(5) IBI, PROPERTY TAX : shopping around the world

4 September, 2011 No Comments

Real estate tax, impôt foncier, Grundsteuer, stondbeleisting, owners fiscale, Tax on properties, EMLAK vergisi ………. Taxes are paid one way or the other in the majority of countries

Taxes are inevitable. There are different property taxes:

1 – Taxes from the purchase of a property; they are in force in most countries and can be referred to as stamp duty, TRANSFER TAX, TAX PURCHASE, but in the end is the same tax that the respective governments collect. Even though the amount may vary from country to country, some countries only charge a fee on the resale and not on new construction properties. Usually VAT is applied on new construction buildings.

2 – Taxes regarding the ownership of a property: In Spain we refer to as the IBI, based on the assessed value of the property. Every property owner must pay it no matter what his/her status is. Since we are talking about a municipal tax the amount usually varies depending on the size of the property and its location. This tax is paid annually and the amount is automatically charged into the owner’s bank account. In the UK would be similar to Council Tax.

3 -. Taxes levied on the profits from the sale of the property: In many countries this tax is applied to the gain obtained from the property’s purchase price and its sale price (note; some countries allow the deduction of expenses such as maintenance, repairs or improvements made to the property (which must be justified with receipts and vouchers). Also referred to as Capital Gains Tax (CGT), is applied at the time of sale. In some countries the amount due is paid gradually ie. Turkey. In other countries such as France, this tax is paid off in fifteen years. Outside the US, there are different ways to view this tax, considering if they are residents or nonresidents in the country. Many investors are  mistaken because they beleive that if the tax is not imposed in the country where the property is being sold, they do not have to pay anything …….Wrong! You are exempt only if you are tax resident in the country. In the case of being resident, for example in the UK, a tax will be charged on any profit earned around the world. In general, the seller of any property will pay CGT or any similar tax to the country where the property is located because a tax applies for any sale.

Regarding double taxation: be careful not to pay taxes twice (the country where the property is located and the country that you belong). Countries often sign double taxation treaties to avoid its citizens to pay taxes twice for the sale of a single good. In these cases, the amount paid in the foreign country should not be re-paid in the country of residence.

It is almost “mandatory” to seek advice from a tax lawyer or a specialist in the country where the good is bought, so that he helps, within the framework of the law, to minimize the amount to pay in each case.

Property investor show & OPP Live, Excel London Oct 2010

31 August, 2011 No Comments

You make your money When you BUY, NOT When You SELL.

This is one of those phrases that professional real estate investors believe and follow …. and the places with more supply per square meter is at the fairs.

The Property Investor Show & OPP Live was held in London in late 2010. The most relevant facts during this real estate exhibition were:

1 – There was a live auction with more than 200 properties. Even if you previously hadn’t participated in real estate auction, I encourage you to go see one to learn its dynamics, the purchase before and after the auction, the closing of good business, or the rules to perform this type of purchase, etc..

2 – In the English market, and in the international (but in a smaller scale), there is the possibility to “buy fractional”, ie. to buy a part or portion of the entire property. It is a figure that has considerable popularity in a market like the one we have today.

The approach is aimed at the holiday home as an investment. Second home buyers seek homes that require them to give a small down payment, with low building expenses, and few financial risks … but that allows them to benefit 100% from their investment. It differs from multiowners, which means only a right to use the property x weeks per year. (I’ll make a post detailing this type of fractional purchase).

3 – Almost half of the exhibition was dedicated to the international market, with potential countries such as Spain and Portugal for the English market, as well as new destinations to invest, such as Cyprus, Greece, Africa, Egypt, Brazil, Swazi and Turkey (the ones that had great reception in the English market were mainly: Cyprus, Turkey and Egypt).

4 – In particular, Egypt was the guest country, with many product developers offering the best destinations in the Red Sea. Egypt is considered one of the leading emerging markets in the property sector because it is generating great interest from international markets to invest there.

Many of the reasons to invest in Egypt are: good sustained economic growth, cheap labor and land, and a booming real estate market. A great thing is that the RE market is interesting to both, domestic and foreign customers.

Among the advantages of buying in Egypt is the exemption of tax rates:

* The purchase and ownership of a property is exempt from taxes, both inheritance and capital gains.
* The administrative charges, if any, are very low in general.
* There is an estimated return on investment between 5 to 11% depending on the type of property.
* The areas of the Red Sea are the most popular for tourists and the demand for vacation homes is located in Hurghada, Sharm el Shiekh, and Gouda.

* Theoretically, when buying a home it is not necessary that it be registered in the deeds of the property, although the possibility exists if a buyer decides to register his property paying a fee for it.

5 – There were about 130 seminars of about 45 minute each, in addition to the exhibition, with the idea to reflect this continuous change because new markets are opening at the same time, and new creative ways to face sales and marketing are emerging ….. It is said that the money exists, but will exist only for companies that are prepared to give in exchange good business prospects ….. It is also interesting the idea that investments in “passive properties”, for example student apartments or hotel rooms, should be part of investors’ portfolios as investment alternatives.

Costa Rica, and its amazing Puntarenas Luxury Resort

30 August, 2011 No Comments

The Spanish developer Nyesa soared 16% in an intraday session last year, following the agreement signed with the U.S. investment fund Wilson Capital Group (WCG). This american financial group acquired 20% of the project to build a luxury resort in the area of ​​Puntarenas in Costa Rica, aspiring to be one of the most important in the area.

This agreement amends an earlier one (that I discussed in a previous post), in which WCG was limited to finance the project with a loan of € 330 million.

The agreement, which was being reported as of mid October 2010 to the CNMV (the Spanish Securities Exchange Commission), included Nyesa Costa Rica’s transformation into an SA (corporation), thus changing its capital to USD.

The contract obliged the American group to pay the amount in three phases before the end of 2010.

The megaresort will be located in the Oso Pensinsula, in the province of Puntarenas, with a humid tropical climate, very warm all year round, with a temperature between 22 and 35 º C. That particular area is surrounded by natural parks: Corcovado Park and the Monteverde Cloud, Marina Ballena, which provide shelter to rare species. It is therefore a popular eco-tourism spot due to its exotic flora and fauna. Its diverse landscape, tropical forests, and a sunny coast with great waves suitable for surfing, make it one of the most frequented areas of the country, despite of their great communication infrastructure.

This stretch of the Pacific is a U.S. tourist destination, since it is quite comfortable for them to take a week off there. But nowadays, they are buying more attracted by the good weather, safety and economic standard of living. As a consequence, many areas are developing major shopping centers and private residential compounds.

Where to buy a property in the foreign market

28 August, 2011 No Comments

Know the reasons why you want to buy and have a list of priorities… these are the most important factors to determine the best places to buy your property

It is not the same to buy a vacation home than to buy a home only for investment purposes …… Due to globalization it is less uncommon to buy a house in foreign territories, especially because purchase prices are usually more affordable than in Spain, or Europe in general. The good climate of Spain made it, for many years, one of the main countries in the Mediterranean chosen by French, English, German, Dutch and Belgians as a retirement destination and also as a place for their second home. Nowadays, due to a stronger €, the Spanish people are those who invest in emerging countries where house prices are still cheap in comparison to the prices that have been paying here in recent years.

1 – In the case of purchasing a vacation home the idea seems relatively simple; to find a sunny place where we can escape to relax. But we must go further and think realistically …. How many times a year and for how long am I going to go?…. Do I need to rent the house when I’m away to cover the maintenance costs? If so, how many months per year should I rent it to break even? It is therefore important to carefully study the climate of the area, with its seasonal cycles, rainfall, hurricanes, etc.
One should know what’s the available budget and the total cost that entails. For example the distance is more important than one might think, because in the long run travel costs add up (shoot numbers if you are thinking about a family…), and can end up being much more expensive. Suppose you choose to invest in Malaysia, where it is relatively cheap to buy a house by the beach. If the trip is expensive or airlines do not have direct flights, then you must make some flight connections, the trip is usually expensive and uncomfortable.

2 – In the case of purchasing a property as an investment purpose, or perhaps to enjoy from time to time, it is crucial to consider which areas are suitable for a capital disbursement and study how the resale market behaves. We must also take into account currency variations and the risk that it adds into the transaction.

If the purchase is solely for an investment purpose, then the distance between the place of residence and country of destination is irrelevant. What’s relevant is to evaluate whether they are regions with a high demand by both nationals and tourists. Finally, you should have the strategy to sell in order to be ready when the time to sell arrives: it is preferable to buy in an area where not only local buyers are active, but an area that has a strong local and international market, which would make a possible sale faster and easier. Such examples may be: Tenerife, Laco di Como (Italy), Orlando (Usa), and cities like Paris or Barcelona, ​​as they are locations with a high demand for vacation rentals. Riskier investors could check out opportunities in countries farther east.

3 – If the purchase is intended to settle/ retire and live permanently in the new country, decisions are perhaps simpler, with valuations such as the climate, cost of living, taxes and quality of life (if so, you must also study the job market or how to meet the needs of a family). You have to see the difference between buying a vacation home or a first residence. Tourist areas have a high demand for a few months out of a year, but the remaining months are almost dead with fewer services that supply the area. You must also assess what kind of winters does the area have.

The Mediterranean coast of Europe, combines a good climate with great communications and accessibility. Traditionally, the most popular countries are Spain, Turkey and Cyprus.

Basic ideas to consider before making a purchase:

* If possible, execute your own market research “in situ”. Ask questions, see different options and look for multiple information sources.

* If rental is important, bear in mind that demand for rentals may differ throughout the year.

* Realize that mortgage conditions, if necessary for the purchase of this particular home, vary widely from country to country.

* Finally, as I previously mentioned, know exactly what’s the purpose of your purchase; this will facilitate what kind of country or property best suits you.

(II) HOMES in China

27 August, 2011 No Comments

This post is based on the conclusions of a Spanish entrepreneur who moved with his family to China, and he did his own market research to find a home there.

In China, homes are concessions of 70 years (apparently, they are considering to extend the concession to 90 years). If an investor purchases a brand new home, the concession is for the whole period.

In regards to the Real Estate second hand market;

* If the home is bought in the second hand market, the new owner should subtract the years that the home was previously inhabited to the total period of the concession.
* An interesting fact is that there is small market for rehabilitation of buildings or homes. Chinese are not used to perform regular maintenance to a home (ie; to give maintenance to the building’s garage or facades, or to paint the stairs and the house itself). This leads to visible impairments in a short period of time and therefore the buyer chooses to buy a new apartment or house. (This might be a possible gap in the market that should be carefully studied and be a great business opportunity).
* It could be inferred that second-hand homes in China are not as attractive as new homes. The vast majority tend to search for first hand properties due to the large existing supply across the country. We are talking about an immense market of new homes. However, in the country’s main cities, especially in the city centre (first ring) where the housing market has settled, supply of homes in the second hand market does exist.

The loans offered for the purchase of a home, can amount to 50% of the total investment. NO matter if home prices are fixed, one should always negotiate with the seller, in addition to a 2% discount for early payment. The realtor’s commission is paid by both parties.

Since China is a developing country of considerable size, large cities such as Beijing or Shanghai are not the only ones experiencing this kind of growth, existing cities in the suburbs referred to as “third” or “fourth ring” also follow this trend. These peripheral areas are usually well connected with either high speed trains or a growing subway network.

High speed train networks communicate in a quickly manner people’s homes with the city centers and workplaces. As well as the subway, which makes up the price a house along a station and with good communication (as would happen here).

There are ghost towns, mostly bought by investors who want to own. Taking into account that his mentality is geared toward work all day, have few expenses, and thus, saving. This allowed them to pay a flat to a son (usually one child per family), although now  it is changing, as children salaries are older than the parents’.

In order to appreciate the different areas, despite the large price increase that homes have suffered throughout the country, we see that:

The Hainan Province is a high class residential area with tax advantages. There are promotions of modern design, with resorts and golf courses. It is a very nice, and quite wet area due to its proximity to the sea, located in the south of the country. It is best to buy high apartments and away from the sea to avoid deterioration. The capital, Haikou, and the area of Sanya are also quite expensive. Sanya is a tourist town with an artificial island connected by a bridge. The group of MAD Architects has designed PHOENIX 2, a luxury destination that will be completed by 2014. Since Northern China is very cold, this area is considered a good summer place to spend under the sun. Its target customers are Russian and Northern Chinese. The price of housing in the area is rising at a fast pace, reaching five times its annual price.

Other parts of China are more affordable. Areas that can be a good place to reside are: Guangzhou (near Hong Kong), and Guiling, a beautiful city that will be connected to Shanghai by a high speed train (340km / h), that is still under construction. The price of the area will rise considerably. As of 2010, the highest price to pay would be around 2,000 € / m2, but one can also find housing for 200 € / m2 outside the cities.

Beijing, the capital, has a very extreme weather, such that good conditions only last two months because August can reach up to 40º C. It’s a dense city in terms of people and with high pollution levels. It would be interesting to buy a house in the capital for investment purposes.

(I) HOMES in China

25 August, 2011 No Comments

The Chinese market is a market in which companies from all over the world will settle sooner or later, there will be a predictable increase in investment in homes and offices from foreigners. The average national wage is quite low to be able to rent an apartment or office space, which is why it is not a common alternative among Chinese people. When comparing both options, purchasing a space seems to be cheaper in the long run.

Here are some interesting legal/administrative details for foreign investors looking to buy a property in Beijing (published on the web spanish.china.org.cn). I am not positive; but I suppose that the conditions of foreign real estate investment in Beijing should be similar to the ones in the rest of the country.

Nowadays, it takes a series of permits and requirements that make this transaction a bit more complicated:

1. If you want to purchase a home in Beijing, you would need to request a certificate to the B. Municipal Public Security Bureau of Beijing, and it is mandatory that you have been working or studying in China for at least a year.
2. Foreign companies or organizations that have branches or agencies in Beijing, must certify in a written manner that the homes bought are used only for their own use, and prove their legal status.
3. In the event that the purpose of the purchase of dwellings is to rent, sale, or for commercial use, investors must submit a certificate showing the operations to be performed, and a certificate proving that the company is legally established in the country.
4. Foreign embassies in China, representatives of international organizations, and individuals who possess a “diplomatic status” must present a document from the Ministry of Foreign Affairs in order to buy a home.
5. In other words, what Chinese want is people who buy a home to live there, not for other purposes. They must buy the asset under their name (which, in theory, would exclude the possibility of purchasing it as a foreign corporation).

Real estate market in china

In conclusion, foreigners may only own a house in the capital, Beijing (China), as a dwelling, without the right sell or rent it. The new regulation that limits the real estate investment requires foreign buyers to show that they have been living in the capital for over a year as a student or for work reasons.

To buy a property for investment or business purposes, an investor must first establish a company and obtain approval from the authorities. The Investment in the sector, the constant increase in house prices and its consequences will be discussed in the next post.

€240 million, a rare price for a two floor penthouse…

17 August, 2011 No Comments

…. And possibly the most expensive sold so far ….

The penthouse has an area of 1625 m² and occupies the two highest floors in the “Belle Epoque”  building, in Monte Carlo. Its former owner, banker Ed Zafra, sold it in 1999 to British Developers Candy who have made a complete and costly renovation to continue with the building’s original decorative trends.

For the year 2009, in areas such as Monaco and the French Riviera, St. Tropez and Cap Ferrat, prices of luxury homes have risen due to the higher demand from Russians and Arabs. This can be seen as a sign that ‘the wealthiest’ return to the traditional luxury house market, as in recent months record prices also have been reached for homes in Hong Kong and London.

It is not a common three-bedroom apartment.

Each suite of the apartment has its own movie theater, kitchen, dressing room, 2 bathrooms, spa, library and garden/ patio. It also counts with a security room, shielded, in case of theft (new homes are currently being equipped with this type of room also referred to as “The panic room”).

The terraces combine a decoration of vegetation and sculptures. In this picture there is a piece of the author Lorenzo Quinn, called “Reflections.” The decorative elements of the main terrace are quite baroque with views to the port.

In the dining room, tapestries are hand-painted and the use of glass is quite noticeable. On the floor are details of marquetry, and the roof is finished with a coating of platinum.

2010 World Expo Shanghai, China

17 August, 2011 No Comments

Much has been said about the Expo, which closed its doors on October 31 2010, but there are always uncovered pictures and details that dazzle and we were not aware of. The central theme of the exhibition is “A Better City, A Better Life,” representing the common desire of all societies to have urban nucleus in accordance with modern life, welfare and sustainable development.

At this Expo, cities were able to directly participate, and for that reason, a space referred to as Best Urban Practices Area was created, where several cities around the world presented their experiences and proposals, as well as their point of view of a better model of urban development. Spain was represented by three cities: Madrid, Barcelona, ​​Bilbao.

Given the size and the number of participating countries, the Expo was considered the largest international exhibition to date, with the representation of 192 states and 50 international organizations.

The Chinese Pavilion aimed to show visitors the Chinese culture and its traditions. Its shape was inspired by the ancient Chinese imperial crowns, and the facade, with four columns and a central body in the form of a truncated pyramid, is covered with painted steel beams, twisted in accordance to the Dougong Technique. The ceiling has the shape of a Sudoku. The urban development in China from old times to present times was shown in the Pavilion.

The Expo Cultural Center, designed by the ECADI team of Chinese Architects, was one of the 5 buildings that would remain intact after the Expo disappeared. It looks like a flying saucer, which at night, becomes what appears to be a floating city.

The EXPO HUB, a 1km walk that acts as the access point of the streets and the river, is built with a plastic membrane supported by 50 masts and six funnel-shaped columns.

this picture is the interior of one of the pavilions. They delve into different aspects of urban development:

* The Thematic Pavilion: based on the architectural techniques Shikumen (typical of Shanghai), with two facades with an origami design.

* The Urbanian Pavilion: dedicated to people living in cities. Made by the Dutch architect Herman Kossmann and Mark Jong

* City Hall Being: shows the daily life in the cities, seen as living organisms.

* The Urban Planet Pavilion: represents the process of urbanization at a global level and its interaction with the environment and the countryside.

* The Urban Footprints Pavilion: its purpose was to cover the development of cities from ancient times to current times.

In Costa Rica: Nyesa as the promoter of mega-resort “La Roca” in Puntarenas

12 August, 2011 No Comments

The developer NYESA Valores Corporacion (from the merger of two groups,  Inbesós + Group Nyesa) from Zaragoza, Spain, a year ago signed a financing agreement to build a great tourist project in Costa Rica with an American investment fund that made a €255 million loan, to be disbursed later this month, and amortized over 10 years.

This residential-resort project was scheduled to take place in 2008, but the current credit situation forced the delay. This financing allowed the construction of the first phase of the complex, since the licenses are already in the developer’s hands.

“THE ROCK” will be considered the most important resort in the Pacific Coast of Central America, held in the town of Puntarenas, Costa Rica.

The complex will build 3 hotels (along with Setai Hotel Management Group), a beach club, a fitness center, 1,400 residential villas and condominiums (with the following strategy: the condominiums will be purchased as property, and when the owner does not use it, will be in hands of the resort, who will rent them).

At the time of the housing bubble, the target customer was the Spanish investor. However, they now see  U.S. citizens with high purchasing power as potential customers, and some domestic demand from the country (the company in charge of marketing the project in the US is Playground, specialized in luxury tourism in the US).

NYESA could have modified the initial investment, which was under €600 million, to €1,000 million. The complex expects revenues of $ 1,600 million and an estimated profit of $485 million. (Expansión 07/09/10)

The project includes a 18 hole golf course designed by former tour player Greg Norman. Norman describes the course as unique due to the privileged characteristics of the topography; its rainforest, natural waterfalls, and its breathtaking ocean views. Therefore, “the Rock” should be considered a top class course, with enough qualities to host PGA tour events.

NYESA has focused its efforts on management and development of urban ground, real estate promotions and wealth, diversifying among the hotel industry, office space sector, residences for the elder, shopping centers, and the logistic and industrial sectors.

In older posts, I have talked about the qualities of Costa Rica, and again I describe it as an exceptional country for many reasons; close to 25% of its surface are natural parks with a great biodiversity such as tropical jungles, dense forests, active volcanoes and beautiful beaches in both coasts, which can border the Caribbean or the Pacific Ocean. Its average temperature ranges, in most of the country, between 23 to 27º C. It is also referred to as “the Switzerland” of the Caribbean for its economic and political stability. These characteristics are creating greater tourist demand, and therefore placing the country under the eye of many potential investors.

BRASIL, limits the purchase of Brazilian land to foreign investors.

11 August, 2011 No Comments

Last summer, the Brazilian Government put a limit on the purchase of land foreigners can buy, in order to avoid price speculation as well as the illegal production of biofuels. The government allowed the purchase of a maximum of 100 hectares with the condition that it must be registered.

Biofuels originate from the derivation of biomass, especially created for this purpose, becoming a renewable resource, as a counterpart to fossil fuels. Biofuels have been created to replace traditional fuels, which are harmful to the environment, with the advantages of being biodegradable, environmentally friendly and renewable.

Brazil has discovered that its engine to growth and development is based on executing large infrastructures, investments and technological innovations, which turns it into a great time for promotion and investment.

The real estate sector in Brazil also has its challenges and difficulties such as: the current inflation in land prices, the rising construction costs, and the bureaucratic difficulties in some organs that forbids the entry of international builders and developers. The Brazilian ADMINISTRATION should prioritize the resolution of these issues and thus speed up the international real estate investment. The administration is already working on it, by gradually reducing the required paperwork, which has allowed the entrance of a number of listed Real estate investment companies or REITs and portals that highlight/promote the advantages of investing in real estate in Brazil. As a consequence, the area has increased its value by 30% during 2009, such as Natal or Fortaleza.

There are several real estate developers who personally have told me that they run out of product in a considerably short period of time once it becomes available in the market, and in some cases is sold over planes. Bear in mind that only in the country’s domestic residential market there is a deficit of eight million homes in the short term (e.g, buyers of first residences ), and the fact that Brazil is hosting the World Cup in 2014 and the Olympic Games in 2016, it will cause significant property investments …The opportunity for new investments in infrastructure (roads, bridges, hotels, etc. .) will become available soon, in other words, new business opportunities in the largest economy of Latin America and the 8th world economy, according to World Bank data. Brazil is a stable economy with a consolidated democracy.

Given such a favorable market situation, and features so difficult to find in current times, I recommend that each one of you analyze the information above mentioned and come up with a personal conclusion.