Expats investing in property around the world need to consider real estate taxes as well as currency exchange and the shifting fiscal environment, according to a new report.
It analyses the costs for foreign individuals buying a property in 15 key cities around the world as well as the holding and selling costs over a five year period from 2015 to 2020.
The global tax report from independent global property consultancy Knight Frank and Ernst & Young also explains how changes in policies aimed at slowing certain markets, particularly in Asia Pacific, can impact the decision on where to invest.
“Policymakers in many markets have used tax as a macro-prudential measure to slow down booming markets and address domestic issues of affordability. As an important strand of the so called cooling measures, the resulting shifting fiscal environment has had implications for investors,” said Nicholas Holt, head of research at Knight Frank Asia Pacific.
“Not only have we seen additional taxes on purchase, but also changes in capital gains and sellers stamp duties, all of which can have a significant impact on total returns. When looking across borders, investors should therefore not only consider market, currency, management and liquidity costs, and risks, but also the tax implications over the lifetime of their investment,” he pointed out.
Currency shifts, wealth flows, tax changes and fluctuating levels of supply and demand have all had a bearing on the performance of prime residential markets worldwide. As the rate of price growth slows in many global city markets, transaction costs and taxation are becoming increasingly important considerations for investors.
London sits neatly in the middle of the 15 cities when analysing both property costs and tax costs. Foreign investors are charged 7.8% and 5.4% respectively in property costs when buying at the US$1 million and US$10 million level. Looking at the tax costs, including stamp duty land tax, investors buying in their own name expect to pay 9.7% for $1 million investment and 20.7% for $10 million.
Sydney follows closely behind London’s statistics in property costs with foreign investors being charged 9.2% and 5.2% respectively in property costs when buying at the $1 million and $10 million level. With tax costs however investors expect to pay 18% for $1 million investment and 26% for $10 million.
When analysing those cities where property costs are highest, Knight Frank and EY have determined Paris at 15.3%, Berlin at 13.3% and Geneva at 12.6% to impact foreign investors with the highest property costs at the $1 million mark. Geneva replaces Paris when considering property costs at the $10 million level, charging investors 13.2% of the five year sales price, followed by Berlin at 11.3% and Monaco at 10.8%.
Considering the tax costs across the 15 cities, it is a different story. Taxation is highest in Sao Paulo both at the $1 million and $10 million level, costing investors 31.5% over the five year period. It is followed by Hong Kong. Investors here are charged 22.4% of the $1 million property cost over a five year period but Sydney replaces Hong Kong at the $10 million mark charging foreign buyers 26% in tax.
The report explains that policymakers are increasingly using tax and property costs as a means of regulating housing demand, controlling affordability and generating revenue and suggests that it will be interesting to see how the current situation in each of the 15 cities will change in the coming years.
“As more of our investors become global citizens, the importance of understanding true property costs becomes even greater. The traditional hubs of the UK and Australia have remained the clear favoured residential investment destinations for our Malaysian investors,” said Dominic Heaton-Watson, senior manager for international project marketing at Knight Frank Malaysia.
“Main drivers include education, security, lifestyle and capital appreciation. Despite some recent alterations to the UK’s taxation policy, London very much remains in the middle of the pack on a global taxation scale and offers a safe haven destination from global fluctuations,” he explained.
“We expect Malaysian investment appetite for good grade, well located international property to continue and Knight Frank will be well placed to offer the best in class developments,” he added.
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The advantages of Luxembourg life insurance With a clear and detailed legal framework, life assurance is internationally recognized thus providing a safe and efficient asset transfer vehicle. In addition to its general characteristics, Luxembourg life assurance offers a number of advantages. A legal framework providing the policyholder with the highest levels of protection A client of an insurance company in the Grand Duchy of Luxembourg benefits from a legal protection regime unique in Europe, adding a true advantage in asset security. The principles established by Luxembourg regulations are as follows: The choice of a custodian bank is subject to the supervisory control of the insurance commission authority (CAA – Commissariat aux Assurances). A tripartite agreement must be signed between the Luxembourg insurance company, the custodian bank and the CAA. The custodian bank is required to keep the client’s assets segregated from its own and is legally bound to protect the interests of the policyholder, by reporting to the CAA any irregularity of the insurance company likely to weaken the Super Privilege. The “Super Privilege” ensures the rights of the policyholder in the event of the company’s default, and takes precedence over all other creditors (Luxembourg Treasury, Social Security, company employees). […]
Luxembourg Life Insurance – 2.5%
This property is located in a busy vibrant part of Dublin City Centre, enjoying all the conveniences of the City Centre, in the Christchurch area and very close to Temple bar. The apartment is on the 1st floor and there is also a lift. Generally it’s in good condition throughout. The Hall, double bedroom and lounge areas are all laminate flooring, the kitchen and bathroom are tiled and the single bedroom is carpet. There is storage heating throughout. Both bedrooms have built in Wardrobes and there are two good size hall storage cupboards. A little downside to this one is there’s an automatic gate just under the window of the living area which makes noise on opening (it does not affect the bedrooms) and also the light is not great due to large buildings facing this apartment. However the upside is there is a lovely roof terrace (the first photo on the dropbox I sent you) located on the same floor which the two bedrooms overlook – this terrace could be used for BBQ’s etc and is an added bonus. The building is about 18-20 years old. In this area I believe it’s a perfect for a buy to let […]
talbot st, dublin
140k€ – 8% – Talbot Street
Description of this p2p loan This 40k peer to peer Loan is for a house near Miami evaluated at 80k$ recently. Investor is closing the sale shortly, wants to do some home improvements and resell it in a few months. Zillow link to the property here Investor Profile :
8701 SW 141st St APT C5, Village Of Palmetto Bay, FL 33176
40k$ – 10% – Best p2p Loan
Great investment! If you are looking for a place called home or to build your investment portfolio, this home has both.! Offering a nice sized lot with a fenced in back yard and a covered patio. The 2 bedrooms and 1 bath, a family room and eat in kitchen give you lots of space to move around. The all tile flooring makes a nice touch too! Facts Lot: 6,072 sqft Single Family Built in 1955 Cooling: Central Heating: Wall Features Flooring: Tile Parking: Off street Find out more about the Property Market Overview, Transactions Cost and Processes etc…
E Crawford St, Tampa, FL 33610
80k$ – 12% – Crawford st, Fl
CORUM Convictions is for the 3rd consecutive year SCPI with variable capital offering rates the highest distribution to its partners with 6.31% in 2015 . In addition, retained earnings strengthened at 1.3 months of dividends CORUM late 2014. Convictions was created in 2012 with a value share of € 1000. The value from your REITs rose in June 2013-1020 € and then € 1,030 in June 2014. Both indicators that position on three years CORUM passed Convictions like that SCPI outperformed the market. What strategy investment and management followed by managers to achieve these results? An innovative strategy Convictions CORUM has adopted a strategy open and opportunistic investment. No on a thematic specialization (offices, shops, activity, health …) or geographic area (Paris, France, Germany …). Being freed of any real estate marketing, managers can seize opportunities offering themselves in different markets without being prisoners a ring or a sector to adverse investors. The ability to invest in other market becomes a fundamental parameter of the immediate and future profitability. Diversification consequent is another positive effect of this Strategy: CORUM offers exclusivity Convictions a truly diverse heritage. Look beyond the real estate market analysis the economic conditions of a city, a […]
REIT – 6.4% – Corum Conviction
Description This 80k Loan is for a house near Miami evaluated at 160k$ recently. Investor is closing the sale shortly, wants to do some home improvements and resell it in a few months. Zillow link to the property here Investor Profile :
Village Of Palmetto Bay, FL 33176
80k$ – 10% – Loan
11-apr-16 The apartment is in Richmond Street. It is located at the back of the development. The condition is good and it is currently rented at €1200pm until June 2016. The market value however is in the region of €1500 per month. There is an allocated parking space and also attic space as the apartment is on the 3rd floor. I have attached some photos however they are not great (received from the agent who let the apartment) so we can arrange to show you the property at a time that suits. The price the vendor is seeking is €230,000. The management fees are in the region of €1650 (waiting on confirmation on this). The kitchen and the bathroom are both well used and need attention but nothing structural. With a good refurbishment (which we can arrange) costing between 5 and 6k we estimate this apartment will generate at least 1500 per month. Presently 2 beds in ok condition rent for 1400 without parking and usually one bedroom is substandard to the other which in this particular apartment is not the case. The yearly management fee is 2,200 which is at the upper end but is reflected in the […]
richmont street, dublin
230k€ – 7% – Richmond Street
This property is located in Belgium. Pagodas near the Japanese Tower , the 4th floor and top floor of a small building with low charges , nice apartment of ± 95m² consisting of: entrance hall with security door , cloakroom , wc , living 35m² , kitchen, 2 bedrooms, bathroom, terrace. Transaction costs + repairs are evaluated at 23,950€ Besides rental income , our experts believe it is reasonable to expect a capital gain 3.5% / year for 10 years considering the Belgium property market : Property prices in Belgium are rising again, after a short-lived decline in the first half of 2014. Nationwide, Belgian house prices rose by 1.13% (1.23% inflation-adjusted) y-o-y in 2014, based on Statistics Belgium figures. On a quarterly basis, house prices increased 1% (1.1% inflation-adjusted) in Q4 2014. more to be found here YOUR ANNUAL TOTAL RETURN : ( Rental income + gain annual average) 4.24% + 3.5 % = 7.74%
165k€ – 8% – LAEKEN
This apartment is over 800 sq feet approx. Built 12 years ago – it’s a development in an old Georgian Building with the front remaining as Georgian and the interior modernised. It’s on the 4th floor and theres a lift. Enter the hall and the bathroom (with bath) is to the left – to the front are each of the 3 bedrooms – all 3 are double sized – (all with built in wardrobes) and to the right is the very large living/dining area which has the kitchen off. Find out more about the Property Market Overview, Transactions Cost and Processes etc…
Mountjoy Square, dublin