Tag Archives: real-estate
New tax on property in New Zealand owned by non-citizens from April 2016
A new withholding tax on sales of residential property in New Zealand by people who live overseas and go on to sell the property within two years of purchase will be introduced in 2016. The Residential Land Withholding Tax (RLWT) is the third part of the Government’s investment property tax reforms announced as part of its Budget 2015. It will come into force on 01 July 2016 under a new Bill before Parliament. Revenue Minister Todd McClay said that the RLWT will act as a collection mechanism for the new bright-line test, which applies to gains from the sale of residential property purchased on or after 01 October 2015 and sold within two years. ‘The proposed RLWT will ensure the integrity of the tax system and will bring the collection of bright-line tax into line with other withholding taxes, which generally apply when there is likely to be a tax liability and collection may be difficult,’ he explained. RLWT will apply when the property being sold is located in New Zealand and defined as residential land under the bright-line test provisions; when the seller acquired the property on or after 01 October 2015 and has owned the property for less than two years before selling it; and the seller is an offshore person. An offshore person would include people who are not New Zealand citizens, people who do not hold residence class visas and New Zealand citizens and residence class visa holders who have been away from New Zealand for a significant period of time, three years in the case of New Zealand citizens. New Zealand trusts and companies may also be considered offshore persons if they have significant offshore interests in them. ‘Unlike the bright-line test there is no exception for the seller’s main home under the proposed new RLWT rules. As the withholding tax would only apply to a person living overseas, it is unlikely that the New Zealand property being sold would be the person’s main home,’ said McClay. The Bill does, however, propose an exemption from RLWT for transfers upon death, and for transfers made in relation to a property relationship agreement, in keeping with the bright-line test. The Bill also proposes that the obligation to pay the RLWT will primarily be the responsibility of seller’s conveyancing agent or in their absence, the purchaser’s conveyancing agent and in the absence of both, directly by the purchaser. ‘The RLWT proposal in the bill, together with the new bright-line test and changes to collect better tax information about buyers and sellers of residential property will help to ensure that everyone pays their fair share of tax on gains from property sales,’ added McClay. Continue reading
Buy let stamp duty could make investment unviable for new entrants in UK
The extra 3% stamp duty tax being levied on buy to let and second home buyers in April 2016 means that it may no longer be financially viable for new entrants to the lower end of the private landlord market, it is claimed. And the new tax band will have a disproportionate impact on pensioners looking to generate revenue in retirement, according to Chestertons, one of London's largest estate agents. The announcement of the additional levy on second homes and buy to let purchases came as a surprise announcement in the Chancellor's Autumn Statement, and initially caused some confusion across the industry as pundits disagreed on how the additional 3% would be applied. Chestertons has now calculated that the extra duty will hit the lower end of the market more heavily in terms of a percentage increase than it will the higher end. A buy to let property acquired for £150,000 attracts stamp duty of £500, but under the new regime it rises to £5,000, a tenfold increase. By comparison, an investor buying a property for £1 million currently pays £43,750 in stamp duty, while the new rate will be £73,750, less than double the original duty, although of course a larger amount in cash terms. ‘The Chancellor claimed that this change to stamp duty would prevent wealthy investors and overseas buyers from pricing first time buyers out of the market, but as usual the devil's in the detail,’ said Nick Barnes, head of research at Chestertons. ‘What we can now see is that this change is likely to completely deter many first time landlords from getting into the private rental market in the first place, including pensioners looking to wisely reinvest their precious pension pot,’ he pointed out. ‘ The obvious effect of this will be that there may well be a significant number of smaller landlords deterred from entering the sector altogether. Those who remain will have their margins slashed and, on top of the increasing regulatory burden and the planned reduction in mortgage interest relief, they may have to raise the rent in order to make the numbers stack up. Either way, the already highly competitive private rental market is about to get a whole lot more so,’ he added. According to Robert Bartlett, chief executive officer of Chestertons, the industry had hoped that the Chancellor might have announced stamp duty change that would have helped the current negative impact on sales above £1 million. ‘We'd hoped he might consider capping rates, or reducing them by 3%, so you can imagine the dismay when this extra surcharge was announced. The buy to let sector has become an essential part of the UK housing landscape and we urge the Chancellor to think clearly around the rules for when this is being introduced,’ he said. He pointed out that a number of key questions still need to be answered, for example whether a buy to let investor who has contracted… Continue reading
Scottish farm land market subdued but the best still sells well
Weak commodity prices, increased acres on the market and reduced subsides have subdued the Scottish farmland market yet, a new analysis report suggests. But the very best land has continued to achieve record prices, according to the latest data from real estate firm Savills. The statistics also shows that supply in Scotland was up by 23% this year in the 12 months to the end of September to 37,000 acres compared with the same period last year. ‘With UK farm debt at a record high, and prospects for improved commodity prices looking gloomy, more farms are likely to appear on the market in 2016 and this may have an impact on land values,’ said Luke French of Savills. ‘However with farmland supply at record lows, the fundamentals for why land is a good long term investment remain the same,’ he added. The Savills report says that there is a margin of around 20% to 30% between the average price per acre for prime arable land in England compared to Scotland and that is continuing to attract national interest in Scotland’s farms from those seeking to expand their farming businesses. Despite a good harvest in terms of yield, changes to the support system and continued poor commodity prices have created a tougher market, the report points out and units are taking longer to sell as more due diligence is undertaken and funding arranged. At the same time, it adds that buyers have become more discerning, resulting in a more fragile market and values out with local hot spots have plateaued across the board and are under pressure, as has been evident in some recent sales. ‘What is very evident is the resulting regional variation in average land values across all land types. Best in class continues to sell and sell well,’ said French. He gave as an in the Spring of 2015 in the lead up to the General Election in early May when Mains of Ravensby, a 190 acre arable farm on Angus, sold in five weeks after a highly competitive closing date, at a record price per acre. According to Savills buyers of Scottish farms continue to be predominantly farmers, many with funds from renewable projects and development land, in contrast to the English market where the lifestyle buyer has returned to the list of active purchasers in 2015. Continue reading
