Treasury Considering Further Taxes on Foreign UK Property Owners

This article by Outlaw.com on November 1st, 2013 tells us about  George Orborne's statement to impose additional taxes on foreign owners of UK properties as revealed by press reports.

Sky News has reported that the Treasury is "actively investigating" imposing capital gains tax (CGT) on foreign owners who resell a UK property. Non-residents are currently exempt from CGT on property sales, while UK residents are subject to CGT on profits made when reselling all but their main homes. CGT is charged at 18% for basic rate taxpayers and 28% for higher rate taxpayers.g

A spokesperson for the Treasury told Out-Law.com that the report was "pre-Autumn Statement speculation".

According to the report, bringing foreign-owned properties into the scope of CGT would not raise significant sums, but would address concerns about favourable treatment for overseas property investors. Foreign property owners are liable for CGT in many other European countries.

Around 70% of the most expensive newly-built properties in London are purchased by non-UK citizens, and around 65% of these buyers intend to rent their properties rather than live in them, according to estate agency Knight Frank. The Office for National Statistics (ONS) said that house prices in London rose by nearly 9% in the year to August, compared with around 2% elsewhere in the UK.

Responding to the report, the British Property Federation said that the reason behind this increase was the lack of supply, not foreign buyers. Penalising people who wanted to invest in the UK would lead to fewer homes being built, as would the related uncertainty, its chief executive Liz Peace said.

"It makes no sense to slap kneejerk taxes on people who want to spend money in the UK and contribute to the UK economy," she said. "Uncertainty of this kind is hugely damaging to Britain's image as a country that is 'open for business', and far outweighs the paltry sums which this tax would raise – indeed, it is only with foreign investment that many London schemes are able to go ahead."

Property expert Suzanne Gill said that the introduction of CGT on these transactions would be "a real issue, administratively" for the tax authorities.

"An increase in stamp duty land tax (SDLT) would be less burdensome, and must be more likely: recent changes in rates have not affected the property market," she said.

"What does affect the market is uncertainty. An SDLT announcement can be quickly absorbed, but a period of consultation over CGT will have an impact - especially following on from the introduction of the annual tax on enveloped dwellings (ATED) earlier this year," she said.

ATED came into force on 1 April this year, and the first payments were due in October. It applies to company-owned residential properties valued at over £2 million, and is intended to ensure that people who purchase high value residential properties in the name of a company, partnership or other 'non-natural person' pay their fair share of tax. Dwellings purchased as part of a genuine property rental business, held for charitable purposes or run as a commercial business are exempt from the charge.

Article Source: http://www.out-law.com/en/articles/2013/november/treasury-considering-further-taxes-on-foreign-uk-property-owners-according-to-press-reports/

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Buying a Holiday Home is a Huge Waste of Money

This engaging article was posted in Yahoo Finance UK and Ireland on August 30th, 2013 suggests reasons not to consider buying a holiday home because it is the biggest waste of money ever.

As millions of us come back from holiday, many will dream of owning a home in the sun - crazy property-struck fools that we are.

Right now, 5.4 million Britons are considering buying abroad, according to HSBC, even more than before the financial crisis. Have we learned nothing?

Spain and the Balearic Islands are the top dream destination, attracting 30% of buyers, followed by France at 16%. Italy, Portugal, Greece, Cyprus, the Caribbean, Florida and Turkey are also dream home hotspots.

If you've been seduced by dreams of a place in the sun, here's a measured word of warning. You've lost your mind, because buying a holiday home is the biggest waste of money ever.

Twice yearly, really

Before you protest, you happy holiday homeowners, here's the proof. The average owner visits their holiday or second home just twice a year, according to new research from household insurer Schofields.

They didn't plan it that way. Two-thirds expected to visit their bolthole far more when they originally bought it, but never get round to it.

Work, family commitments and lack of cash were the main reason people leave their holiday homes empty and forlorn, although an entrepreneurial 17% said they did so to maximise guest bookings.

Sun-baked and half-baked
 

A holiday home is an alluring dream. I regularly find myself browsing Spanish property websites to see how far prices have fallen, and whether they have fallen enough for my budget.

Prices are lower, skies are bluer. What's not to like?

But like most dreams, it eventually bangs its head against hard reality. The truth is, you've got too many other things to do.

Curse those jobs and families.

Bills, not thrills

You won't get to that holiday property as often as you like, but you will keep paying for it. 

First, there's the purchase price. Yes, Spanish holiday home prices have fallen more than 30% in the last five years, but you're paying in sterling, which is also down 20% against the euro.

Then there are local property taxes, legal fees, mortgage administration charges, and that's only the beginning. Your expenses don't stop when you exchange contracts, they're just getting started

You have to furnish your exotic new financial liability. Do it up. Pay for insurance. Carry out maintenance and repairs. Cover utility bills. Pay local taxes. You may have to hire a cleaner or stump up a monthly service charge.

And that's before you factor in the cost of actually getting to your property (although that won't be so expensive, as you're only going to visit twice a year).

X-rated expat tales

Plus there's always the chance you will end up buying the holiday home from hell, and lose everything. I recently spoke to British expats whose Andalusian retirement dreams were destroyed in an instant when the local police called to explain, not very politely, that they were the proud owners of an illegal home.

Nobody told them, not even their lawyer, that the developer hadn't got planning permission. 

Some lost hundreds of thousands of pounds. Several in the Valencia region saw their home torn down before their very eyes, without compensation. Others are stranded in the deserts of Murcia, with no running water or electricity.

Expat pain isn't restricted to Spain. Thousands of British homeowners in Cyprus risk losing both their holiday home and their UK property, in a vicious legal dispute over mis-sold mortgages.

I asked one couple, who were waiting to hear if their home in Almeria would be torn down, what advice they would give to the current generation of Spanish property buyers.

Their answer was succinct: "Forget it. Stay at home or go elsewhere."

Oh, I give up

Well, I've tried. I've done my best to make you see sense. It won't work. You still dream of a place in the sun, and in my dafter moments, so do I. So how do we make it match up to reality?

Before you go any further, ask yourself these questions:

1. Do you really want to go to the same place on holiday, year after year? Can you afford the flights? Do you have the time? Don't you want to see the rest of the world?
2. Even if you do want to go to the same place, wouldn't it be easier and cheaper to rent a holiday home instead, or stay in a hotel?
3. Can you afford all the costs of running a holiday home, including mortgage, insurance, maintenance, repairs, service charges and taxes, not to mention those twice-a-year flights?
4. Have you done your research? Do you know what similar properties are selling for? Is the local council planning to build a municipal waste incinerator in your backyard?
5. Is that bargain property really a bargain? Cheap isn't always cheerful, especially if you're stranded in a half-built complex a mile from the nearest communal water pump, or squeezed between the autoroute and municipal tip. Location, location, location are key words in any language.
6. Have you taken the right advice? You must appoint an experienced English-speaking lawyer, with no connections to your seller, estate agent or property developer, to avoid conflicts of interest.
7. Is your property legal? Your lawyer must confirm you have got all the necessary planning permission, licenses and consent. You must also pay for an independent valuation, even if buying in cash.
8. Is your mortgage in the right currency? If you earn your income in pounds, but your mortgage is in euros, you are at the mercy of currency swings, as many expats discovered when the pound collapsed after the financial crisis.
9. Are prices still in freefall? Spanish house prices could still plunge another 25%, according to newsletter Spanish Property Insight.
10. Do you plan to retire there? Visiting your property twice a year makes a lot more sense if you plan to stay for six months each time.

So what do you think? Do you still want a place in the sun?

Article Source: http://uk.finance.yahoo.com/news/buying-holiday-home-huge-waste-082409006.html

UK Property Prices Rise By 5.5%

This article by Natasha Al-Atassi of Select Property on August 22, 2013 reveals that properties in the UK rose in price by 5.5% between August 2012 and August 2013 according to Rightmove.

Summary:

• House prices in the UK are £249,199 on average
• This is an increase of 5.5% in August 2012
• London saw the greatest price increase, rising 10.2% in the 12 months

Property values in the UK have risen by 5.5% over the last year, according to recent figures from Rightmove.

In the property search website’s latest House Price Index, it revealed average property prices rose significantly between August 2012 and August 2013, taking the typical asking price to £249,199.

According to figures, the average cost of a detached home in the UK is £364,254, up by 4.2% year-on-year, and semi-detached properties are typically £204,392, an increase of 3.8% over the 12 months.

Rightmove also reported terraces rose in value by 4.4%, taking them to £188,445, while apartments average £209,652, an increase of 5.9% over the year.

The area of the country with the most expensive average prices is London, which saw prices grow by 10.2% over the year to £501,067.

Comparatively, costs in the north were the cheapest in the UK with values averaging £149,362 in August, a rise of 0.8% over the year, followed by Yorkshire and Humberside’s low prices at £154,237, and the north-west at £164,503.

These results come after Knight Frank and Markit’s released findings that showed 18% of British homeowners believe their property increased in value in July, which is the fifth consecutive month households have thought real estate values in the UK are on the rise.

Article Source:  http://www.selectproperty.com/2013/08/rightmove-uk-property-prices-rise-by-5-5/