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Measure risks and challenges when purchasing British properties

Posted by georgechai on June 22, 2011
| 0

Malaysians need to measure the pros and cons when making a decision to buy British properties.

Hall Chadwick Asia Chairman, Kumar Tharmalingam commented British especially London is an expensive place to maintain a property.

“Unless you have children in British, or else buying British properties can be burdening for you.

“When you make a purchase of landed property in British, you need to ensure that the unit is occupied. Or else, you face problems with squatters moving in and hence, in the end, to move them out of your property, you need a court order.

“However, London property is great in terms of capital appreciation and owners are looking at least seven years ahead to cover the maintenance cost,” said Kumar.

Kumar explained a friend’s situation in which he owned a condominium in Victoria that is complete with concierge and security system that costs £460

“Unfortunately, my friend had to sell it after a mere four years as he failed to secure monthly rental of more than £900 with more than half gone for services charges.

“So bear in mind that owners need to bear costs for other things besides rental,” said Kumar.

Kumar also relates that the service charges increased by 10% annually instead of the rental. Hence, management is the main issue concerned.

On average, an agent charge about 10% of the amount in order to handle the asset and also a month rental every time there is a new tenant.

So, the issue here is the low cost on returns of investment but high capital gain.

“Property buyers are hoping for exchange rate to revert back to RM7 per pound and for London prices to go back to pre-2007.

“The only solution is to pay cash or acquire small amount of loan over short tenure since owners need to pay in pounds. Besides that, British have a capital gain tax of about 30%.

“So, when you measure and consider these factors, investing properties in Sydney and Singapore is much cheaper besides easier to maintain.

“However, bear in mind that you still face the same value upside but less on currency risk,” said Kumar.

He said it is possible that British economy may never regain the financial status as in pre-2008 after the deep plunge.

“Prices in Manchester, Birmingham and Liverpool have gone down by halves with lower rates and taxes.

“Thus, when somebody offers you a property in British, one should check out the website, rightmove.co.uk, as it is the country’s most popular property website,” said Kumar.

One can check out the most recent property sold on the same district and find out if it is leasehold or freehold. An added advantage provided by this particular website is the comparison of prices over the years.

Therefore, one can decide if the other party is trying to slap you for higher price.

“This is one of the reasons why agents hate websites as individual can check out how much the prices have gone down since 2008.

‘Take these few elements into consideration when buying a British property – Is that only a vacation home? Is it worth it for investment? Is it for children’s education?

“In addition to that, one must remember that the culture in Malaysia and British is totally different. If you desire for new carpets and high ceilings, forget about old properties as only newer apartments offer these designs,” concluded Kumar.

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