Hello and welcome to the Someplace Else Ireland blog.
If any of our readers are thinking about attending this weekends Sunday Busines Post Expo in the RDS, we’d be absolutely delighted to meet with you. More details on opening times, our stand location and my emerging market seminars are below.
But back to business – last week some of you might remember that I spoke about the much stricter lending conditions Irish and UK property buyers are facing at home and how lending conditions in countries like Romania with much lower mortgage debts and booming economies are the complete opposite.
There is another category of countries I’d recommend investors study closely – those who don’t yet offer reasonable mortgage products to locals or foreigners but could be doing so in the very near future. If you can locate a market with a fast growing ecomony, low property ownership, relatively high but falling interest rates and a government that implements sensible fiscal policies then it is probably only a matter of time before affordable financing become available.
Can anybody remember what happened in the Baltics 4-5 years ago? Interest rates in the region fell from 12% to 4% enabling banks to offer mortgage products to hundreds of thousands of people who previously would never have been able to afford to buy a property with savings alone. The supply of new property more or less stayed the same while demand shot up dramatically. Result? Property prices increasing 30-40% per year. Someplace Else investors made a fortune because we were the first into the market.
Take a closer look at the much bigger and more powerful Brazil – banks don’t yet offer financing to foreigners but an economic boom and easier credit terms for locals have caused a “consumption frenzy” as millions of Brazilians qualify for loans for the first time. The people that are now taking out loans to buy new cars will eventually take them out to buy new houses.
Or take Argentina – ultra modern tower blocks are springing up all over Buenos Aires and the vast majority of them are snapped up by well heeled locals buying with cash. Think about that for a moment – there is a property boom in Argentina being driven not by overseas investors but by Argentineans buying with cash. When lower interest mortgages become available to Argentinean professionals who don’t have $150,000 in cash lying around, property prices will absolutely soar.
What I’m writing here will be nothing new to adventurous Irish investors, in the last three months alone I’ve met Irish people who own hundreds of city centre apartments and thousands of acres of land. I also spoke to a gentleman last week who is planning to buy 100,000 hectares in Bolivia.
Want to learn more about €60,000 apartments and land with planning permission for $11 per square metre? Just give us a call - 1890 425 425.
Best Regards
Colin Murphy
Director
Someplace Else Ireland Ltd
Thursday, February 14, 2008
Friday, February 8, 2008
Lending conditions are tight in Ireland, but what about emerging markets?
If any readers of the Someplace Else Ireland Newsletter are fans of Little Britain, they might remember a very funny sketch where a bank manager refuses to give a loan to a customer because “the computer says no”. That seems to be very close to reality these days, with lending conditions both here and in the UK the tightest they’ve been for almost a decade.
It feels like only yesterday that banks were falling over themselves to offer us financing. Young couples in their early twenties with relatively low salaries had no problems getting 90-100% mortgages on properties that should have been way out of their league.
Nowadays, it’s the exact opposite – I recently had a client on the phone with a mutimillion euro portfolio who told me he was refused a €40,000 topup on his mortgage – “not right now” was what they told him, but it may as well have been “the computer says no”.
It seems like the Irish banks are telling us to come back another time when we’re considered less risky - but why on earth should we do that?
Another option is to forget about Irish and UK banks and approach their global competitors that offer financing for property in countries that are undersupplied, underpriced, with very low mortgage debt and who are more than happy to lend to foreigners that meet their (very reasonable) lending criteria.
Romania falls very firmly into this category (75% LTV 30 years, 6-7%), as does Bulgaria (75% LTV 25 years, 6-8%), Germany (60-70% LTV 25 years, 5-7%) and many more.
There’s a lot of negativity out there at the moment, and it’s tempting to shrug our shoulders and wait until things get better in Ireland, but in my opinion that won’t be for a long time. In the meantime however, myself and my colleagues will continue sourcing exciting property opportunities and building relationships with banks in countries that have much better investment potential.
If anyone is interested in learning more, please give us a call, we’d be delighted to hear from you.
Kind Regards
Colin Murphy
It feels like only yesterday that banks were falling over themselves to offer us financing. Young couples in their early twenties with relatively low salaries had no problems getting 90-100% mortgages on properties that should have been way out of their league.
Nowadays, it’s the exact opposite – I recently had a client on the phone with a mutimillion euro portfolio who told me he was refused a €40,000 topup on his mortgage – “not right now” was what they told him, but it may as well have been “the computer says no”.
It seems like the Irish banks are telling us to come back another time when we’re considered less risky - but why on earth should we do that?
Another option is to forget about Irish and UK banks and approach their global competitors that offer financing for property in countries that are undersupplied, underpriced, with very low mortgage debt and who are more than happy to lend to foreigners that meet their (very reasonable) lending criteria.
Romania falls very firmly into this category (75% LTV 30 years, 6-7%), as does Bulgaria (75% LTV 25 years, 6-8%), Germany (60-70% LTV 25 years, 5-7%) and many more.
There’s a lot of negativity out there at the moment, and it’s tempting to shrug our shoulders and wait until things get better in Ireland, but in my opinion that won’t be for a long time. In the meantime however, myself and my colleagues will continue sourcing exciting property opportunities and building relationships with banks in countries that have much better investment potential.
If anyone is interested in learning more, please give us a call, we’d be delighted to hear from you.
Kind Regards
Colin Murphy
Monday, February 4, 2008
Irish Tax Implications of Foreign Property Ownership
Hello and welcome to the Someplace Else blog.
This week I’m going to briefly address a hugely important subject that seems to be widely misunderstood and misinterpreted by the overseas property industry – the tax implications of foreign property ownership.
Although I’m going to provide various links for further information, I’d like to limit this article to two issues solely from an Irish residents tax perspective.
Paying tax on rental income earned from an overseas property, and
Paying capital gains tax on the profits from the sale of an overseas property.
1. Paying Tax on Rental Income
In a nutshell, if you receive rental income from a foreign property, you will have to pay tax on the net profit to the Irish authorities on or before 31st October of each tax year. It doesn’t matter whether you bring the money into Ireland or leave it in a foreign bank account. For a detailed guide to taxation on rental income, please click here.
If you are already paying income tax in the country where your property is being rented, you are still liable to pay income tax in Ireland, although you will be able to reduce your tax liability to take into account some or all of the income tax already being paid abroad. The actual amount of this reduction mostly depends on whether or not Ireland has a double taxation agreement with the country where your property is. Click here for a list of these countries.
For a detailed example of foreign tax liability in a country with versus a country without a double taxation agreement with Ireland, please view page 14 of this document.
2. Paying capital gains tax on a foreign property
A simple rule of thumb for an Irish resident is as follows: if you sell a foreign property for a profit, you are subject to Irish capital gains tax within that tax year. The standard rate is 20% and it doesn’t matter whether you bring the money into Ireland or leave it in a foreign bank account. For a detailed guide to capital gains tax, please click here.
If you own your foreign property through a foreign company, it is more complicated, but generally speaking, you will still be liable to pay Irish capital gains tax on the disposal of your share in this company.
If you buy a property offplan and sell (flip) it on before completion, any increase in value is still liable to Irish capital gains tax.
As per the income tax paragraph above - if you have already paid capital gains tax (or equivalent) in the country where your property is based, as an Irish resident, you are still liable to pay capital gains tax in Ireland. However will be able to reduce your tax liability to take into account some or all of the capital gains tax already paid abroad. The actual amount of this reduction mostly depends on whether or not Ireland has a double taxation agreement with the country where your property is. Click here for a list of these countries.
For a detailed example of capital gains tax liability in a country with versus a country without a double taxation agreement with Ireland, please view page 18 of this document.
3. Conclusion
That’s it. I hope some of you found this useful. Nobody likes thinking about or studying taxation, but if your aim is to make lots of money on the overseas property markets, I’m afraid it’s something you are going to have to spend time on.
For information on all of our projects, including a new project in Bolivia, please view our website.
Kind Regards
Colin Murphy.
Disclaimer: I would like to state that I am not a qualified tax advisor and that this short article is merely my interpretation of information freely available from the Irish Tax authorities. Responsibility cannot be accepted for any losses suffered as a consequence of relying on the information contained in this article.
This week I’m going to briefly address a hugely important subject that seems to be widely misunderstood and misinterpreted by the overseas property industry – the tax implications of foreign property ownership.
Although I’m going to provide various links for further information, I’d like to limit this article to two issues solely from an Irish residents tax perspective.
Paying tax on rental income earned from an overseas property, and
Paying capital gains tax on the profits from the sale of an overseas property.
1. Paying Tax on Rental Income
In a nutshell, if you receive rental income from a foreign property, you will have to pay tax on the net profit to the Irish authorities on or before 31st October of each tax year. It doesn’t matter whether you bring the money into Ireland or leave it in a foreign bank account. For a detailed guide to taxation on rental income, please click here.
If you are already paying income tax in the country where your property is being rented, you are still liable to pay income tax in Ireland, although you will be able to reduce your tax liability to take into account some or all of the income tax already being paid abroad. The actual amount of this reduction mostly depends on whether or not Ireland has a double taxation agreement with the country where your property is. Click here for a list of these countries.
For a detailed example of foreign tax liability in a country with versus a country without a double taxation agreement with Ireland, please view page 14 of this document.
2. Paying capital gains tax on a foreign property
A simple rule of thumb for an Irish resident is as follows: if you sell a foreign property for a profit, you are subject to Irish capital gains tax within that tax year. The standard rate is 20% and it doesn’t matter whether you bring the money into Ireland or leave it in a foreign bank account. For a detailed guide to capital gains tax, please click here.
If you own your foreign property through a foreign company, it is more complicated, but generally speaking, you will still be liable to pay Irish capital gains tax on the disposal of your share in this company.
If you buy a property offplan and sell (flip) it on before completion, any increase in value is still liable to Irish capital gains tax.
As per the income tax paragraph above - if you have already paid capital gains tax (or equivalent) in the country where your property is based, as an Irish resident, you are still liable to pay capital gains tax in Ireland. However will be able to reduce your tax liability to take into account some or all of the capital gains tax already paid abroad. The actual amount of this reduction mostly depends on whether or not Ireland has a double taxation agreement with the country where your property is. Click here for a list of these countries.
For a detailed example of capital gains tax liability in a country with versus a country without a double taxation agreement with Ireland, please view page 18 of this document.
3. Conclusion
That’s it. I hope some of you found this useful. Nobody likes thinking about or studying taxation, but if your aim is to make lots of money on the overseas property markets, I’m afraid it’s something you are going to have to spend time on.
For information on all of our projects, including a new project in Bolivia, please view our website.
Kind Regards
Colin Murphy.
Disclaimer: I would like to state that I am not a qualified tax advisor and that this short article is merely my interpretation of information freely available from the Irish Tax authorities. Responsibility cannot be accepted for any losses suffered as a consequence of relying on the information contained in this article.
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