No, the historic and very central London Paddingtion Station, Zone 1. The station is the terminus for many services, e.g. from Reading, Bristol, Oxford and for inner-and-outer suburban services. More than 35 million use the National Rail through this station annually.
 |
| Hello from London Paddington |
London Paddington Station Underground (aka Tube)
London Paddington is served by four London Underground lines through two separate stations. The Circle, Bakerloo and District lines have a combined station to the south of the main line station, and the Hammersmith & City and Circle lines have a sub-surface staiton to the north. Circle line services go through both stations as part of a spiral route. (Circle, remember?)
Furthermore, many commuters just take a short walk to Lancaster Gate Tube station for the Central Line. This will get them to the City or the West End, and is usually faster than other routes. In total, the London Underground served more than 46 million out of London Paddington.
Ok, very good so far. This place must be very central, and it is.
Crossrail - the icing on the cake
Compared to other Zone 1 builds, this place will get Crossrail. Yes, I hear your wows.
Examples of Centrality
Heard of Bayswater? Ok, maybe not. What about the famous Duck? Yes, go to Bayswater for the Duck. From Paddington, 1 stop to Bayswater, just one.
 |
UCL - Hammersmith Line takes you to Euston Square in 4 stops.
Not very convenient to LSE. (London School of Economics) at the moment. However, once Crossrail comes online, it is literally 3 stops to LSE with just one change. Crossrail power.
OK, you got my attention now. What's the Damage? Obviously, a BEST project like this won't come cheap. If it did, something must be wrong right?
Prices
You are looking at GBP 1,400 to 1,500 psf. E.g. a one Bedroom on the 5th floor, 888 sq ft (rather big) - abt 1.25 Mil GBP.
Well, obviously this is not an every man's property. This is right smack in Central London, premier location, high-class property. It doesn't suit us, as we have explained in our other blog posts. Anyway, for all practical purposes, we can't afford this.
However, this does not mean that the property is no good. In fact, I would venture to say that if I had the million odd pounds to spare, I would seriously look at this property as a long-term investment. (Usual disclaimers apply)
Do share your views on my community forum here.
Important Disclaimer - . The views contained in this blog and blog post are entirely mine. We cannot be made responsible for any investment decisions you may, or may not, take. Nothing in this blog can be construed as professional investment advice, as we are NOT professional investors and we are ill qualified to give you any advice. Read the blog at YOUR own risk
Tuesday, April 1, 2014
The Forge, Wesfery Road - 10 minute walk to Mudchute DLR
When I first read this advertisement! I thought I could walk from this development to Canary Wharf in 6 minutes. Wow, that sounded very attractive and the price looked good!
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However, the fine print in the newspaper advertisement has clarified that the development is a 10minute walk to the nearest Docklands Light Rail station called Mudchute. From Mudchute, it is indeed 6 minutes to Canary Wharf, by DLR.
So, the development is not so near after all. Remember to read the fine print. At least the advertisers did not give the wrong impression that you could walk from this development to Canary Wharf in 6 minutes. Their 6 minutes referred to the time it takes from Mudchute DLR and you need to read the fine print to realise that the development is a 10 minute walk to Mudchute DLR.
Where exactly is this development located? It is in a place called the Isle of Dogs. Again, Google maps is your friend. This development is almost completed, if not already completed and you can see the building from the Google maps street view.
Snapshot of the location, see the dropped red pin. I think this is where this development is located but I stand corrected. Best to check with the sales agent. You can find Mudchute DLR to the northeast of the red pin.
Speaking of which, why is the DLR station called Mudchute station? Apparently this place is literally a Mud chute, where the mud from River Thames ended up here and was deposited here. The mud chute park and farm is a place for wildlife. The scenery near the park is actually quite pretty.
Isn't this gorgeous?
Also there are houses with some water facing near Mudchute DLR that look very nice.
Overall, the immediate area looks rather residential and would probably be rather pleasant to live in. Just be aware of the transport links and walking distance to the nearest DLR.
Happy investing!
Important Disclaimer - . The views contained in this blog and blog post are entirely mine. We cannot be made responsible for any investment decisions you may, or may not, take. Nothing in this blog can be construed as professional investment advice, as we are NOT professional investors and we are ill qualified to give you any advice. Read the blog at YOUR own risk
Monday, March 31, 2014
Royal Wharf, Double Glazing Won't Block Out All Noise
I have shown in previous blog posts that the Royal Wharf site is situated very near the London City Airports.
London City - More than 200 Flight Movements A Day
This Airport has more than 200 flight movements a day, on average. It has permission to operate up to 120,000 flight movements per year, currently it is operating about 70,000 flight movements a year.
Double Glazing
The issue to be addressed in this blog post is whether the double glazed windows as promised by the developer of Royal Wharf would be useful. Some agents I have talked to on the noise issue give me the impression that these windows will block out all noise, like magic.
What Can Double Glazing Do?
What exactly is double-glazing and what type of double glazing is being used? Another way to ask this question is as follows - how many decibels of noise can double-glazing cut? With these research questions in mind, we can start searching the Internet and/or asking experts.
Findings - Normal Double Glazing Reduce Noise by 20 Decibels
Here is what I found, and I stand corrected (since I am not an expert on double-glazing). Typically, double-glazing windows can only reduce the noise by 20 decibels, which isn't too bad.
The best noise reduction results I have seen so far is what is called a laminated acoustic double glazing window which can reduce noise levels by up to 35 decibels. Source: www.double-glazing-info.com
Now, what type of double-glazing is the developer installing for the unit? It is not clear from the marketing collateral. What is very clear, however, is that double-glazing doesn't work like magic to cut out all the noise.
The next logical question to ask is this. How loud are the planes when they take off?
If your double-glazed windows can only block out 20 decibels of noise, it means that you still have 60 decibels coming in. 60 decibels is as loud as a normal conversation. You may think that sounds reasonable.
But think of it this way. Every time the plane takes off or land (200 movements a day), you have to hear somebody 'talking' to you, even though you don't want to hear that person. Bearable?
Don't forget, your double-glazed windows would help cut noise if and ONLY IF, they are shut. Wait a second, isn't that obvious? What's the big deal?
Royal Wharf Units have No Air-Conditioning
Do you know that the Royal Wharf units do not come with air-conditioning? Before you scream at the developer, cool down and realise that this is London, not Singapore. Only the very high-end UK properties and developments come with some type of heating plus air-conditioning system. The bulk of residential developments only have heating elements.
Ok, so what's the point?
Rely on Natural Ventilation
UK properties, even London properties, rely on fresh natural air for their day-to-day air circulation! People leave their windows open. They expect to be able to leave their windows open for the fresh air.
Now you see what I am driving at? People in London would like to leave their windows open. In summer, when it gets warmer, would you want to live in a flat that you can't open the windows lest 80+ decibels of aircraft noise overwhelms you? Oh, whatever the case, do buy a fan for the summer. It may help the stuffiness.
Anyway, Noise is to Be Expected in a City
Well, London is a big city and not the countryside, therefore some level of noise is to be expected. Given that the Royal Wharf development doesn't face a main road, one can expect little if any noise from traffic. Also, the London City Airport does have flight time restrictions, so you shouldn't be disturbed at night.
Happy Investing!
Back to Royal Wharf Landing Page
London City - More than 200 Flight Movements A Day
This Airport has more than 200 flight movements a day, on average. It has permission to operate up to 120,000 flight movements per year, currently it is operating about 70,000 flight movements a year.
Double Glazing
The issue to be addressed in this blog post is whether the double glazed windows as promised by the developer of Royal Wharf would be useful. Some agents I have talked to on the noise issue give me the impression that these windows will block out all noise, like magic.
What Can Double Glazing Do?
What exactly is double-glazing and what type of double glazing is being used? Another way to ask this question is as follows - how many decibels of noise can double-glazing cut? With these research questions in mind, we can start searching the Internet and/or asking experts.
Findings - Normal Double Glazing Reduce Noise by 20 Decibels
Here is what I found, and I stand corrected (since I am not an expert on double-glazing). Typically, double-glazing windows can only reduce the noise by 20 decibels, which isn't too bad.
The best noise reduction results I have seen so far is what is called a laminated acoustic double glazing window which can reduce noise levels by up to 35 decibels. Source: www.double-glazing-info.com
Now, what type of double-glazing is the developer installing for the unit? It is not clear from the marketing collateral. What is very clear, however, is that double-glazing doesn't work like magic to cut out all the noise.
The next logical question to ask is this. How loud are the planes when they take off?
See this video where a person measures the sound of a passing plane. It reaches a whopping 81 decibels.
If your double-glazed windows can only block out 20 decibels of noise, it means that you still have 60 decibels coming in. 60 decibels is as loud as a normal conversation. You may think that sounds reasonable.
But think of it this way. Every time the plane takes off or land (200 movements a day), you have to hear somebody 'talking' to you, even though you don't want to hear that person. Bearable?
Don't forget, your double-glazed windows would help cut noise if and ONLY IF, they are shut. Wait a second, isn't that obvious? What's the big deal?
Royal Wharf Units have No Air-Conditioning
Do you know that the Royal Wharf units do not come with air-conditioning? Before you scream at the developer, cool down and realise that this is London, not Singapore. Only the very high-end UK properties and developments come with some type of heating plus air-conditioning system. The bulk of residential developments only have heating elements.
Ok, so what's the point?
Rely on Natural Ventilation
UK properties, even London properties, rely on fresh natural air for their day-to-day air circulation! People leave their windows open. They expect to be able to leave their windows open for the fresh air.
Now you see what I am driving at? People in London would like to leave their windows open. In summer, when it gets warmer, would you want to live in a flat that you can't open the windows lest 80+ decibels of aircraft noise overwhelms you? Oh, whatever the case, do buy a fan for the summer. It may help the stuffiness.
Well, London is a big city and not the countryside, therefore some level of noise is to be expected. Given that the Royal Wharf development doesn't face a main road, one can expect little if any noise from traffic. Also, the London City Airport does have flight time restrictions, so you shouldn't be disturbed at night.
Happy Investing!
Back to Royal Wharf Landing Page
Sunday, March 30, 2014
How & Why We Started Buying UK Property
It was 2008/09 when we seriously started thinking about investment in UK property.
At that time, we had two young children. We were fairly stable in our careers. We had moved from a Condo to HDB flat. After some years of living in a 99 year leasehold Condo, we realised that we didn't use the facilities very much and it wasn't very palatable to pay such high maintenance fees a month.
We decided to move closer to our parents and in-laws, so that it was easier for the child-care arrangements. Living near parents and/or in-laws is a great plus, especially if they help look after the young ones! Hence, we sold off our Condo and moved to a HDB flat.
We started thinking hard with regard to our children's future education, as well as our retirement. Money is hard to earn, but most easy to spend. Yes, we can be prudent and save & save. However, what do you do with the savings? Leaving them in a bank would earn paltry interest. Therefore, you need a plan.
Original Plan - purchase Singapore Freehold Property
That seems to be the dream of many people right? Buy some freehold property somewhere. After all, freehold land was very limited. Looked like Government would not allocate any more freehold land. We could sell the HDB and upgrade. So we looked, and looked and looked.
We didn't find anything that was affordable. And this was in 2008/9, when prices weren't as high as today (2014). Not only that, we were worried that if we committed to a significant private property purchase, it would mean that both of us had to continue working. Based on the financial calculations, much of our monthly income would be required to pay off the loan, i.e. feed the house.
Why Pay So Much to Feed the House?
This concept of 'feeding the house' got us thinking really hard. We already had a very comfortable place to stay (i.e. HDB flat). Roof over our head was secured. Monthly payments was very manageable.
If we 'upgraded' to a private property, what does this mean? Wiping out our savings is one thing. We will also be mortgaging our future income, to feed this house. It didn't sound very palatable to me.
UK, London Property Option Came Along
It was almost by chance. There was an exhibition going on in Singapore. That time, London Property was quite in the dumps. It was not too long after the 2007 crisis and crash. The wife did all the initial research, looking at the property's location and financial projections. It looked bite-sized.
Financial Calculations
The investment we first looked at was in Zone 2, right next to the Tube station. A one-bed would cost about £250,000. At that time, the SGD was 2.4 to the £.
The sums looked like this then.
We could get a 70% loan and the repayment was £850 per month, over 25 years.
We needed to cough up £75,000, which worked out to be SGD 180,000
There were also other costs like legal fees, stamp fees, furnishing etc.
Rental Income versus Loan Repayments
We did some research. Upon completion (i.e. TOP in Singaporean terms), we expected to be able let out the unit for £250pw. That would mean £13,000 gross a year. Subtract 12% management & lettings fees, we have £11,440 per year. Recall, the loan repayment was £850 per month, or £10,200 per year. There was still a £1K + buffer.
Property On Its Own
Therefore, once we completed the property, with the rental stream coming in, we expected that the property would at worst be cash-flow neutral, i.e. the rental income should be able to pay-off the housing loan, more or less. Maybe we have to top-up a bit here and there, but it wasn't expected to be significant.
Furthermore, given the good location of the property, we hoped for capital appreciation over the long-term. We figured that as long as we had the holding power, this property should do ok.
Property Feeds Itself
Doing such calculations was liberating. Why? Instead of us feeding the property we stay in, now it looked like we could invest in a property that could feed itself. After we cough up the initial 30% payment, it would look after itself and 25 years down the road, we would have a property fully paid up. As we were bullish on London, we felt quite sure that we wouldn't lose money, 25 years down the road. And therefore, we jumped in and bought our first UK London property at Montreal House, Canada Water.
Fast Forward to 2014
Looking back, we did not expect this property to do so well. We would be happy with a steady 3% to 4% increase in capital price a year. We have benefitted from the UK, London economy recovering (way to go Tories!) and also the chronic housing shortage.
Furthermore, the area we bought in has really matured and is in a much better shape today, compared to 2009. Our weekly rental has gone up from the initial £250pw to more than £300pw. This has made our investment cash-flow positive. Very happy to see the bank balance building up. Capital value of this property have also gone up very quickly, thanks to the housing shortage.
This was how we started. And through this, we realised the power of passive income. We don't want to feed the property. We want the property to feed us.
And there has been no looking back since.
Back to About Us page.
We decided to move closer to our parents and in-laws, so that it was easier for the child-care arrangements. Living near parents and/or in-laws is a great plus, especially if they help look after the young ones! Hence, we sold off our Condo and moved to a HDB flat.
We started thinking hard with regard to our children's future education, as well as our retirement. Money is hard to earn, but most easy to spend. Yes, we can be prudent and save & save. However, what do you do with the savings? Leaving them in a bank would earn paltry interest. Therefore, you need a plan.
Original Plan - purchase Singapore Freehold Property
That seems to be the dream of many people right? Buy some freehold property somewhere. After all, freehold land was very limited. Looked like Government would not allocate any more freehold land. We could sell the HDB and upgrade. So we looked, and looked and looked.
 |
| We didn't find anything affordable for us. |
Why Pay So Much to Feed the House?
This concept of 'feeding the house' got us thinking really hard. We already had a very comfortable place to stay (i.e. HDB flat). Roof over our head was secured. Monthly payments was very manageable.
If we 'upgraded' to a private property, what does this mean? Wiping out our savings is one thing. We will also be mortgaging our future income, to feed this house. It didn't sound very palatable to me.
UK, London Property Option Came Along
It was almost by chance. There was an exhibition going on in Singapore. That time, London Property was quite in the dumps. It was not too long after the 2007 crisis and crash. The wife did all the initial research, looking at the property's location and financial projections. It looked bite-sized.
Financial Calculations
The investment we first looked at was in Zone 2, right next to the Tube station. A one-bed would cost about £250,000. At that time, the SGD was 2.4 to the £.
The sums looked like this then.
We could get a 70% loan and the repayment was £850 per month, over 25 years.
We needed to cough up £75,000, which worked out to be SGD 180,000
There were also other costs like legal fees, stamp fees, furnishing etc.
Rental Income versus Loan Repayments
We did some research. Upon completion (i.e. TOP in Singaporean terms), we expected to be able let out the unit for £250pw. That would mean £13,000 gross a year. Subtract 12% management & lettings fees, we have £11,440 per year. Recall, the loan repayment was £850 per month, or £10,200 per year. There was still a £1K + buffer.
Property On Its Own
Therefore, once we completed the property, with the rental stream coming in, we expected that the property would at worst be cash-flow neutral, i.e. the rental income should be able to pay-off the housing loan, more or less. Maybe we have to top-up a bit here and there, but it wasn't expected to be significant.
Furthermore, given the good location of the property, we hoped for capital appreciation over the long-term. We figured that as long as we had the holding power, this property should do ok.
Property Feeds Itself
Doing such calculations was liberating. Why? Instead of us feeding the property we stay in, now it looked like we could invest in a property that could feed itself. After we cough up the initial 30% payment, it would look after itself and 25 years down the road, we would have a property fully paid up. As we were bullish on London, we felt quite sure that we wouldn't lose money, 25 years down the road. And therefore, we jumped in and bought our first UK London property at Montreal House, Canada Water.
Fast Forward to 2014
Looking back, we did not expect this property to do so well. We would be happy with a steady 3% to 4% increase in capital price a year. We have benefitted from the UK, London economy recovering (way to go Tories!) and also the chronic housing shortage.
Furthermore, the area we bought in has really matured and is in a much better shape today, compared to 2009. Our weekly rental has gone up from the initial £250pw to more than £300pw. This has made our investment cash-flow positive. Very happy to see the bank balance building up. Capital value of this property have also gone up very quickly, thanks to the housing shortage.
This was how we started. And through this, we realised the power of passive income. We don't want to feed the property. We want the property to feed us.
And there has been no looking back since.
Back to About Us page.
UK Property - Must You Complete After Exchanging Contracts?
Question – Must you complete on an off-plan property that you had exchanged contracts on?
Good question. If you are buying an off-plan property in the UK, you will first be asked to pay a reservation fee (usually ranging between GBP 1000-5000) to book a unit. The developer and sales agent will then take this unit off the market.
You will be given a deadline to exchange contracts, during which at least 10% of the purchase price (less the reservation fee) will be paid through your solicitors.
Understand that unlike say Singapore, most of the payments towards a UK property occurs at completion. For our properties, the standard was 10% to exchange contracts, and then 90% at completion. Sometimes, the developer may ask for another 10% say 12 months before scheduled completion. Make sure you negotiate the payment schedule before you exchange contracts.
We have have seen nothing like what we have to pay in Singapore. By the time the off-plan property TOPs in Singapore, you would have already paid 70% to 80% of the sales price to the developer!
After you reserve your unit, you will have to appoint the solicitors who will handle the purchase for you, and work towards the exchange of contracts.
You can pull out after the reservation stage if you change your mind; whether you lose your reservation fee will depend on the developer and selling agent’s policies.
However, if you have second thoughts, this is the time to pull out, and not any later. Once contracts are exchanged, things become legally binding. You are contractually obligated to complete, unless you manage to do a sub-sale.
Sub-sale?
Yes. Another term, is to flip the property before completion. Take note, however, that this is not common in the UK, though in recent times it is becoming a bit more common. I wouldn't bet on it. Even if your plan is to flip the property, we would strongly recommend that you have the funds to complete the purchase.
Investment Risks
Bear in mind, your financial circumstances, economic conditions or even personal preferences may change while the property is being constructed. This is a risk you are bearing as an off-plan investor.
The unit may take any time between a few months to several years before the construction is completed.
Between the exchange of contracts and completion, you may or may not be required to make further payments, and the payment terms would have been clearly laid out in the contracts.
Further Payments
Some developers require further payments of 5% or 10% of purchase price a year after the exchange of contracts. Once the developer issues the notice of completion, you are legally obligated to see through completion.
If you are not able to complete for any reason, the developer may take legal actions against you. Please do all due diligence before you exchange contracts. A good solicitor will be able to advise you well.
What Happens If You Really Pull Out?
Do not foolishly assume that you will only forfeit your 10% (or 20%) deposit. If you do not complete, you have technically breached the contract and therefore the developer can sue you for damages. The developer will surely win, in the event of such a lawsuit.
Is this fair? Of course it is. Think about it this way. You put down 10% deposit for an off-plan property. 2 or 3 years later, if the property market tanks (e.g. prices drop by 30%), you may be better off walking away and not completing if all that you lose is 10%. In such a scenario, when the market is bad and you did not complete, expect the developer to sue you and attempt to get the full price from you.
In reality, if the market has gone up, then it is likely that the developer will resell the unit quickly. If successful, the developer can still sue you but the damages that the Court would award would likely be a lot less, because the actual damage suffered by the developer is much lower. In fact, the developer could have made more money this way, if indeed he could sell at a higher price that what you had contracted with previously.
In all the advice we have read, you are strongly recommended to ensure that you have financing and you can complete on the property before you sign on the dotted line to exchange contracts.
Good question. If you are buying an off-plan property in the UK, you will first be asked to pay a reservation fee (usually ranging between GBP 1000-5000) to book a unit. The developer and sales agent will then take this unit off the market.
You will be given a deadline to exchange contracts, during which at least 10% of the purchase price (less the reservation fee) will be paid through your solicitors.
Understand that unlike say Singapore, most of the payments towards a UK property occurs at completion. For our properties, the standard was 10% to exchange contracts, and then 90% at completion. Sometimes, the developer may ask for another 10% say 12 months before scheduled completion. Make sure you negotiate the payment schedule before you exchange contracts.
We have have seen nothing like what we have to pay in Singapore. By the time the off-plan property TOPs in Singapore, you would have already paid 70% to 80% of the sales price to the developer!
After you reserve your unit, you will have to appoint the solicitors who will handle the purchase for you, and work towards the exchange of contracts.
You can pull out after the reservation stage if you change your mind; whether you lose your reservation fee will depend on the developer and selling agent’s policies.
However, if you have second thoughts, this is the time to pull out, and not any later. Once contracts are exchanged, things become legally binding. You are contractually obligated to complete, unless you manage to do a sub-sale.
Sub-sale?
Yes. Another term, is to flip the property before completion. Take note, however, that this is not common in the UK, though in recent times it is becoming a bit more common. I wouldn't bet on it. Even if your plan is to flip the property, we would strongly recommend that you have the funds to complete the purchase.
Investment Risks
Bear in mind, your financial circumstances, economic conditions or even personal preferences may change while the property is being constructed. This is a risk you are bearing as an off-plan investor.
The unit may take any time between a few months to several years before the construction is completed.
Between the exchange of contracts and completion, you may or may not be required to make further payments, and the payment terms would have been clearly laid out in the contracts.
Further Payments
Some developers require further payments of 5% or 10% of purchase price a year after the exchange of contracts. Once the developer issues the notice of completion, you are legally obligated to see through completion.
If you are not able to complete for any reason, the developer may take legal actions against you. Please do all due diligence before you exchange contracts. A good solicitor will be able to advise you well.
What Happens If You Really Pull Out?
Do not foolishly assume that you will only forfeit your 10% (or 20%) deposit. If you do not complete, you have technically breached the contract and therefore the developer can sue you for damages. The developer will surely win, in the event of such a lawsuit.
Is this fair? Of course it is. Think about it this way. You put down 10% deposit for an off-plan property. 2 or 3 years later, if the property market tanks (e.g. prices drop by 30%), you may be better off walking away and not completing if all that you lose is 10%. In such a scenario, when the market is bad and you did not complete, expect the developer to sue you and attempt to get the full price from you.
In reality, if the market has gone up, then it is likely that the developer will resell the unit quickly. If successful, the developer can still sue you but the damages that the Court would award would likely be a lot less, because the actual damage suffered by the developer is much lower. In fact, the developer could have made more money this way, if indeed he could sell at a higher price that what you had contracted with previously.
In all the advice we have read, you are strongly recommended to ensure that you have financing and you can complete on the property before you sign on the dotted line to exchange contracts.
Saturday, March 29, 2014
Tenants, UK Property
Tenants
London is a global city and attracts talents from all around the world. The same can't be said for the rest of UK, so we have not gone into UK property outside London. Your tenant pool will be wider if you keep an open mind. You should however be mindful of protecting your own financial interests.
Significant Voids Not Expected
If your property is correctly priced, you should not experience significant voids. If your letting agent is not actively marketing your property, switch out. You can also list your property for let with multiple agents, though that will mean more coordination work for you. This has been our experience for our London properties. Not sure about UK properties, outside London.
If you have multiple units, you have more bargaining power. Pick the arrangement that works best for you. In general, we give sole marketing rights to a single lettings agent only for a limited time, say one month.
Tenant's Deposit Must Be Protected
The most important thing about tenant deposits that you as a landlord of UK property must know and heed is that you are legally liable to ensure the deposit must be registered with an approved authority within 30 days of receiving it. There are strict penalties if you do not observe this.
This webpage explains it well. If the letting agent is registering the deposit for you, ensure that you have a copy of the registration certificate. We had a rogue letting agent who did not register the deposit properly and our tenant was in a position to take legal proceedings against us! UK property landlords, do not mess around with deposits! Thankfully, the deposit serves as a good protection and buffer for landlords, to recover damage costs and/or unpaid rent.
What sort of tenants should you look for?
First, do familiarize yourself with UK legislation regarding the eviction of tenants. A non-paying tenant is every landlord’s nightmare, especially if you have to take steps to evict the tenant. As such, it is in your interest to ensure that the tenant is able to afford the flat financially.
Second, discuss with your lettings agent on the profile of the applicant. All the lettings agent we have used so far generally go by the rule of thumb that the rental should not exceed more than a third of the applicant’s monthly income. Thankfully, we have not had experienced a rental default thus far with individual lets.
Our tenants have all been regular salaried individuals, some of whom are working in the City of London. They value their tenant profiles and credit history and would not want to blemish their own records. They have also kept the apartments in good shape.
Should one then insist only on professional tenants? Our view is, perhaps not. There are many categories of tenants who are able to afford the rent, but for some reason or other, do not have employment records in the UK, and thus will not pass the traditional affordability checks.
Take for example, students, as well as professionals who have just moved over to the UK. They would make good tenants too, but as a way to mitigate your risks, you can negotiate to have rent paid upfront, or to request a copy of their bank statements as proof of funds.
Corporate Lets?
How about corporate lets? One of our apartments has been let to three different companies to date. Corporate lets tend to be above market rental rates. However, there is huge disadvantage in that they tend not to be pay deposits, but have a letter of guarantee in lieu of a deposit. The letter of guarantee is pretty much useless if the company goes under.
Do research the company to ascertain if it is likely to make a good tenant. If your apartment is let to a big corporation like Barclays or Morgan Stanley, I think there is little cause for concern. However there are many other smaller companies looking to rent apartments as well.
Also, check the eviction clauses to see what recourses you have if the tenant defaults on payments. A lack of deposit does increase the risk for landlords – you will have to weigh out the potential benefits and costs vis-à-vis a private let. We have experienced a rental default by a serviced apartment company before and we had to evict the tenant. It was a costly exercise for both the letting agent and for us.
Back to our buying a newbuild page.
London is a global city and attracts talents from all around the world. The same can't be said for the rest of UK, so we have not gone into UK property outside London. Your tenant pool will be wider if you keep an open mind. You should however be mindful of protecting your own financial interests.
Significant Voids Not Expected
If your property is correctly priced, you should not experience significant voids. If your letting agent is not actively marketing your property, switch out. You can also list your property for let with multiple agents, though that will mean more coordination work for you. This has been our experience for our London properties. Not sure about UK properties, outside London.
 |
| Significant voids unlikely, as long as your price is right. |
Tenant's Deposit Must Be Protected
The most important thing about tenant deposits that you as a landlord of UK property must know and heed is that you are legally liable to ensure the deposit must be registered with an approved authority within 30 days of receiving it. There are strict penalties if you do not observe this.
This webpage explains it well. If the letting agent is registering the deposit for you, ensure that you have a copy of the registration certificate. We had a rogue letting agent who did not register the deposit properly and our tenant was in a position to take legal proceedings against us! UK property landlords, do not mess around with deposits! Thankfully, the deposit serves as a good protection and buffer for landlords, to recover damage costs and/or unpaid rent.
 |
| Some tenants are lovely. |
What sort of tenants should you look for?
First, do familiarize yourself with UK legislation regarding the eviction of tenants. A non-paying tenant is every landlord’s nightmare, especially if you have to take steps to evict the tenant. As such, it is in your interest to ensure that the tenant is able to afford the flat financially.
Second, discuss with your lettings agent on the profile of the applicant. All the lettings agent we have used so far generally go by the rule of thumb that the rental should not exceed more than a third of the applicant’s monthly income. Thankfully, we have not had experienced a rental default thus far with individual lets.
Our tenants have all been regular salaried individuals, some of whom are working in the City of London. They value their tenant profiles and credit history and would not want to blemish their own records. They have also kept the apartments in good shape.
Should one then insist only on professional tenants? Our view is, perhaps not. There are many categories of tenants who are able to afford the rent, but for some reason or other, do not have employment records in the UK, and thus will not pass the traditional affordability checks.
Take for example, students, as well as professionals who have just moved over to the UK. They would make good tenants too, but as a way to mitigate your risks, you can negotiate to have rent paid upfront, or to request a copy of their bank statements as proof of funds.
Corporate Lets?
How about corporate lets? One of our apartments has been let to three different companies to date. Corporate lets tend to be above market rental rates. However, there is huge disadvantage in that they tend not to be pay deposits, but have a letter of guarantee in lieu of a deposit. The letter of guarantee is pretty much useless if the company goes under.
Do research the company to ascertain if it is likely to make a good tenant. If your apartment is let to a big corporation like Barclays or Morgan Stanley, I think there is little cause for concern. However there are many other smaller companies looking to rent apartments as well.
Also, check the eviction clauses to see what recourses you have if the tenant defaults on payments. A lack of deposit does increase the risk for landlords – you will have to weigh out the potential benefits and costs vis-à-vis a private let. We have experienced a rental default by a serviced apartment company before and we had to evict the tenant. It was a costly exercise for both the letting agent and for us.
Back to our buying a newbuild page.
UK Chancellor George Osborne's 2014 Budget Speech Salient Points
From an economic growth point of view, we think that the Tories do a much better job than Labour. Alright, we are partisan. We'd prefer the Tories running fiscal policy over Labour anytime.
Here are salient points from the Budget Speech. The full speech is available here.
Economic Growth Forecasts
2014 - 2.7%
2015 - 2.3%
2016 and 2017 - 2.6%
UK is growing faster than Germany, faster than Japan, faster than the US - in fact there is no major advanced economy in the world growing faster than Britain today.
Employment Forecasts
Pace of net job creation under this government has been three times faster than in any other recovery on record. 1.3 million more people in work. Latest figures show a staggering 24% fall in the claimant count in just one year, and the fastest fall in the youth claimant count since 1997.
Unemployment down from the 8% we inherited to just over 5%.
Fiscal Policy
Taken difficult decisions. Before we came to office, the deficit was 11%! This year, they say it will be 6.6%. Next year, 5.5% - down a half. Then it will fall to 4.2%, 2.4% and reach 0.8% in 2017-18.
In 2018-19, they are forecasting no deficit at all - instead, at plus 0.2%, a small surplus.
Faster growth alone will not balance the books. Securing Britain's economic future means there will have ot be more hard decisions; more cuts.
Britain was borrowing £157 bn a year before we came to office. This year we expect to borrow £108 bn... In 2018-19, we won't be borrowing at all. We will have a small surplus.
Debt is lower. And the biggest single saving of all is £42bn reduction in interest payments we will have ot make on that debt. Saving every family in the nation the equivalent of almost £2,000.
Money that was going to creditors around the world, now going to pay for the NHS and other public services.
All that said, UK Government is making very hard but good decisions, to put UK back on the right track. We are bullish on the UK economy. Hopefully, the Tories win the 2015 UK General Elections.
Here are salient points from the Budget Speech. The full speech is available here.
 |
| UK Chancellor George Osborne (i.e. UK's Minister for Finance) |
2014 - 2.7%
2015 - 2.3%
2016 and 2017 - 2.6%
UK is growing faster than Germany, faster than Japan, faster than the US - in fact there is no major advanced economy in the world growing faster than Britain today.
Employment Forecasts
Pace of net job creation under this government has been three times faster than in any other recovery on record. 1.3 million more people in work. Latest figures show a staggering 24% fall in the claimant count in just one year, and the fastest fall in the youth claimant count since 1997.
Unemployment down from the 8% we inherited to just over 5%.
Fiscal Policy
Taken difficult decisions. Before we came to office, the deficit was 11%! This year, they say it will be 6.6%. Next year, 5.5% - down a half. Then it will fall to 4.2%, 2.4% and reach 0.8% in 2017-18.
In 2018-19, they are forecasting no deficit at all - instead, at plus 0.2%, a small surplus.
Faster growth alone will not balance the books. Securing Britain's economic future means there will have ot be more hard decisions; more cuts.
Britain was borrowing £157 bn a year before we came to office. This year we expect to borrow £108 bn... In 2018-19, we won't be borrowing at all. We will have a small surplus.
Debt is lower. And the biggest single saving of all is £42bn reduction in interest payments we will have ot make on that debt. Saving every family in the nation the equivalent of almost £2,000.
Money that was going to creditors around the world, now going to pay for the NHS and other public services.
---------------------------
Our Views
UK is already viewed by many developed countries as a good example of a developed Western country that can get its finances under control. Yet, look at its debt and deficits! Unthinkable from a Singaporean viewpoint, but easy to happen. Just vote in irresponsible Governments that spend and spend.All that said, UK Government is making very hard but good decisions, to put UK back on the right track. We are bullish on the UK economy. Hopefully, the Tories win the 2015 UK General Elections.
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