Real Estate / TAG Property (J)
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Real Estate / TAG Property (J)
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.
Contact: Marc Ausfresser; Berdon LLP (New York, New York, USA)
The IRS has proposed regulations to clarify what is real property for purposes of real estate investment trust (REIT) rules. Long overdue, it noted that no guidance has been published on this topic since 1975. The proposals define real property to include land, inherently permanent structures, and structural components. Safe harbors are provided for determining whether certain assets are or are not real property. The proposed regulations also identify certain types of intangible assets that are real property or interests in real property for REIT purposes.
Residential property is not the only thing in short supply in Prime Central London the funding needed to develop new stock is equally hard to secure.
Not so long ago the high street banks were falling over each other to finance residential projects. Now they are being extremely selective. If a developer is fortunate enough to fall within a bank's core criteria then access to relatively inexpensive debt is available, albeit at a loan-to-cost that may require topping up with mezzanine finance. Outside those criteria, a plethora of specialist lenders, family offices and ultra high net worth individuals (UHNWs) are filling the void.
Contact: Pat McLaughlin; Spencer Fane Britt & Browne LLP (Missouri, USA - TAGLaw)
Thinking about buying rental property in Missouri? If you are, make sure you review all relevant statutes or, better yet, give us a call.
Contact: Bruce Gorman; Berdon LLP (New York, New York, USA)
The deadline for filing RPIE (Real Property Income and Expense) forms for 2013 has been pushed up to June 2, 2014 from September 1. For future years, the deadline will be June 1. This form is required for all income producing properties within New York City with a value of over $40,000.