Would-be BTL investors urged against alternatives
A leading online letting agency is urging would-be buy-to-let landlords deterred by the Government’s legislation changes to resist investing in other alternatives.
An investigation into 500 investors by PropertyLetByUs found that many are considering overseas investment. European destinations such as France and Spain were found to be popular countries.
Challenges
However, the agency is warning investors tempted to invest abroad to think about the challenges of different fiscal regimes.
Managing director of PropertyLetByUs, Jane Morris, said, ‘each country has different tax laws relating to property and they can change quickly, with little warning. For example, in 2012 the French Government imposed a 15.5% social charge on capital gains from the sale of second homes or rental income-a measure which was estimated to bring in €250 million a year. Tax on rental income rose overnight, from 20% to 35.5 % while capital gains tax on property sales rose from 19% to 34.5%.’[1]
‘These new tax measures hit overseas investors hard and meant that a British couple who bought a French property for €200,000 20 years ago and were selling it for €750,000 would have to pay almost €60,000 in charges, on top of the existing capital gains tax. They received no credit against their UK tax bill for this amount,’ Morris continued.[1]
Would-be BTL investors urged against alternatives
Tax
This tax implication was overturned last year by the European Union, which decided the measure was illegal. As such, France was ordered to repay tens of millions of euros to UK and other EU non-resident owners, who had rented or sold their properties in the last two or three years.
Morris noted that, ‘clearly, overseas property taxation can be more costly than the UK, despite often much lower property prices. It is important that landlords take into account potential tax hikes and don’t get sucked into the marketing hype that surrounds overseas property investment.’[1]
‘Property experts will often highlight new markets they appear to be investment hotspots and you may be able to find bargains in countries where prices have fallen dramatically, but it’s often wiser to buy in more established markets,’ she concluded.[1]
[1] https://www.lettingagenttoday.co.uk/breaking-news/2016/5/letting-agency-warns-against-easy-alternatives-to-buy-to-let