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Saturday, July 11, 2009

Consultant: Weigh risks when buying

A Malaysian property consultant says Malaysians must consider the risks and challenges when buying British properties.

Kumar Tharmalingam ... Britain can be an expensive place to maintain a property.

Hall Chadwick Asia chairman Kumar Tharmalingam says unless one have children studying abroad, Britain can be an expensive place to maintain a property, more so London.

“If you buy a landed property, you have to have somebody to occupy it. Otherwise you may get squatters moving in and you cannot move them out without a court order. The only advantage of buying London property is its capital appreciation and one may be looking at between seven and 10 years before you get real appreciation in value to cover the cost of maintenance,” says Kumar.

He related a friend who had a condominium in Victoria that come with concierge and security. His monthly service charge was £460. He sold it after 4 years as he could not get more than £900 a month rental and half of that goes towards payment of service charges. It is a cost that the landlord has to bear, among other things.

Although Kumar’s friend makes a small profit, the service charge increases by 10% annually, but not the rental. So management is an issue. An agent will charge 10% of the amount to manage the asset and one month rental every time you have a new tenant. The returns on investment is rather unattractive but the capital gain is attractive.

“What buyers are aspiring today is for London prices to go back to pre-2007 value and our exchange rate going back to RM7 a pound.

“But you will be caught unless you pay cash or take up a very small loan over a short tenure because you will be paying in pounds. In addition, Britain has a captial gain tax of 30%.

“If you take all this into consideration, I prefer to buy in Sydney or in Singapore where you are able to monitor your investments more easily. It is also cheaper to maintain. There is also the same value upside but without the currency risk,” says Kumar.

He says the British economy has taken such a deep hit that it may never regain the financial status of pre-2008.

He says prices in Manchester, Liverpool and Birmingham have almost halved. Rates and taxes will be lower, but the resale value will also be lower.

Kumar suggests interested parties check out a website address, one of the country’s most popular property website. It captures every sale, in any district in Britain.

“If somebody offers you a property, you can check the website to see the transacted prices of other properties along the same street by typing the address or street name. You will be able to see the most recent property sold in that street, the type of property, the price paid and whether it is leasehold or freehold. You can even check how far the prices have gone up over the years. That way, you can check if anyone is trying to slap you with a 2007/2008 price.

Agents don’t like websites because you can check yourself. You also need to know what people have paid for in that locality. The price cannot be very far from the other.”

Aspiring buyers must ask three questions: Is that a holiday home? Is it for the children’s education? Is it for investment?

“It can be all three. If it is a holiday home, then somebody must manage it so that it does not get broken into when you are not there. If it is for the children’s education, you can rent it after your children graduate. North of the Thames is always better than south,” says Kumar.

“Another thing to consider is culture. Malaysians are spoilt when it comes to apartment living. We want carpets, high ceiling and en suite bathrooms. These are only found in new properties so forget about the Georgian variety, which may only have a bathroom for an entire three-room house. Look for newer apartments which are better suited for Malaysians. There is no cultural shock.”

By The Star

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