Research Report 2019/2020: 11 Australia & UK
01
Foreword
02
Australia
Melbourne 19 Perth 33 Sydney 37 Brisbane 40 Australia Purchase 45 Cycle Guide
1
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2
Making A Difference Our People 5 Our Mission 6 Our Portfolio 7 2XU 2I²FH 9 Testimonials 10
16
3
United Kingdom
04 05
57
London 62 Northern Powerhouse Manchester 71 Liverpool 78 Birmingham 84 UK Purchase 90 Cycle Guide
Appendix
97
Reference
98
69
CONTENTS
03
Research Report 2019/20 03Australia & UK Overview The global economic landscape is shifting. The year 2018 saw a marked departure from an economy that was neither too hot nor too cold, to one dominated by trade conflicts and interest rate concerns. China’s continued slowdown, the intensifying trade war tensions between US and China, Fed interest rate hikes and looming uncertainties in the Eurozone — these are clouding the global economy and affecting emerging markets caught in the crossfire. Closer to home, Malaysia and Singapore deal with political change and challenges within the housing markets.
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Beware the investment activity that produces applause; the great moves are usually greeted by yawns. — Warren Buffet
In Retrospect: Brick & Mortar vs Stocks The global economic backdrop paints a bleak picture, emphasising more than ever the importance of financial prudence and savvy investing. What you choose to invest in will determine if you achieve your long term financial goals. And here’s where the Asian obsession in brick and mortar warrants merit. While the exciting short term gains of the stock market prove captivating, the numbers show that property outperformed stocks by a
wide margin over a span of 25 years (see Figure 1). Specifically, the gains from the Malaysian market have more than doubled: on average, a Malaysian who invested $100,000 25 years ago would have gained approximately $143,000 in stocks vs $327,000 in property. To be clear, this investment guide by no means disparages the stock market or any other investment vehicle. Our intention is to encourage investors to minimise risk by diversifying their investment portfolio.
Singapore & Malaysia: Property vs Stocks, 1993 - 2018 What is your $100,000 investment in 1963 worth today?
FTSE KLCI FTSE STI Singapore Property
0
$100,000
$200,000
$300,000
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Research Report: Overview
Malaysian Property
Property: How the Markets Measure Up Research by Knight Frank has found that property remains a preferred investment for the ultra-wealthy despite the growing popularity of cryptocurrency.
Australian and UK property, in particular, hold the greatest allure for Malaysian and Singaporean investors. While largely due to familiarity and sentiment, this is also due to the marketsâ&#x20AC;&#x2122; resilience and strong performance in terms of capital appreciation and returns.
NZ UK Australia Hongkong Malaysia US Singapore
House Price Index by Country, 1995 - 1H2018 500
400
Over the last 15 years, UK and Australia charted the strongest performance in house price growth after New Zealand (Figure 2), with London and Melbourne demonstrating the highest increase among the leading cities in both countries (Figure 3). Manchester and Sydney came in at an impressive second place with house price growth well above the national average.
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House Price Index (UK & Australia), 1995 - 1H2018
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Making Informed Decisions The strength of the housing market in these cities is unsurprising. These major cities have benefited greatly from large private and public investments into infrastructure, leading to jobs and population growth. With rapid economic expansion and population growth comes a surging demand for housing, driving growth in house price over time.
This investment guide tracks the economic, population and housing market trends in some of the core cities of Australia and UK, and is the fruition of many hours of research. Its main aim is to serve as a reference point for investors looking to diversify their investments to hedge against uncertainties in the local and global markets. All data provided within are researched by our own team and is accurate at time of writing and print.
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Australia Housing is one of Australiaâ&#x20AC;&#x2122;s largest assets and the foundation of its household wealth, financial system and economy. The Bank of International Settlements (BIS) pegged Australia as having the 6th highest rise in annual property prices in the world over the last 5 decades, with house prices surging 6556% since the 1960s at an average increase of 8.1% per year. Indeed, the market saw a moderation in 2018 with Sydney being the hardest hit and, to a lesser extent, Melbourne, Brisbane, and Perth, due to stricter regulatory
and lending measures which have affected investor appetite. Yet, the Australian housing market remains underpinned by strong population growth which directly corresponds to demand for housing, especially in Melbourne, Sydney, Brisbane and, increasingly, Hobart. Australiaâ&#x20AC;&#x2122;s population grew by another 1.6% to 24.7 million in the 12 months to the end of Sept 2017, adding another person every 1 minute and 26 seconds.
Population Growth
Rental Growth
Price Growth
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Investment Indicators
AU/NZ House Price Growth Among Highest in the World
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Index, 1970=100
NZ
6000
UK Australia
5000
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4000
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Germany
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Data by the Australian Bureau of Statistics (ABS) shows nett overseas migration (NOM) increased by 27% y-o-y, driven by the governmentâ&#x20AC;&#x2122;s acceptance of skilled migrants. Migration and a skilled workforce will boost productivity and the overall GDP, and continue to drive the need for housing, education and transportation. Research by the Australian Treasury and Department of Home
Japan
Italy
Singapore
Spain
France
Germany
South Korea
UK
US
Switzerland
Canada
Mexico
Malaysia
Australia
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Affairs shows that skilled migrants add to the countryâ&#x20AC;&#x2122;s wealth and benefit the countryâ&#x20AC;&#x2122;s economy more than existing residents, hence the governmentâ&#x20AC;&#x2122;s positive reception towards immigrants.
Quick Facts: Australia . . . . .
Strong governance, banking & judicial systems 27 Years recession-free growth Strong population growth driven by migration Good returns: strong property price growth Weaker & more accessible currency
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1.22
1.0
1.39
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2017 Annual Percentage
United Kingdom The clockâ&#x20AC;&#x2122;s ticking and itâ&#x20AC;&#x2122;s crunch time for Brexit. Concerns are mounting as to whether the UK will be able to weather its â&#x20AC;&#x2DC;divorceâ&#x20AC;&#x2122; from the EU. For sure, there will be significant shockwaves affecting the British economy and the housing market, but we are positive that the political and economical turbulence, and slowdown in the property market will be a short-term one. What would affect the real estate market significantly, however, will be the agreements on future trade and migration arrangements, as a reduction in immigrants could result in labour shortages and further inflation. A shortage in labour in the construction sector will cause a slow-down of on-going developments.
This is no small matter. Brexit or not, one of the UKâ&#x20AC;&#x2122;s biggest issues has been the critical undersupply of housing â&#x20AC;&#x201D; research shows that England is facing a backlog of 4 million homes! The construction sector has already been hard hit, with worker shortages at a record high earlier in 2018. Further hits to the construction sector will inevitably cause a reduction in supply and increase in price. Affordability constraints coupled with lifestyle changes mean continued growth for the build-to-rent/ private rental sector. The number of households living in private rental housing has doubled over the last decade, and a Knight Frank report shows that 1 out of 4 households will be renting privately by the end of 2021.
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Investment Indicators
Economic Growth
Population Growth
Rental Growth
Price Growth
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Housing Supply: A Growing Crisis in the UK (Shortage of 4 Million)
An estimated 340,000 new homes are needed per year in England.
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Ultimately, and, despite the spectre of Brexit, UK property offers comparatively strong returns and lower risk compared to other countries. This, combined with the much weakened pound and low interest rates will continue to underpin demand from overseas investors. Meanwhile, property price inflation
has slowed down, rising at the slowest annual rate for almost five years, dragged by falling London property values. House price growth is now at 0.5% in the year to Dec 2018 compared to 2.6% in 2017. Needless to say, this relative affordability, coupled with the cheaper currency, has been a real draw for investors.
UK House Prices Since 1952 200
160 140 120 100 80 60 40 20
UK house price £-nominal (â&#x20AC;&#x2122;000)
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In light of the circumstances, investors have become more risk averse, hence, investments with long-term and secure income streams have become more highly-prized. The investments that fall within this category are usually commercial property, e.g, offices, purpose-built
student property and retirement/care housing. Institutional investors from Singapore, such as GIC, Mapletree, Singapore Press Holdings and the Malaysian Retirement Fund (Incorporated) (KWAP), have invested heavily in these asset types, proving the continued viability of such investments.
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UK House Price & Rental Forecasts 2018-2022 (%)
%
2018
2019
Rent
2.5
2.5
Price
1.0
2.0
2020
2021
2022
Total
2.5
3.0
3.0
14.0
3.0
3.5
4.0
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On the residential front, cities like Birmingham in the West Midlands, and Liverpool and Manchester in the northwest, have charted the best performance in house price growth. The Hometrack UK Cities House Price Index (Nov 2018) places Manchester as the top city for annual house price growth (6.6%), with Liverpool (5.2%) and Birmingham (6.3%) in the top 5.
In short, uncertainties are inevitable, but there will be recovery and opportunities, too. Because, underneath the broiling Brexit surface, is the continued lack of housing stock that will help prop the market from collapse. After all, the need for housing is not going to go away, and neither will opportunities for property investors.
Quick Facts: United Kingdom . . . . .
Housing undersupply: backlog of 4 million houses Continued growth of the private rental sector Weakened pound (30-year low) means the UK is still â&#x20AC;&#x2DC;on saleâ&#x20AC;&#x2122; Fast growth in cities like Manchester, Liverpool & Birmingham Purpose-built student property & care homes defy circumstances with long-term income stream
Get a complimentary copy of our UK & Australia Property Investment Guide at Cornerstone International Centre @ KLCC. Call 03-2162 2260 to make an appointment to collect yours today!