Global Property Guide - News and Discussions
Foreigners to pay tax on property fund investments in Ireland
Non-residents will need to pay a 20% withholding tax on their investment in Irish property funds from next year, according to the Irish finance ministry. The government has introduced the change in the tax law to dissuade foreign investors from using 'structures' to minimize tax bills. Foreign investors who have been buying up swathes of Irish property in recent years through two types of property funds - Irish Collective Asset-management Vehicles (ICAVs) and Qualifying Investor Alternative Investment Funds (QIAIFs) - will be most affected by the new withholding tax, experts said. Nearly ?12 billion (US$13.06 billion) of Irish property assets are held in both types of property funds. The government is planning to introduce stringent anti-avoidance laws to take action against investors who try to circumvent the tax. Certain categories of investors such as pension funds, life assurance companies and other collective investment undertakings have been exempted from the new tax, the finance ministry said in a statement. Experts added that since non-residents accounted for 71% of property sales in 2016, uncertainty around the legislation that governs QIAIFs and ICAVs had already delayed well in excess of 100 million euros ($109 million) worth of deals. It is predicted that the new tax will lead foreign investors to move billions of euro of Irish property assets out of funds. "The proposed changes will materially alter the tax treatment of Irish property funds," William Fogarty and Andrew Quinn, tax lawyers with Maples and Calder in Dublin, said in a note to clients recently. "Investors may wish to restructure their Irish real estate holdings in order to utilise standard corporate structures, or alternatively, to develop a real estate investment trust (Reit)."
Portugal to levy tax on real estate fortunes, will affect foreign buyers the most
The Portugalete government will introduce a tax on property fortunes above ?600,000 (US$661,000) to help pay for pensions. The tax has invited strong criticism from the real estate sector as experts fear it will directly impact foreign investment as overseas buyers, particularly from other European Union countries, make up a major chuck of investors purchasing luxury properties in Portugal. The tax was included in Socialist Prime Minister Antonio Costa's draft budget for 2017. 'The taxation of large real estate fortunes will enhance the sustainability of our social security system and contribute to fiscal justice,' he told parliament recently. If the value of all real estate owned by a taxpayer surpasses 600,000 euros ($661,000), a levy of 0.3 percent will be applied to the amount above this threshold, according to the draft budget. The government expects the measure will raise 160 million euros ($176 million) each year. Experts said that on one hand, the Portugal government has introduced 'golden visa' scheme to encourage foreign investment, it is trying to put break on this trend by introducing this tax. There are no restrictions on foreign property ownership in Portugal and transaction costs are generally low. Portugal grants a residency permit to non-EU citizens who buy a minimum of ?500,000 worth of property. Nearly 4,000 golden visas have been offered since the scheme was launched in 2012, raking in investments of ?2.37 billion. The Association of Lisbon Homeowners (ALP) criticised the new tax, terming it an 'unprecedented fiscal attack against the real estate sector'. The tax will affect buyers from EU countries as they purchase properties in Portugal to take advantage of tax exemptions when moving to the country for the first time. French nationals account for 27% of all foreign real estate buyers, followed by Britons who account for 18%. The government also decided to raise its tax on home rentals for tourists, which have up until now been lower than those applied to long-term rentals.
Property curbs to stay in Singapore: Monetary Authority of Singapore
Property curbs introduced by the government in the past few years won't be eased anytime soon despite falling home prices, according to Singapore's central bank, the Monetary Authority of Singapore (MAS). Recent relaxation of the mortgage refinancing rules shouldn't be taken as an easing in curbs, MAS insists. "Property prices have softened somewhat, but like I said last year, in the context of the price increase that had occurred - 60% over three years - the softening we have seen is really not all that much. So, it's still premature to consider removing any of the cooling measures that are in place," MAS managing director Ravi Menon said recently. MAS relaxed mortgage rules last month. Households refinancing existing mortgages will be exempt from a 60% cap on their total debt-servicing ratio (TDSR), even if they observed it when making the purchase. But only owner-occupiers can avail of the exemption, which has already come into effect. Previously, the TDSR exemption was granted only to refinancing loans on properties bought before the June 2013 introduction of the TDSR framework. "This doesn't represent an easing at all," Menon said. "If you look for a prop up to the market, this is not going to help as it doesn't apply to new loans. This is to improve financial prudence without creating new demand for housing loans. We won't ease anytime soon." The Singapore government started introducing curbs in 2009, but the most stringent curbs were implemented in 2013. They included the TDRS framework and higher stamp duties on residential purchases. The curbs have cooled the property market with homes prices dropping by 9.4% from the peak in 2013. Despite many demands to ease the curbs, the government has repeatedly said that they will stay in place. The real estate industry, however, welcomed the relaxation in mortgage refinancing rules. Cushman and Wakefield research director Christine Li said the MAS move is a timely one, that will ensure the stability of the property market. 'In view of the recent weaknesses in the oil and gas and financial services sectors, retrenchment and pay cuts could affect the home owners' ability to refinance existing home loans,' she added. 'While mortgage rates are still low, the inability to refinance under the old TDSR rules could result in some foreclosures where home owners are forced to sell their properties in a down market.'
The regeneration of Manchester throughout the years
Manchester's population grew 19% between 2000 - 2011, driven by regeneration Manchester today couldn't be more of a contrast to the Manchester of the 60s and 70s. Then it was run down and unkempt, with masses of derelict buildings and sprawling wasteland. It did have vibrancy, with an impressive emerging music scene, and in fact redevelopment was already underway with the introduction of a new tram network in the early 1990s. But the catalyst for change was a bombing in 1996. The catalyst that spurred on regeneration in Manchester In 1996 on Saturday 15th June, a 3,300 lb bomb exploded in Manchester city centre, injuring 220 people. Buildings such as the Arndale Centre and Shambles Square were damaged, but the shocked city fought back with a dream of a new life. A Masterplan was drawn up which not only sought to restore existing buildings, but introduced exciting architecture - a new flagship Marks and Spencer, a new Millennium Centre and a bridge spanning Corporation Street. Completed in 2002, Piccadilly Gardens, formerly a no-go area, its desolation exacerbated by the increasingly abandoned buildings surrounding it, is now full of life. A large amount of private sector funding was sought for the regeneration, and since then, the city has been abuzz with redevelopment projects. Regeneration in the neglected north - NOMA Towards the north there's the NOMA regeneration project. Headed up by the Co-operative group, the socially responsible project focuses on developing an area which to date has yet to see much development. Four million square feet of prime real estate will be transformed into office, retail and leisure space. The £800 million project is the largest outside England's South East. Spinningfields, the "Canary Wharf of the North" To the south, between the centre and Salford, lies Spinningfields, a £1.5 billion regeneration project dubbed the "Canary Wharf of the North" due to the presence of banks including HSBC, RBS and Barclaycard. This Allied London Properties development consists of 20 new buildings spanning 430,000 square metres of commercial, residential and retail space. St John's, a "unique and vibrant place to belong to" St John's, a unique neighbourhood, combines enterprise with culture and living, is mainly aimed towards creative agencies, and will incorporate up to 2,500 homes and 600,000 square feet of office space, riverside parks, arts venues, shops, restaurants and bars, and a £110 million theatre and arts studio named The Factory. Mainly situated on the old Granada Studios site, this is another Allied London Properties project. Ancoats and New Islington - "the world's first industrial suburb" The owners of Manchester City are funding the regeneration of the formerly run down Ancoats and New Islington area of east Manchester is being partly funded by Manchester City Football Club. £1 billion is being spent on 6,000 new homes, aiming to take advantage of the existing features of the area, including the canals and historical architecture. New businesses are springing up, bringing fresh jobs and prosperity. Manchester's future Despite the significant regeneration that has already taken place, the pace of change is picking up. Over the next five years, three Manchester stations are to be redeveloped along with their surrounding areas: Oxford Road, Piccadilly and Victoria. A new railway line, Ordsall Chord, will link Manchester Victoria to Manchester Piccadilly, speeding travel across the city. More skyscrapers are being built, including a 27-storey apartment block off of Deansgate Locks, with its own 90ft high advertising screen, and the 'Axis' tower containing 174 apartments, to be built near Beetham Tower, currently the tallest building in Manchester. An attractive city to overseas investors Manchester is now gaining significant attention from overseas investors. German investors have named Manchester as the most important city outside of London for investment, and German bank Deka have paid £164m for the new office block at One Saint Peter's Square. Manchester is also the largest economic area outside of London with £56 billion gross value added (GVA). The flow of cash into Manchester does not look to be subsiding, as Germany is expected to spend another £200m in the city before the end of the year. UK property is being seen as an attractive prospect for German investors due to the drop in the sterling in comparison with the euro. Even before Brexit though, German investor Hansainvest bought the 280,000sq ft Amazon distribution hub at Manchester City Airport for £35m. Research by Knight Frank has shown that property prices in London are beginning to hit an affordability ceiling, and investors are looking at properties elsewhere in the UK. It's not just overseas investors that are recognizing the benefits of buying property in Manchester. Manchester has been experiencing the strongest house price growth of any city in the UK and has received several accolades including being voted the most liveable city in the UK in the Economist Intelligence Unit's Global Liveability Scale. British investors are enthusiastic about purchasing property in Manchester, especially in terms of student accommodation. Manchester has the largest student population in the UK, and student accommodation investments typically offer excellent return on investments. Student property is also expected to weather the Brexit storm due to the constant demand for purpose-built units and an overwhelming undersupply. Student accommodation investments such as Kings Court, on Hyde Road Manchester offers 8% net income guaranteed for five years, with immediate income and no development risk, as it is a ready-built development. "It is now an ideal time to invest in buy to let property in Manchester, says Arran Kerkvliet, investment director at One Touch Property. Investors will get to take advantage of affordable property prices and the capital uplift they will experience due to the various rejuvenation projects happening in the city. 'Manchester has a vast student population and an overwhelming need for more student properties, and these often provide excellent yields due to their locations and demand." It is ironic that a bomb that was meant to cause destruction, in the end contributed to the rise of Manchester as a centre for investment and improvement. With the amount of regeneration in Manchester, investors are excited about purchasing property in the city, as the capital uplift is expected to be phenomenal and it's showing no sign of slowing down. Photo credits: Michael Pickard The Co-op Group Andrew Nic-Pawelek St. John's Manchester Alan Stanton
High rises in Melbourne riddled with issues
Investors, home buyers, beware: there is a whole slew of problems with recent construction projects in Melbourne. From shoddy workmanship to illegal materials and buildings to a lack of insurance, there are certainly many issues to worry about when looking at new real estate in Melbourne. In the past financial year, Consumer Affairs Victoria has reported nearly 3000 complaints regarding defects, poor workmanship, and general problems with the construction of buildings across the city. That's an increase of 13 per cent over the previous year's reports. Another local organization, Strata Community Australia, has stated that they know about at least 58 apartment buildings in Melbourne that have at least some kind of defect. The group, which is responsible for representing Victoria's governing body of community managers, has also stated that the total value of these defects is somewhere around $49 million. Strata Community Australia's general manager in Victoria, Rob Beck, has said that 'That's just the tip of the iceberg. It is rare for buildings to be defect-free.', implying that there could be many more buildings in Melbourne that have defects and sloppy craftsmanship. What makes this situation worse is that these defects are not limited to a single industry, a single builder, or any other sort of isolated source. These defects have been caused by system-wide practices, leading to a wide variety of problems that potential home-buyers and property investors should be aware of. One of the biggest issues comes from poor quality glass. Glass used in windows of various high-rise buildings has been known to fall to the ground, causing danger for many people in the immediate area! There's also the issues of sinkholes that have occurred at the ground level of some of these buildings. On top of that, some buildings have been constructed in such a way that they pipe exhaust from areas reserved for car parks directly into the apartments of homeowners! These are some of the worst problems, but there are also reports of diluted paint, windows that aren't the right shape, and improper seals. So, the question is, how did the situation in Melbourne come to this? There are a variety of problems that span multiple industries, but the one thing they have in common is that they are all systemic problems that plague these newer building projects all across Melbourne. In some of the issues described above (most notably the falling window panes and leaking buildings), the root problems is a lack of regulation. For instance, the installation of glass, whether it be in windows or other fixtures, is not a licensed trade in Australia. This means that it does not fall under the same scrutiny as other professions, and is not subject to the same rules, regulations, and inspections. In short, building surveyors and inspectors were not making sure that glass was being installed properly. Additionally, they weren't even checking the quality of the glass. There wasn't much opposition if someone were to bring in cheap, inferior, foreign glass, install it, and sign off themselves that the glass met Australia's building codes. Practices such as this have led to the wide array of defects that home buyers and investors are seeing across Melbourne. As if all of these problems weren't enough, there is also the question of who is paying for all this? As it turns out, the answer to that question is usually the home buyer. When these buildings are built in such a way that they don't meet building codes, they are considered illegal buildings. If a person unknowingly purchases an illegal building, they are not legally allowed to sell that building until the building is brought up to code. However, there are little to no measures in place requiring the builder to bring the building up to code. This leaves the home buyer paying the cost of these improvements themselves! In some cases, home buyers were able to hire a shrewd legal team to navigate the red tape necessary to bring the builder to justice, but this situation is hardly the norm. More often than not, the builder has actually gone bankrupt by the time the home buyer seeks legal action, or it would be more expensive for the home buyer to take the builder to court than it would be to perform the repairs and improvements themselves. At this point, you might be asking yourself about homeowner's or domestic building insurance. This insurance is mandatory in Victoria, but only for homes up to three stories tall. These shoddy apartment high-rises are exempt from that mandate. It is this exemption that puts many home buyers in the position of having to choose between spending money to take a bankrupt builder to court, or spending money to perform costly repairs on an illegal home they bought. Unfortunately, this has created a broken system in which many are losing out. Some reforms are in place, however. Recent laws have prohibited builders from choosing their own inspectors, but many experts say that this just leads to builders coercing their clients to pick their preferred inspectors. More optimistically, a new organization called Domestic Building Dispute Resolution Victoria will have the authority to force builders to either fix problems and defects they created, or at least pay for rectification. It would appear that change is coming in Melbourne, but for those who are currently stuck with illegal homes, it probably can't come soon enough.
Canada introduces new measures to cool housing market
The Canadian government is to plug loopholes in the capital gains exception laws, to ensure that only people living in their home as a principal residence before the home is sold are eligible to claim capital gains tax exemption. Experts believe that the change is mainly aimed at foreign buyers.
The government will also introduce a more rigorous mortgage rate stress test for all insured borrowers to ensure that borrowers can sustain interest rate hikes or income losses, Finance Minister Bill Morneau has said.
'Exceptionally strong activity in certain markets, particularly in Toronto and in Vancouver, mean that people are concerned about the state of the housing market,'' Morneau told a news conference in Toronto recently.
'Across the country, many middle-class families looking to buy their first home see prices climbing often out of their reach. Some are taking on high levels of debt in a rush to buy before it's too late.''
'My view is that the Canadian housing market is stable,' Morneau told reporters. 'The measures we're taking today are intended to ensure long-term stability in the market.'
He added that the government wants to ensure rules that allow a capital gains tax exemption are being used fairly and only by homeowners selling a primary residence.
The British Columbia government recently announced restrictions on property purchases in Vancouver. Overseas property buyers must now pay an additional property transfer tax of no less than 15% of the property's price. The tax is in addition to the province's general property transfer tax of 1% on the first C$200,000 (US$153,500) of a home's value, and 2% on any further value up to C$2 million (US$1.54 million). The new tax applies to foreign corporations and individuals buying residential properties in Vancouver.
Vancouver has also decided start taxing vacant homes by the year's end, in a further attempt to rein in foreign buyers and absentee homeowners who have allegedly contributed to a steep increase in Vancouver home prices.
Chinese cities to restrict property purchases
Amid reports that speculators are snapping up properties in second and third-tier cities, contributing to a steep increase in prices, new restrictions have been introduced in four cities - Chengdu, Jinan, Wuhan and Zhengzhou. Residents in Zhengzhou who own two properties, and non-residents who own one, will not be allowed to buy homes larger than 180 square metres (1,938 square feet), according to the local government website. Chengdu has restricted second property purchases. Prospective buyers will have to make a down payment of at least 40% to buy a second property in certain city districts. Action will be taken against developers who don't build on empty land within a specific period of time, after advertising their residential development. Jinan has prohibited residents who already own three properties from buying more homes. The down payment requirement for those buying a first home has also been increased to 30%, from 20%. Similarly, Wuhan has increased the down payment requirements on second homes in certain parts of the city to 50%. First-time home buyers will have to pay 25% down payment. No loans will be given for third homes. Non-residents of Wuhan will be ineligible for loans for second homes in parts of the city, and barred from buying third homes. The average new home price in 70 major cities climbed an annual 9.2% in August, up from 7.9% in July, according to China's National Bureau of Statistics.
Rich Indonesians snap up properties in Singapore
There has been a sudden surge in Indonesian interest in the Singapore luxury property market. In the first half of 2016, Indonesians bought 189 properties in Singapore, up by 23% over the same period last year, according to Cushman and Wakefield. Indonesians bought at least 30 properties valued at S$5 million (US$3.7 million) or more, up from just eight such properties during the whole of 2015. Indonesians have been buying properties in Singapore for years, but the sudden interest in Singapore property market is being attributed to the fact that Singapore, Indonesia and some other countries adopting global tax reporting requirements to inform each other of nationals holding assets overseas. Indonesians believe that Singapore government will only report assets held in banks, not the money invested in real estate. The Indonesian government recently passed a law that requires Indonesians to either repatriate, or pay taxes on, moved overseas during periods of unrest worth around US$300 billion. According to the law, the tax rate on declared funds or properties left overseas will increase to 10% in stages until the end of the amnesty period in March. Indonesians who bring their money back from overseas and invest it in Indonesia for at least three years have been offered several tax benefits. They will pay only 2% tax on declared funds. On the other hand, 200% tax will be charged on Indonesians who don't declare their assets and are discovered by the Indonesian tax authorities. Some real estate professionals, however, say Indonesians are trying to take advantage of possible appreciation in property values in Singapore in the near future as they believe the market has bottomed out. Property prices have been falling steeply in Singapore following a slew of cooling measures introduced by the government.
Increased tax requirements and regulations for foreign investors in Australia
Australia's property market is booming, particularly in the capital cities of Australia. The Swiss Bank UBS even reported recently that Australia's largest city Sydney, is in the midst of a property bubble.
A great deal of the demand for Australian property is coming from overseas, particularly from Asian markets. The demand has tripled in the past three years. Chinese investors have been targeting Australia in recent years and according to the Foreign Investment Review Board, Chinese investors spent more than $24 billion on Australian property in the 2014/15 financial year.
Australia has semi-strict foreign investment laws. Foreigners cannot for example buy existing residential property, or rent it out. They can however, purchase vacant land to build a house. Foreigners living in Australia on a temporary basis can purchase a single established home or apartment, which they are allowed to use while living in Australia, under the condition that they sell it if the property no longer becomes their primary place for living. The laws are designed to encourage development of new properties and increase housing supply. It is why off the plan types of developments are marketed towards foreign investors.
The major Australian banks have begun to limit lending to foreigners who do not earn income in the country, including NAB, ANZ, Commonwealth Bank, and Westpac. They have also increased the minimum deposit requirements from 20 per cent to 40 per cent of the property value.
The current government has cracked down on illegal property purchases by foreigners and even implemented stiff new punishments for anyone found to breaking the law including fines of up to $135,000 and/or three years jail.
The rise in property prices has made it very difficult for Australian home buyers, especially young people looking to purchase their first home. Sydney has some of the highest price property in the world, if you compare property prices with average income.
The government has reacted by increasing taxes for foreign investors. Such as a new requirement to pay 10 per cent withholding tax on properties worth more than $2 million.
The state governments have also reacted by increasing stamp duty for foreign investors. Queensland has added a 3 per cent stamp duty surcharge to foreign buyers from October 1st.
In NSW, the government started a 4 per cent surcharge on the stamp duty for new property purchases, from June 21 this year. There will be a new land tax surcharge of 0.75 per cent for foreigners owning property in NSW, starting from the 31st of December 2016. Victoria and Queensland also have similar land tax surcharges.
In Victoria the surcharge on stamp duty for foreigners is even greater at 7 per cent. The Victorian government also tripled the land tax on foreign buyers from 0.5 per cent to 1.5 per cent, making the state the most expensive state for foreigners to purchase property.
The tax increases have helped to bring in extra revenue for the governments and stabilize property prices for now. In property markets outside of the states that increased their taxes, property prices are more affordable. In Western Australia for example, prices have dropped dramatically with the decline in the mining industry and there are some excellent buying opportunities for people to buy at the bottom of the cycle.
Australia's residential property market: investors' next big opportunity
You may be surprised to learn that over the past weeks and months, the value of Australia's residential property market has been rising dramatically. Specifically, Australia's central coast region is experiencing strong growth and a booming economy. Cities like Sydney, Brisbane, and Melbourne have had their property costs rise recently, with Melbourne experiencing the most profound growth over the past twelve months.
Although Sydney has been experiencing declining property values for six consecutive months, in June, Sydney house prices rose by 3.6% since the previous quarter. This turnaround in price was great news for Sydney, and was mainly spurred by more valuable lower and middle class housing. Sydney's good fortune came amidst a value increase almost across the board for Australia. In fact, most other large cities in Australia experienced rising residential property prices in recent months. Melbourne's prices rose by 8.2% over the year, while other cities experienced growth all the same:Canberra experienced 6% growth Hobart experienced 4.9% growth Brisbane experienced 4.3% growth Adelaide experienced 3.5% growth
These great increases in housing prices mean good things for Australia as a whole, too. In the past year, the average price of a house in Australia has risen by 8.2%. This means that, across the country, the combined total value of all of Australia's houses is $6.04 trillion. For a frame of reference, the current price of the average single residence in Australia is $623,000. Keep in mind, this number takes into account both apartments and houses.
This success isn't entirely universal, though. Two major cities in Australia did experience decline in their housing prices in the past year. Perth experienced a loss of 4.8%, and Darwin performed the worst with a loss of 6.5%. However, while this may seem like bad news for Perth and Darwin, it could actually be an exciting business opportunity for a savvy investor.
Many people think often of getting into real estate investing. They are often scared off by a number of issues, though. Lack of knowledge about the subject, difficulty in acquiring funding for property development, and a whole host of other issues tend to turn most people off from getting into real estate investing. However, with the help of property development loans, more people could get started in real estate investing, and the current situation in Australia makes it very tempting to do so!
With most major cities posting very good growth numbers in real estate values for 2016, it looks like Australia's real estate market is going to continue to grow. Sydney's recent turn from declining property values to growing property values is further evidence of this, and cities like Perth and Darwin are looking like they'll be excellent opportunities to buy real estate at lower-than-normal prices.
But, the average price of a house in Australia is still rather high, so it might take some form of property development loans or mezzanine finance property development in order to get started. There are many financial institutions that can provide these services, allowing new investors to focus on researching their potential investments, while having most of the financial requirements taken care of. It is very important to both have solid research and plenty of capital when getting into real estate investing.
Overall, Australia looks like a great real estate market to invest in. Property prices appear to be rising consistently across most major cities, and there are so many markets to invest in. In the past year, there have been 27 suburbs where the value of homes has risen more than the annual income of their inhabitants! It's entirely possible to make more money just owning a house in Australia than by actually working in Australia. With the right knowledge, this could be a great opportunity for both new and seasoned real estate investors.
Post-Brexit panic subsides in Britain, as property funds resume trading
The nervousness which affected the U.K.'s real estate markets following the Brexit vote has subsided. Some property funds have eased penalizes on redemptions by investors, while others have resumed trading. At least seven major property funds had halted trading or put restrictions on redemptions immediately after the Britain's decision to leave the European Union, as investors tried to cash in their assets managed by these funds. Columbia Threadneedle Investments reopened its U.K. Property Fund recently. The company had either sold or agreed to sell some 25 properties with prices just 1% lower than valuations before the referendum, the firm said, suggesting that Brexit has not had a major impact on U.K. real estate markets. "We saw animal spirits drive unprecedented levels of redemptions," Don Jordison, managing director of property at Columbia Threadneedle, said in a statement. "Much of the earlier commentary now appears slightly irrational and more informed reflection has settled the market." Aberdeen Asset Management Plc and Canada Life have also reopened trading for their U.K. property fund. Redemption penalties are still in place, but have been lowered substantially. Experts were expecting a short-term fall in property prices after Brexit, as domestic buyers adopted a 'wait and watch' strategy. On the other hand, dollar-based overseas buyers have been taking the opportunity to snap up UK property and make a saving of around 12%, and there has been a surge in interest in buy-to-let property from investors in the Middle East, Hong Kong and other countries with currencies pegged to the dollar.
Property agents to be targeted by New Zealand's anti-money laundering laws
The New Zealand government is to include real estate agents in the scope of its money laundering laws amid fears that some agents may, either knowingly or unawares, be helping overseas buyers and companies to stash ill-gotten gains in New Zealand property.
New Zealand's money laundering laws currently lay out punitive action only against financial institutions and casinos. The new rules, likely to be implemented by mid-2017, will also cover property agents along with lawyers and accountants.
The government is under pressure to curb money laundering via real estate as most people in New Zealand blame foreign buyers for skyrocketing property prices. Some other countries, including Canada and the United Kingdom, already have money laundering laws which specifically target real estate investors, and professionals related to the industry.
The New Zealand government was under pressure to introduce a law against money laundering in real estate after the release of the Panama Papers in April. The papers provided detailed evidence of the already well-known fact that offshore companies were setting up trusts in New Zealand to invest in real estate, and evading tax in this way.
Until recently, the government has been denying claims that foreigners have contributed to a steep rise in home prices in New Zealand.
Only 11% of dwellings in New Zealand are owned by people living overseas, according to the New Zealand government. The data was compiled by the Inland Revenue Department (IRD) in June last year, and recently released a few months ago by Housing Minister Nick Smith. Based on this data the government argued that since foreign home ownership is lower in New Zealand than in other countries, the restrictions on foreign residential investment demanded by the Opposition are unnecessary.
The results were based on property owners' tax returns. Of 199,000 taxpayers making rental tax returns, 11% were non-residents and 1% were of unknown residency. The 'non-resident' category included New Zealand citizens who lived overseas and the data did not distinguish between expat New Zealanders and foreign buyers, Smith said.
Vancouver to tax empty homes
Close on the heels of the Vancouver government's decision to impose an additional property transfer tax on overseas property buyers - at no less than 15% of the property's price - Vancouver has decided start taxing vacant homes by the year's end, in a further attempt to rein in foreign buyers and absentee homeowners who have allegedly contributed to a steep increase in Vancouver home prices.
Overseas buyers are being blamed for pricing middle class families out of the housing market in Metro Vancouver.
There are 10,800 homes lying empty in Vancouver. The government believes that absentee homeowners will be forced to rent out their properties to avoid the new tax, thus easing the unaffordability crisis.
The tax, which targets properties left empty or underutilized, would be levied through self-declaration, audit, and compliance measures, according to Mayor Gregor Robertson.
'Owners will have to prove they or tenants occupy the homes for a minimum number of days a yearandhellip;Vancouver's dangerously low vacancy rate is putting our renters in crisis,' Robertson said in a statement. 'Our proposed empty homes tax is first and foremost about bringing rental homes back into the market.'
The government is yet to decide the annual amount of tax, but it could be between 0.5% and 2% of the property's assessed property value, the mayor said. If the tax is collected on just 5% of the nearly 11,000 empty homes, it would raise C$2 million (US$1.51 million) in annual revenue, he said.
The new tax (15% of the property's price) on foreign buyers came into effect on August 2. It is in addition to the province's general property transfer tax of 1% on the first C$200,000 (US$153,500) of a home's value, and 2% on any further value up to C$2 million (US$1.54 million). The new tax applies to foreign corporations and individuals buying residential properties in Vancouver.
Malaysian developers can once again make loans to property buyers
In a reversal of recent policy, the Malaysian government will allow property developers to make loans to property buyers. The initiative is aimed at assisting home buyers who are unable to get a full housing loan from banks or those who may only be given a partial housing loan.
Developers can charge people buying properties from them an interest rate of between 12% (for loans with collateral) and 18% (without collateral), according to the ministry of Urban Wellbeing, Housing and Local Government.
The initiative is part of the Developer Interest Bearing Scheme (DIBS), which was abolished in 2014 after it led to massive speculation in the property sector. However, Malaysia's property markets have slumped over the past one year, so industry players urged the government to reintroduce the scheme.
"The ministry agreed to give money lending licenses to any developer that is interested, especially developers that are more establishedandhellip;Buyers sometimes don't get a 100% loan. Sometimes the bank only gives them a 70% loan and they only have money to pay 10% so the balance, the developer can give them a loan,' Minister Tan Sri Noh Omar said while making the announcement recently.
The minister said that this proposal is a win-win situation for both developers and house buyers.
"For the developers, this end-financing facility offers a second profit centre. First, of course, from the sales of these houses and second from the proceeds of the end-financing scheme," he said.
Developers will have to obtain a money lending license from the ministry in accordance to the Moneylenders Act 1951.
The ministry did not impose any restrictions on the types of properties the loans will apply to.
A world first for Greece: government to tax every short-term rental
The Greek government will impose a tax on home owners who rent out their properties through short-term rental websites like Airbnb. Owners will have to register their properties with the government before advertising them on the Internet. The government plans to levy a tax of up to 5% on every booking. A proposal to this effect will be voted through next month, Greek media has reported. "We will ensure that properties are registered. Anyone posting on internet sites that they have property for rent will have to have registered it first. This is just part of the government action we're taking to fight tax evasion, illegal trading and corruption," Deputy Finance Minister Trifon Alexiadis was quoted as saying. The tax is likely to affect thousands of properties in Greece. There are 50,000 short-term rental listing on Aibnb alone. Greece is probably the first country to levy additional tax on every booking in short-term rental which are gaining massive popularity in the country, to the extent that it has had severe ramifications on the hotel industry in Greece. Many hotels in popular tourist cities like Athens are reporting higher vacancy rates.
Home sales plunge in Vancouver after tax on foreign buyers
A new tax on foreign buyers has had a huge impact on the Vancouver property market. While home prices continue to rise at a robust rate, sales reported an unprecedented 26% drop in August compared to the same month last year. August 2016 sales also represent a 22.8% decline compared to last month's sales. The drop in sales volume stands in sharp contrast to the continued rise in prices. The MLS Home Price Index composite benchmark price for all residential properties in Metro Vancouver is currently $933,100 (US$711,801). This represents a 31.4% increase compared to August 2015 and a 4.9% increase over the last three months. The data was released nearly a month after Vancouver in British Columbia became the first Canadian city to impose an additional property transfer tax on overseas property buyers - at no less than 15% of the property's price. The tax, which came into effect on August 2, is in addition to the province's general property transfer tax. The general transfer tax equals 1% on the first C$200,000 (US$153,500) of a home's value and 2% on any further value up to C$2 million (US$1.54 million). The tax applies to foreign corporations and individuals buying residential properties in Vancouver. "The record-breaking sales we saw earlier this year were replaced by more historically normal activity throughout July and August," Dan Morrison, REBGV president said. 'Sales have been trending downward in Metro Vancouver for a few months. The new foreign buyer tax appears to have added to this trend by reducing foreign buyer activity and causing some uncertainty amongst local home buyers and sellers. "It'll take some months before we can really understand the impact of the new tax. We'll be interested to see the government's next round of foreign buyer data.' Though the sales volume dropped, prices continue to rise at a robust rate. "In aggregate, we continue to see an imbalance between supply and demand in most communities. However, we're also seeing fewer detached sales in the highest price points and fewer detached home sales relative to all residential sales," Morrison said. "This is causing average sale prices to show a decline in recent months, while benchmark home prices remain virtually unchanged from July." The average price is the simplest home price measure to explain but is not the most accurate since it may be skewed by the mix of properties. More high-end or low-end sales will skew the number up or down. The new tax was introduced amid fears that foreign buyers have contributed to the city's skyrocketing property prices, pushing middle-class families out of the market. The province of British Columbia has also allowed the city of Vancouver to impose an annual vacancy tax on residential properties left uninhabited. In Metro Vancouver, foreign buyers make up 5% of all buyers, according to data released by British Columbia's finance minister Michael de Jong, though certain areas have higher foreign investment ratios, notably Richmond (14%) and Burnaby (11%), with Chinese the biggest segment of foreign buyers. In British Columbia, according to the report, 3.3% of all property transactions involve foreigners. However the data generated scepticism among real estate experts, with many unwilling to believe foreign investment in British Columbian real estate is so low.
In Portugal, properties offering good views, better sunlight, may attract higher tax
The Portugal authorities plan to adjust council taxes on residential properties on the basis of the amount of sunlight they enjoy and the quality of views they offer.
But the proposal has drawn strong criticism from real estate industry experts, and from citizens.
An increase of up to 20% in council tax is proposed for apartments offering decent views and facing south, and a 10% decrease for dwellings overlooking a cemetery, or located on the ground floor, or facing north. The tax authorities will also take into account other factors like noise pollution.
These tax adjustments will not impact existing dwellings, but only newly built properties, and properties currently being reappraised.
The purpose is not to gain additional revenue, but rather to tax people according to the homes and luxuries they enjoy, said Rocha Andrade, Secretary for Finance.
Real estate experts have criticized the proposal, saying that the government is planning to penalize people for making sensible decisions.
"This law makes no sense whatsoever,' said Association of Lisbon Homeowners (ALP) President Luandiacute;s Menezes Leitandatilde;o. 'People are paying tax on something that generates no profit. These are people's homes and many of them could now face not being able to pay these new taxes.'
Most people in Portugal prefer to buy apartments facing south, because they offer great exposure to sunlight.
Local media have compared the proposed tax to the window tax imposed by King William III in Great Britain three hundred years ago, when people were taxed according to the amount of daylight entering their homes.
That's chivalry! Businessman pays tax owed by Mexico's first lady on her Florida property
Mexican President Enrique Peandntilde;a Nieto has landed in the middle of yet another property scam. His telenovela star wife Angelica Rivera has been accused of accepting 'property tax favours' from a Florida businessman who has business interests in Mexico.
Businessman Ricardo Pierdant paid nearly $30,000 in property taxes on a luxury condo owned by the Mexican first lady Angelica Rivera in Florida.
According to reports, one of Pierdant's companies will likely bid to run Mexico ports. Pierdard owns a popular bike sharing company, DecoBike, in Florida.
Angelica Rivera bought the property, south of Miami beach, in 2005, through a holding company.
The holding company paid a total of $1.7 million for the 3,000-square-foot, spacious three bedroom unit located at Ocean Club, a gated waterfront community on Key Biscayne.
Public records show that Rivera's company paid property taxes every year, except for 2014 when one Biscayne Ocean Holdings, managed by Pierdant, paid the annual $29,703 tax bill.
After the Guardian broke the story recently, the Mexican president's office in a statement, terming it "all speculation".
"The story termed Ricardo Pierdant as a "potential" government contractor without offering a single data, document or declaration to support itandhellip;It is all speculationandhellip;the story predicts the future," the president's office said, adding that Ricardo Pierdant has not entered into any agreements with the Government of the Republic.
The scandal gives credence to reports that foreigners are investing money linked to corruption in Florida real estate under the shield of shell companies. These foreigners include Mexican government officials.
The federal government announced last month it would expand its crackdown on secret cash deals for pricey homes in Miami-Dade County and Manhattan to other luxury real estate markets in Florida, New York, California and Texas.
In January, an agency of the U.S. Treasury Department said it would temporarily order title insurance companies to identify the true owners of shell companies that pay $1 million or more in cash for homes in Miami-Dade and $3 million or more for homes in Manhattan.
Because buyers can cloak their identities in opaque shell companies, regulators say cash home deals are a magnet for money laundering. Corrupt foreign officials, drug dealers and other law-breakers have been caught parking dirty money in U.S. real estate.
Management service for Airbnb hosts launches in six cities
Landlords who balk at the hassles of short-term renting: the startup Guestready.com, launched on Tuesday, may be what you're waiting for. Aimed at real estate investors and Airbnb or HomeAway hosts looking for help managing their property, it provides a range of host services such as laundry, cleaning, check-in and check-out of guests, but more importantly, manages entire properties, including guest communication, maintaining listings on multiple short term rental sites, and ensuring that the property generates the maximum possible yield. GuestReady has launched its services in London, Paris, Amsterdam, Singapore, Kuala Lumpur, and Hong Kong, and is expected to roll to more cities across the world in the near future. "Airbnb and similar websites have been well-established among leisure travellers, but the short-term rental platform is also becoming increasingly popular among business travellers who are looking for an alternative to long-term stays at hotels or serviced apartments," said the start-up's London-based CEO Alexander Limpert who sees this trend as the big opportunity for GuestReady. "As the short-term rental industry is maturing, there is a natural need for more efficiency, professionalism, and standardisation. Especially with business travellers, the property and any service related to a stay need to be of immaculate quality. For non-professional hosts, this is hard to achieve, which is where we step in," Limpert said. While traditional property agents focus on long-term rental and management of properties, GuestReady focuses on the underserved niche of short-term and vacation rentals. By launching GuestReady globally, the startup leverages location-specific advantages and taps into economies of scale to keep costs at bay. The startup is backed by the Swiss Founders Fund with an undisclosed sum. Romano Brandenberg, Venture Partner at Swiss Founders Fund, sees big potential in the growing and maturing short-term rental market. "Living and work patterns are becoming ever more mobile and the 12-month rental agreement or a room in a hotel is often not an adequate solution anymore for today's business travellers, digital nomads or city hoppers. Short-term rentals offer a great alternative for these audiences," elaborates Brandenberg. He considers GuestReady the missing link in the industry, enabling more property owners to become hosts.
Prime residential real estate market in Dubai still buoyant, says latest report
Acclaimed by many as a 'safe haven for UK commercial property investors' and ranked topmost target for real estate in the Middle East, Dubai's market is fast becoming vibrant and remains stable despite the geopolitical unrest. The property market in this country features first-class infrastructure and a regulatory environment considered as one of the most favorable in the world. After several years of turbulence, Dubai's real estate market is thriving again among foreign investors, thanks to the high rental returns and government initiatives aimed at enhancing stability-an economic boost previously relied upon by the country. According to Knight Frank's report earlier this month, high-end properties in Dubai are spearheading the property market indicators even as prices soared during the first quarter of 2016. The report also noted that rental prices within the prime segment inched two percent during each quarter between Q4 2015 and Q1 2016. The surge in the property market was unexpected considering that the economy recorded the slowest pace in five years earlier this year. Foreign Investors: They Dominate Dubai Real Estate Market As the country's economy keeps improving, so is foreign investment-and indeed, the market is currently dominated by foreign investment. In fact, British citizens were the second largest investors in Dubai property market after investing a whopping £1.9bn in 2015. Despite the 9% drop across the mainstream real estate market in the last 12 months to April 2016, the monthly General REIDIN sale price index remained relatively flat, with no tangible changes in performance for both villas and apartments, says the report. Dubai's extremely attractive rental yields--currently averaging a little over seven percent compared to other cities (Hong Kong averages at about two to three percent and London at three to four percent), are driving new projects into the market, and quickly appealing to the growing pool of global and regional investors and property funds looking to diversify their property portfolio. The country's growing yields are attributed to the robust rental property market and the increased job opportunities. Renting is now a quick and easy option compared to buying property, hence the first choice for most residents. Knight Frank's report also highlighted that Dubai's top-end properties outperformed the market average despite the 5% drop in the prime price index during the 12 months to April 2016. Notably, the performance of apartments outweighed that of prime villas, with the index pointing to a slight quarterly increase of 2% over the same period. On the other hand, prime villas did not record any significant price change. While it's too soon to predict the real impact of the Expo 2020 on the residential property sector, sustained government commitment to spending on projects aimed at supporting events such as Dubai Parks and Resorts and Route Metro 2020 would grow investor confidence in the market and draw inward capital. 'Looking ahead, the residential market in the UAE is expected to soften over the second half of the year. While it's difficult to predict when the next growth cycle will be, we expect the residential market to level out by the end of 2016 before seeing gradual recovery in 2017. We expect prime residential properties will continue to outperform the market average in the short to medium term,' the report says in part. 'We expect Dubai to continue attracting investments both regionally and globally. However the outlook for the emirate in general and the real estate sector in particular depends on a number of fundamentals,' it explains. 'Further volatility in oil prices, the European Union referendum in the UK, the US presidential elections in November and ongoing geopolitical tensions are likely to impact the behavior of currencies, investor sentiment, and demand for property,' the report concludes. In order to ensure the country doesn't plunge itself in the economic hardship as 2009, Dubai needs to have confidence in its property market, which is largely driven by foreign investment as this could save its real estate revenue, accelerate progress and drive other sectors such as retail, tourism and hospitality.