This latest article by James Weir posted in stuff.co.nz on July 31, 2013 reveals how rental property lost its ranking being an asset to give best returns.
For the first time in nine months, rental property has lost its
ranking as the asset that investors say is most likely to give the best
returns. It now shares honours with term deposits, according to an ASB
Bank survey.
"Rental property or nothing" used to be the catchcry of many
investors, but they are now more open to other forms of investment, such
as shares, according to ASB head of wealth advisory Jonathan Beale.
Overall, investor confidence went south for the winter, the June
quarter survey showed. The confidence index fell 7 points from a net 18
per cent positive in the March quarter to a net 11 per cent in the three
months to June.
That reflected a fall in confidence in April, when investors were worried about events in Cyprus.
The ASB Bank survey shows that, nationwide, rental property dipped
two points, to be favoured by 17 per cent as the asset giving the best
returns.
Term deposits jumped two points to 17 per cent of those surveyed, to share the top spot.
Beale said that change was a reflection of house-price concerns.
"Optimism for returns on rental property may have been affected by
talk of an overheated house market and the Reserve Bank reaching for its
macro-prudential tools."
The prospect of rising interest rates next year was also likely to lower confidence in property, he said.
The survey results reflected investors' views of what would give the
best returns, rather than actual returns from investments.
At best, term deposits would return 4 per cent to 4.5 per cent, Beale said.
Property Investors' Federation president Andrew King said this week
that returns on property had been rising in recent years, and were now
about 7.7 per cent on average across the country, up from 6.5 per cent
in 2007.
Yields peaked at 10.2 per cent in 2002.
But Beale said rental returns might be good if people had bought a few years ago, paid a good price and the rent was high.
If investors were buying now, when prices were high, the returns might not be so good.
Some people were also moving out of investment property because of "hassle factors", such as difficult tenants, he said.
In the past two years there had been a definite shift in investors
willing to look at putting money into New Zealand and Australian shares.
People were now much more open to talking about shares and managed funds, Beale said.
Article Source: http://www.stuff.co.nz/business/money/8983238/Investors-looking-beyond-property
For our clients – many of whom prefer European destinations, notably France
and Spain – estate planning comes to the fore. Inheritance rules differ
between countries. In France, for instance, Napoleonic succession laws mean
that there is a compulsory obligation to leave a certain proportion of a
property to children. Advice will often be required to structure the
purchase of the property – this will normally include individual or joint
ownership or more complex structures such as corporate or fiduciary
vehicles. Furthermore, in many circumstances local estate taxes remain
payable, even if property owners remain residents of the United Kingdom for
tax purposes.
Most UK residents, even if relocating, will retain their UK domicile and will
still suffer UK inheritance tax as a result. Relief against local
inheritance taxes will usually be available via a double tax treaty
agreement between the UK and the country where the property is located – but
it goes to show why advice in both jurisdictions is vital.
When our clients buy a French property, we bring together a UK lawyer and a
reciprocal lawyer in France to facilitate the transactions, discuss estate
planning and to liaise with conveyancers, known as notaires.
There's another reason to have experts on hand – tax rules frequently change,
as they have in France, so buyers need to be careful not to get caught out.
Buyers also need to be aware that property taxes may be due. Florida, for
example, tends to have higher property taxes than many overseas
destinations. We find that for many an overseas buyer it is a trade-off
between an emotional purchase and wanting to live in a certain jurisdiction,
balanced against the tax and costs they have to pay to live there.
Author: Armando Rosselli
Article Source: http://www.telegraph.co.uk/finance/personalfinance/investing/10175549/Expert-view-How-to-buy-property-abroad.html
Whichever location you choose, whether it's Florida, France, Portugal or
Spain, you will find different planning regulations, succession laws and
costs. Like any other investment, get all your ducks in a row before you
sign on the dotted line – or you could end up with property or land without
clear ownership, or not paying the correct amount of tax.
First, overseas property buyers need to consider if the time they will be spending at their new overseas property could constitute taxable presence, and check whether there are double tax treaties in place that could relieve this, or whether other aspects might affect their individual tax status.
Second, there could be local property taxes or duties applying on purchase and on an ongoing basis, which should be taken into account while considering the investment. In some jurisdictions, residents might only be allowed to buy residential property.
Naturally, when it comes to buying property overseas, one of the key questions is financing. Should a property buyer borrow in the currency of the property's location – and what are the ramifications if you do?
If this route is chosen, there will be a currency exchange risk. This risk can be accentuated if someone borrows in the local currency, say euros, but all or most of their income is in a different currency, say sterling. If sterling falls markedly against the euro, a consequence would likely be that your loan repayments would increase, causing cash-flow problems. Foreign currency loans and assets might also have UK capital gains tax implications. We have strict lending criteria on overseas mortgages – it is vital that clients understand what they are getting into.
While our clients tend to opt for the traditional expat countries for long-term occupancy, we are seeing different trends for those looking at buying a second home.
Barbados is fast becoming the holiday home destination of choice, although some of our younger clients are turning to Ibiza. Others are looking at alternative options.
For example, we had a client looking to buy a villa but who ended up buying a yacht. He now has a "floating villa" and can holiday in Barbados, Italy, Spain and Portugal – enjoying a variety of quality restaurants, beaches and resorts. It's a decent solution – although yachts can be expensive to run and consideration still has to be given to tax and ownership.
Whether people opt for a farmhouse, a villa or even a yacht, it is important not to let your heart rule your head. Consider the implications and take advice – it will help you keep your house in order.
Armando Rosselli is executive director, head of tax and wealth structuring
at CouttsFirst, overseas property buyers need to consider if the time they will be spending at their new overseas property could constitute taxable presence, and check whether there are double tax treaties in place that could relieve this, or whether other aspects might affect their individual tax status.
Second, there could be local property taxes or duties applying on purchase and on an ongoing basis, which should be taken into account while considering the investment. In some jurisdictions, residents might only be allowed to buy residential property.
Naturally, when it comes to buying property overseas, one of the key questions is financing. Should a property buyer borrow in the currency of the property's location – and what are the ramifications if you do?
If this route is chosen, there will be a currency exchange risk. This risk can be accentuated if someone borrows in the local currency, say euros, but all or most of their income is in a different currency, say sterling. If sterling falls markedly against the euro, a consequence would likely be that your loan repayments would increase, causing cash-flow problems. Foreign currency loans and assets might also have UK capital gains tax implications. We have strict lending criteria on overseas mortgages – it is vital that clients understand what they are getting into.
While our clients tend to opt for the traditional expat countries for long-term occupancy, we are seeing different trends for those looking at buying a second home.
Barbados is fast becoming the holiday home destination of choice, although some of our younger clients are turning to Ibiza. Others are looking at alternative options.
For example, we had a client looking to buy a villa but who ended up buying a yacht. He now has a "floating villa" and can holiday in Barbados, Italy, Spain and Portugal – enjoying a variety of quality restaurants, beaches and resorts. It's a decent solution – although yachts can be expensive to run and consideration still has to be given to tax and ownership.
Whether people opt for a farmhouse, a villa or even a yacht, it is important not to let your heart rule your head. Consider the implications and take advice – it will help you keep your house in order.
Author: Armando Rosselli
Article Source: http://www.telegraph.co.uk/finance/personalfinance/investing/10175549/Expert-view-How-to-buy-property-abroad.html
