Tag Archives: london
Sau Paulo has the highest property taxes for real estate investors
As the rate of price growth slows in many global city markets, transaction costs and taxation are becoming increasingly important considerations for investors, a new analysis suggests. With slower price growth forecast in a number of prime city markets, investors are looking more closely at the cost side of the investment equation, according to the report from international real estate firm Knight Frank. While there may be a number of factors behind the choice of location, the research shows that the tax burden across the cities in this report varies considerably both in amount and extent. The tax costs range from as low as 3.5% or 3.6% of the property price in year five in Monaco and Dubai respectively, to over 30% in Sao Paulo. Despite encompassing a wide variety of cities and policies, a number of common themes and trends have arisen throughout the research. For example, in some cities, most notably in Geneva and in Mumbai, there are significant legal restrictions for non-residents who wish to purchase property so it is important to consider these before an investment decision is made. In some jurisdictions, the tax costs are represented primarily by acquisition taxes, notably in Monaco and Dubai, while in most other jurisdictions, tax costs usually comprise acquisition duties payable when purchasing the property; wealth or yearly taxes when holding the property; taxes on rental income, and taxes on disposal of the property, including tax on gains and/or duties at the point of the sale of the property. While in some countries the relative/percentage tax costs are almost equal for both US$1 million and US$10 million properties, in others the tax costs of holding the US$10 million property are almost double those for US$1 million property, the report points out. ‘Finally, it is important to note that some taxes, such as inheritance/gift taxes have not been taken into account in this analysis. Nor were home country taxes. Moreover, we have assumed that investors purchase in their personal name but that might not necessarily be the most efficient from a host or investment country’s tax perspective,’ the report says. However, overall property costs remain largely the same for both a $1 million and $10 million property in many cities such as Sao Paulo, Mumbai and Geneva whilst others see a significant reduction in percentage terms at the $10 million level such as New York and Paris. Reviewing the tax costs across the 15 main cities shows that taxation is highest in Sao Paulo, at both the US$1 million and US$10 million levels, where investors are taxed at 31.5% of the sale value at year five. Hong Kong and Sydney also rank highly. An investor purchasing a US$1 million property in Hong Kong is taxed 22.4%, whilst at the US$10 million level investors in Sydney are taxed 26.0%, in both cases as a percentage of year five price. Monaco offers non-resident investors the lowest rate of tax at 3.5% as a percentage of… Continue reading
Buy to let industry hits out at extra property tax to be introduced next year
There has been a furious reaction to the UK Government’s plans to introduce an increased rate of Stamp Duty for property investors purchasing buy to let properties and those buying a second home from April 2016. Stamp Duty will be calculated at an extra 3% on top of the basic rate if a property is for buy to let purposes, bringing in some £880 million for the Treasury by 2020. But large corporate investors will be exempt from the charge, the Chancellor of the Exchequer has announced. But the industry is furious, saying that it will result in house prices being pushed up between now and next April as would be landlords wanting to extend their portfolios do so before the new rate comes in, then it could result in a catastrophic drop in buy to let investment which would in turn force up rents due to a shortage of supply. David Cox, managing director of Association of Residential Letting Agent (ARLA), described the move as a ‘catastrophe’. He pointed out that it is a bitter blow to landlords coming on top of recent changes to mortgage interest tax relief and the annual wear and tear allowance. ‘Increasing tax for landlords will increase rents and reduce property standards for tenants. To make owning a BTL property financially viable, landlords will need to pass on the increased stamp duty costs to tenants, who will in turn see less spent on maintaining their property and of course see increased rents,’ said Cox. ‘The changes will also deter new landlords from entering the market, pushing the gap between dwindling supply of available property and growing demand even further apart, which will also in turn push up rental costs. In London, where demand is so strong and last year’s stamp duty changes hurt, rather than helped, will see tenants having the greatest burden to bear,’ he added. Richard Lambert, chief executive director of the National Landlords Association, believes that it will cut off future investment in private properties to rent. ‘The exemption for corporate investment makes this effectively an attack on the small private landlords who responded to the housing crisis by putting their own money into providing homes by the party that they put their faith in at the election,’ he said. ‘If it’s the Chancellor’s intention to completely eradicate buy to let in the UK then it’s a mystery to us why he doesn’t just come out and say so,’ he added. David Gibbs, partner at Alliotts Accountants, pointed out that not only will buy to let investors be hit with additional stamp duty on purchase but also a requirement to pay capital gains tax within 30 days of a sale. ‘Investors will face a hike of 3% on stamp duty for all buy to let purchases from 01 April 2016. That means stamp duty rates will run from 5% for property over £125,000 up to 15% on property… Continue reading
UK govt announces details of £7 billion house building priority programme
The UK government has announced a £7 billion programme to make house building a priority which includes more than 400,000 affordable homes. Chancellor George Osborne called it the biggest affordable housing programme since the 1970s when he made the announcement as part of his Autumn financial statement. It will include £2.3 billion paid directly to developers to build 200,000 starter homes aimed at first time buyers. They will be offered at a 20% discount on prices up to £450,000 in London and £250,000 across the rest of the country. He also announced £200 million for 10,000 new homes that tenants can live in for five years at reduced rents while they save for a deposit. They will then have the first right to buy the home. Then there will be £400 million to help build 8,000 specialist homes for older people or those with disabilities, the Chancellor also confirmed. But not all of this is new. The starter homes package has already been flagged up and it is well known that the government wants to build millions of home in the next five years. Nevertheless the programme has been widely welcomed, although concerns have been expressed about the focus on home for sale, although the new homes that tenants can buy after five years will also be welcomed. Among those concerned about the lack of help for the rented sector is Adam Challis, head of residential Research at JLL. ‘The Chancellor's support for 400,000 new affordable homes is welcomed at a time when there is a dire need to expand housing construction right across the country,’ he said. ‘This Government's narrow focus on home ownership is a serious concern however. Support for the private rented sector and social housing is vital to protect the financial stability of millions of households, for whom ownership is beyond reach,’ he pointed out. ‘The private rented sector is the fastest growing tenure in the UK and deserves direct support through the planning system and through the release of public land. Social housing investment provides vital security to more vulnerable households, while also reducing the heavy current reliance on temporary accommodation,’ he explained. ‘Housing delivery desperately needs long term planning rather than short term interventions. They are disruptive to construction programmes and ultimately weaken the system of delivery. Housing should be viewed as infrastructure that protects household stability and supports economic growth,’ he added. Developers will welcome the announcement by the Government of funding for new housing including starter and shared ownership homes, according to Claire Fallows, partner at Charles Russell Speechlys. ‘Questions remain, however, as to whether local authorities will continue to insist on the provision of social and affordable rented units on larger housing sites and, if so, whether Housing Associations will have the funding available to acquire those units. Flexibility by authorities will be required to ensure that housing delivery is not stalled,’ she said. Continue reading
