Government's Latest Move To Curb Property Speculation

[ugoh 0]

Don't underestimate the costs of maintaining a rental property in London.

- Estate agents' fees to market property for rental and to help you liaise with the tenants afterwards in case of maintenance issues

- Cost of furnishings/repairs

- The maintenance fees tend to go up a LOT over the course of years

- Inheritance tax which can be up to 40% should you (sway sway) pass away unexpectedly PLUS the inconvenience/expenses in dealing with your estate in a different country

All of the above need to fork out $$$ Especially the maintenance and everything is subject to GST of 20% (called VAT in UK).

Therefore what you take home might be reduced quite a bit.

Please go in with your eyes big-big.

(fyi I have been renting out my property in London for over 20 years but I bought at historical prices when I was working there - that's why I know how costly can be the maintenance costs as plumbers/builders/estate agents cost more than what you would expect in Singapore. And I also have my fair share of tenants absconding, tenants late in paying rent every single month, boilers stop functioning in cold wather, contractors refusing to carry on works unless you pay up more $$$ etc etc - how are you going to manage when the situation is half way round the world? Your agent would charge you $$$ for handling these matters so be prepared to pay for unforeseen circumstances).

Edited March 29, 2011 by ugoh

[pantieileen 2]

Don't underestimate the costs of maintaining a rental property in London.

- Estate agents' fees to market property for rental and to help you liaise with the tenants afterwards in case of maintenance issues

- Cost of furnishings/repairs

- The maintenance fees tend to go up a LOT over the course of years

- Inheritance tax which can be up to 40% should you (sway sway) pass away unexpectedly PLUS the inconvenience/expenses in dealing with your estate in a different country

All of the above need to fork out $$$ Especially the maintenance and everything is subject to GST of 20% (called VAT in UK).

Therefore what you take home might be reduced quite a bit.

Please go in with your eyes big-big.

(fyi I have been renting out my property in London for over 20 years but I bought at historical prices when I was working there - that's why I know how costly can be the maintenance costs as plumbers/builders/estate agents cost more than what you would expect in Singapore. And I also have my fair share of tenants absconding, tenants late in paying rent every single month, boilers stop functioning in cold wather, contractors refusing to carry on works unless you pay up more $$$ etc etc - how are you going to manage when the situation is half way round the world? Your agent would charge you $$$ for handling these matters so be prepared to pay for unforeseen circumstances).

now inheritance tax is for >325k gbp then u'll kana 40%. What we did was to donate some items off like cars/tv/furniture to churches to lower the value of the estate.

100% agree with all the fuss in handling overseas rental unit..imagine we paid 1k gbp just for disposal services when in Singapore i can just ask some poor Bangladeshi or PRC to come salvage items we are going to dispose. Sell off the house and took the estate so much easier

[ugoh 0]

now inheritance tax is for >325k gbp then u'll kana 40%. What we did was to donate some items off like cars/tv/furniture to churches to lower the value of the estate.

100% agree with all the fuss in handling overseas rental unit..imagine we paid 1k gbp just for disposal services when in Singapore i can just ask some poor Bangladeshi or PRC to come salvage items we are going to dispose. Sell off the house and took the estate so much easier

That's interesting. They also valued the furniture in the estate? I did'nt know that.

But yeah....better to donate it to the churches than to the Inland Revenue I suppose. 40% is no small matter. hehe don't buy a mansion or you will be donating to the govt (and to sponsor those EU immigrants like the gypsies who live off social security there).

If wishing to purchase UK property, don't buy those off the plan NEW developments. They are over-priced (commission to be paid to the agents/marketing staff). It's more worthwhile to make a trip down and purchase a resale property. They will usually be bigger and in better location than the new developments. And also the maintenance fees will be lower. The more swanky (upmarket) the development, the higher the maintenance fees and it goes up higher than the rate of inflation I am warning you all (that's from personal experience of holding property there for more than 20 years so I have seen it through a few property cycles already).

Edited March 29, 2011 by ugoh

[pantieileen 2]

That's interesting. They also valued the furniture in the estate? I did'nt know that.

But yeah....better to donate it to the churches than to the Inland Revenue I suppose. 40% is no small matter. hehe don't buy a mansion or you will be donating to the govt (and to sponsor those EU immigrants like the gypsies who live off social security there).

coz the house must be put up for sale either as furnished or unfurnished...so if got tv, furniture = furnished then valuer come and value higher and if sell higher and then exceed 325k then kana tax..stupid right?

[ugoh 0]

coz the house must be put up for sale either as furnished or unfurnished...so if got tv, furniture = furnished then valuer come and value higher and if sell higher and then exceed 325k then kana tax..stupid right?

Agreed. Stupid indeed. Orh yr lucky if you managed to get it valued below 325K then.

[pantieileen 2]

Agreed. Stupid indeed. Orh yr lucky if you managed to get it valued below 325K then.

325k is value of entire estate, inclusive declared jewellery, bank deposits....anyway worse than sgp as long as <9M ok..325k is so low

[ugoh 0]

325k is value of entire estate, inclusive declared jewellery, bank deposits....anyway worse than sgp as long as <9M ok..325k is so low

Ermm...Estate Duty is no longer applicable in Singapore. So no need to hide your jewellery, bank deposits, etc. It's safe from the taxman here. You might as well move your assets back to Singapore.

Precisely my point. 325K GBP is so low. And 40% is so much to give back to the British Govt. Somemore you don't even live there so you have not benefitted from the usage of the tax (eg healthcare, social security etc).

Since there are so MANY adverts for UK property touting how wonderful an investment it is currently.....that's why I am posting on this thread to share that there may be other factors that ppl may not be aware of in making this kind of investment. Due diligence by the buyer is ESSENTIAL.

If you borrow in SGD to pay a GBP home loan, you will take a hit if the GBP drops against the SGD. Although it's already v. low compared to before, but who knows? It might drop even further as UK is not without its economic problems.

[bepgof 20]

Why give up near to catch the far ones? Money is not the problem, problem is "too far to be reached". Look at Singaporeans' such investment over China, Malaysia, Thailand, can tell from paper. Either build half way stop, or kena breakin,etc.

Actually don't need to be "extra-rich" to consider overseas ppty

999 yr leasehold studio / 1 bedrm units in central London (size abt 350 sq ft) are going for about GBP 170,000. At the current exchange rate (1 GBP = 2.035 SGD), it works out to SGD 346,000. OCBC Bank currently provides up to 70% loans for UK properties (they are the only bank in Singapore offering such a loan right now). The loan is taken in SGD based on prevailing exchange rates at point of disbursement so it's not too "scary", i.e. won't fluctuate over the years based on exchange rates. And it's based on SOR + X% (currently 0.18%+ 2.5% = 2.68%).

Cash outlay (based on purchase price GBP 170,000 and buying GBP t/t rate 2.035) would be:

30% downpayment: SGD 104,000

3% UK stamp duty*: SGD 10,500

Lawyers fees: approx SGD 4,000

Total: SGD 118,500

Factor in another SGD 20,000 for up and down in exchange rate and incidental costs, comes up to about SGD 138,500.

*Stamp duty is 4% if purchase price is more than GBP 500,000.

70% loan would be about SGD 245,000

At 3% interest per year for 25 yr loan, mthly instalment is approx SGD1,200

Rental for these units is about 250 - 300 GBP/week (SGD 2000 - 2400).

Maintenance, etc abt SGD 500/mth

Ppty agt mgmt fees abt SGD 300/mth

So you take home abt SGD 1,200 - 1,600/mth.

If you get a unit in central London near the universities, no problem finding tenants. If students vacate during summer holidays, rent out to tourists. Of course you'd need to do the sums for other expenses like repairs, taxes (it's 20% income tax in UK, and the VAT in UK is 17.5% - that's the equivalent of S'pore's GST). But I don't think it's impossible to own a overseas ppty. Depending on how you calculate your rental yield, it may not seem as attractive as other properties in S'pore. But it does offer an alternative to local property investment if you have limited cash.

I think every investment comes with its own fair share of risks too, so you are really banking on the low exchange rate when you buy a UK ppty now, and hoping too that the exchange rate will go up in 5-10 yrs time, plus capital appreciation.

As a guide, a 99 yr leasehold studio apt in central London (Zone 1) 10 yrs ago was about GBP 100,000 and is now worth abt GBP 200,000. But exchange rates 10 yrs ago were almost 1 GBP = 3 SGD.

Just my two cents worth to share

Edited March 29, 2011 by bepgof