M'sia's role in London property scene
Published on: Monday, December 14, 2015
Kota Kinabalu: It has been a British presence-centric week with the appearance of a Queen's Counsel at the Federal Court sitting here and the visit of the British High Commissioner, coupled with the exhibition of UK property.As a pivotal role of foreign governments in the UK property market, Malaysia's Urban Wellbeing, Housing and Local Government Minister Datuk Abdul Rahman Dahlan, recently launched in London the latest phase of homes at the revamped Battersea Power Station and a new space named Malaysia square in London's housing market.Malaysian developers e.g. from S P Setia, Sime Darby and EcoWorld are active in the London property development market as with many from other foreign countries. From 2012 to 2014, Asian investment in all kinds of central London property doubled to outstrip UK investment, accounting for more than a quarter of the £21b (RM118 billion) that went into the area.
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Oliver Wainwright, an architecture and design critic wrote that London authorities and the mayor's planning team "must have the strength to enforce their own plans, or else be trampled by the supercharged bulldozer of international capital."Richard Blakeway, London's deputy Mayor for housing, land and property, said Mayor Boris Johnson had "challenged" the foreign developers to commit to making new homes available to Londoners to buy before or alongside overseas buyers. There are an estimated 1.4 million private landlords in the UK.Many buy-to-let landlords will face a higher tax bill from April 2017. In his first Budget Announcement for this Conservative government, Chancellor of the Exchequer George Osborne signalled his intention to make interest payments for buy-to-let landlords less generous.Currently, landlords can deduct up to 45p per pound but from April 2017, these income tax deductions will be diminished. Tax relief has not been abolished altogether but will see this relief capped at the basic income tax rate.
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Malaysia's second-richest man Tan Sri T. Ananda Krishnan is among an elite group of some 10 foreign investors who are buying up large swathes of property in London and pushing up prices beyond the reach of local Britons.The Malaysian billionaire's main business holding, Usaha Tegas Group, has sent in plans to build 104 luxury homes on land that previously housed the St John's Wood barracks.
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The proposed apartment units are expected to sell for up to £5m (RM37 million) each, with the detached mansions containing seven bedrooms.Close to 30,000 homes in the UK capital city are owned by just 10 investors from Malaysia, Hong Kong, China, Australia, Singapore and Sweden, sparking concern from British politicians and housing industry experts that Londoners won't be afford their own homes. Many of the new London developments are being treated as "safe deposit boxes" for its international investors instead of being owned by local Britons whom it said were dire need of housing."The capital will not be sustainable unless people in the public services can afford to live here. We are pricing them out," Lewisham Deptford MP Joan Ruddock said.Hong Kong-listed conglomerate Hutchison Whampoa is currently behind plans for 3,500 homes in Ruddock's constituency, according to the news report.Plans for more than 21,000 homes in central London are being developed by investors from Malaysia, mainland China, Hong Kong, Singapore.If you invest in UK property for rental income, take care on tenant referencing or how do you check a tenant if they are good?Unpaid rent and damage to your property – it's a landlord's worst nightmare. But this could be the reality if you fail to fully check out a potential tenant - their ability to pay the rent and their conduct at their previous rental property. That's why thorough tenant referencing is so important.Instances of fraud have increased dramatically recently and now with websites providing fake documents which are getting much more difficult to detect the fraudsters.Landlords might assume that a smart, well presented applicant is honest. That might not be the case. There are those who falsified bank statements and changed their passport. So how do you vet a potential tenant?First, the tenant's employment history and company are to be checked, including facts such as the company status and incorporation date.If there are any issues, extra proof of income must be requested and further checks made until satisfied. There were tenants claiming to work for companies that were only formed a few days before or where fake 'letting' agencies have been set up to provide false references for landlords.In a case, the applicant's accountant turned out to be the applicant himself and on several occasions there are applicants who set up email addresses similar to those of well-known companies.No stone should go unturned when it comes to checking facts! If there are any doubts about landlord references, carry out a Land Registry check to be certain the reference comes from the genuine landlord.For example, there was a tenant who rented a property through another estate agent and only a month into the tenancy, stopped paying the rent. It took the landlord seven months to evict him through the courts. You really cannot be too careful nowadays even in the UK if you think you know bad cases here and the unprofessionalism of professionals.Electrical Appliances Under the Electrical Equipment (Safety) Regulations 1994, landlords are responsible for making sure all electrical appliances are safe.To comply, all electrical installations must be regularly checked and serviced by a qualified electrician. Smoke Alarms All properties built since June 1992 must have smoke alarms fitted at each level. Properties built before this date are exempt, however it is strongly recommend that smoke alarms are fitted in all your properties.The Housing Act 2004 Houses in Multiple Occupation The law in relation to Houses in Multiple Occupancy (HMO) under the Housing Act 2004 has recently changed.A property that is let to at least three tenants / sharers who share a kitchen or a bathroom is considered to be an HMO.If there are less than five sharers, the property is not subject to mandatory licensing, but the Landlord must check with the relevant Local Authority as they may require the property to be licensed.Where there are five tenants / sharers or more the property will require mandatory licensing.In addition, where a building is fully converted into self-contained flats and if the conversion work does not comply with the building standards of the 1991 Building Regulations and less than two thirds of the flats are owner-occupied, this type of building is an HMO and may need to be licensed.The Landlord must check with the relevant Local Authority. Landlords must not ignore this. Failure to obtain a licence from the relevant Local Authority could attract a fine of up to £20,000.A tenancy cannot be allowed to begin until such licence has been obtained. Housing Health & Safety Rating System Where an HMO licence has been issued, the property will be subject to inspection within five years thereafter.Furthermore, unlike largely DBKK inspection absence here, any property, either let or available to let, can be visited by an inspector to assess potential hazards, e.g. poor insulation, dangerous staircases.Any Notice served following a visit must be implemented without delay. The Regulatory Reform (Fire Safety) Order 2005 became effective from 1st October 2006 whereby an HMO must have:1) Mains linked smoke detectors in the common parts (i.e. hallways).2) Fire blankets and extinguishers in kitchens. The age and character of the property, will determine further alterations that be required.Many of the individuals have turned to property as an alternative to a pension or for passive income. With final salary pensions increasingly rare and poor returns on the stock market and on savings, many people have invested their life savings into residential property.Asking landlords to pay greater taxes will have a dramatic effect on the income of many pensioners and those approaching pensionable age. The move is likely to lead to a rise in rents to cover the extra costs and a restriction in rental supply as landlords sell properties.The UK government has already stated that greater investment is needed in the private rental sector (PRS) with one recent report estimating that a further £1.4 trillion will need to be invested into the PRS by 2035 to meet demand.With the UK population expected to grow by a further 12 million over the same period, Osborne's tax plans are unlikely to encourage further investment. What's more the move unfairly targets UK investors as the new measures will only affect those with personal UK incomes greater than £31,785 and will not affect properties owned through companies.A number of charitable organisations have been hounding the Treasury saying it is inherently unfair that landlords have tax relief on their mortgages while private homeowners do not.While Osborne's move was an attempt to redress this unfairness, it actually does no one any favours. It will decrease incomes for many pensioners, making them more reliant on the state and will inevitably lead to an increase in rents, making it more difficult for tenants to save for a deposit.Most of those in the property industry thought that sensible policies would follow in the wake of a Conservative government win but this is yet another example of politicians trying to profit from property to the detriment of the overall economy.In the last Budget Announcement, George Osborne cut landlords' tax relief for those paying higher rates of income tax. Currently, landlords can offset the interest on their mortgage repayments against the income they incur on the rent payments.Landlords can deduct their costs including mortgage interest payments from their profits before paying tax. Higher rate tax payers receive relief at 40 or 45 per cent. However, from April 2017, this tax relief will be slowly phased out, restricting it by 2020 to 20 per cent for all landlords regardless of earnings. While the changes have caused a lot of concern for landlords but the tax changes will have minimal consequences for many investors.The tax changes are intended to cool the buy-to-let market which the Bank of England warned was in danger of overheating. Buy-to-let mortgages now account for 15 per cent of all new mortgages in the UK, and there is growing concern that Britain's appetite for buy-to-let is hampering first time buyers' efforts to get on the property ladder.For overseas landlords who have a long history of investing in London, their UK earnings are at the basic rate of income tax so the recent announcements will have little impact on them.Even for UK based investors, it means they will only have a slightly higher tax bill as they will still be able to claim 20 per cent rather than the existing 40 or 45 per cent. Most will simply use the rent to service the mortgage and see their profit as the capital appreciation of the property.With rents increasing in London as housing supply constricts, property values are predicted to increase further over the medium to long term which should cushion many landlords. There is little indication that landlords wish to exit the rental market because of the planned tax changes.Investment would only be subject to tax of any kind if it was a profitable one. Some landlords may not be able to claim as much tax back on the profits but the tax changes are not likely to send most investors into the red.The UK's tax laws and a rising property market will ensure the buy-to-let market continues to thrive and these changes are intended to ensure that property values continue to climb steadily rather than be subject to boom and bust cycles.Thanks to the change in stamp duty rates, restrictions on lending and a rising pound, sales of properties across London have been slowing.The widely anticipated post-election "bounce" simply has not happened, resulting in plateauing prices and a decrease in transaction numbers.While sales market suffers, though, the lettings market is experiencing a resurgence with rental values seeing a dramatic increase across almost all London postcodes.Some rental values surging ahead by at least two to four per cent over the last quarter, with particularly strong growth in prime central London.South Kensington saw rents increase by over seven per cent on average with similar rises in parts of Chelsea. Huge increases were also seen in parts of trendy east London with massive gains of over 11 per cent in both Bethnal Green and Bow.These gains were particularly impressive given that both areas saw increases of over four per cent last quarter. Only a handful of areas saw decreases in rental values and even these were modest. Notting Hill saw values decrease by less than 1.5 per cent and Battersea and Vauxhall saw rents decrease by less than one per cent.When George Osborne reformed the stamp duty system, it had a huge impact on the property market in London. Stay up-to-date by following Daily Express’s Telegram channel.
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