Real Estate / TAG Property (J)
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Real Estate / TAG Property (J)
Contact: Vincent Altieri, CPA, and Eric Huynh, CPA
If you don’t believe in evolution, stay out of the New York office rental market. In today’s market, the needs and demands of potential renters are changing at a faster pace than ever before. Add this to the fact that the office market is also beginning to evolve from being landlord-driven to tenant-driven, it’s a market full of challenges, but one that is also ripe with opportunities.
Who are they and where are they going?
We are in a great transition period where the Baby Boomer generation, while remaining very active and often still in decision-making roles, is passing the torch to the new Millennial generation. Each group may have different ideas about what they expect from the space they are considering. Millennials tend to look for greater flexibility, functionality, and responsiveness from their office. Boomers might look for more traditional amenities, such as a prestigious address or plush interiors. In short, know thy audience.
A key benefit of establishing and operating a Self Managed Superannuation Fund (“SMSF”) is the ability to acquire overseas property through the fund. This can occur either by an outright purchase by the SMSF trustee or by borrowing using a limited recourse borrowing arrangement (LRBA).
There are however a number of considerations SMSF holders should take into account before embarking on overseas property investment, both for outright purchase of property and investment with borrowings.
By: Alison Palmer
Individuals who are domiciled outside the UK will be aware that their exposure to UK Inheritance Tax (IHT) is limited to their UK assets. Any foreign assets owned by foreign domiciliaries remain outside the scope of UK IHT until the individual becomes deemed domiciled (broadly once they have been resident in the UK in more than 15 out of the previous 20 tax years, under new rules being introduced next year).
Lisa Spearman, Private Client Partner, considers the key points of the CGT regime as now extended to non residents owning property in the UK.
Many other countries charge tax on the basis of where a property is located rather than where the owner is resident, and it is therefore not altogether surprising that the UK has followed suit.
The attraction of the London property market to overseas buyers is legendary, but a lot can happen between one year and the next. Are we at the beginning of the end for London's special place in the eyes of the wealthy elite of Russia, China, the Middle East and Asia? Are the recent tax changes beginning to dim London's lustre?
The changes to SDLT and CGT heralded by the Autumn Statement could be said to represent the culmination of progressive attempts by the government to tap in to the wealth of overseas investors, and to chip away at the comparative freedom from property taxes they have enjoyed.
Our experience is that the tax changes in themselves are not sufficient to deter overseas buyers from continuing to invest their wealth in London. The factors which have long attracted people to London are still present, whether their priority is to "bank" their money in property which in the long term continues to rise in value, to partake in the lifestyle offered by London, to educate their children in the British system, or to live and work somewhere which is still comparatively safe in global terms.
Additionally, the new property taxes are still lower than these buyers would find themselves paying in, say, Dubai, New York or Singapore.
Overall therefore, one could say that it still seems to be business as usual. On the other hand, if we look more closely at the nationality of new buyers, we may find that some change is on the way.
For instance, we anticipate that the falling rouble combined with continuing sanctions will mean that fewer Russian buyers will be evident in 2015. The recent introduction of internal tax changes in Russia to bring property purchases overseas into the Russian tax net will also deter many buyers.
Chinese buyers in contrast are likely to increase in numbers as the wealthy middle classes look for assets outside China to acquire with their growing wealth, and London (together with Auckland and Sydney) remains attractive to buyers from China.
Notwithstanding the huge fall in oil prices, we believe that Middle Eastern buyers will remain attracted to London and may have more incentive than before to invest.
In conclusion, our experience to date is that the cumulative effect of recent tax changes has not served to kill the golden goose. For the future, it remains to be seen whether the worsening political situation across the globe, the Eurozone worries, or the UK election in May will dent investor confidence.