Saturday, May 22, 2010
Tax Hikes, Ghost Estates, and More
Saturday, May 22, 2010
Dear Reader,
A new week, and a new government in the UK, with plans for increased taxation. While an announcement for an emergency budget on June 22nd didn't surprise anyone, the decision to raise capital gains tax on "non-business assets" came as a shock. "Non-business assets" includes property--second homes and rental properties. Real estate investors in the UK are paying close attention to this.
Capital gains tax (CGT) currently stands at 18% in the UK (non-residents, however, don't pay CGT). The new government wants CGT for second homes and buy-to-lets to rise in line with income tax levels. For some owners, that could mean CGT levels of 40-50%. In addition, the £10,100 start level for taxable profit could change to a new lower threshold of £1-2,000. The proposals sparked a backlash from core government supporters, with demands for transitional measures, softening the blow of the tax hike. We'll keep you posted.
Many property owners in Ireland would love the worry of capital gains taxes. Right now, it's the least of their problems. Average property prices have lost up to 50% of their 2007 peak value. The property meltdown in Ireland led to "ghost estates"... brand-new, immaculate housing estates, usually in the suburbs, that failed to sell, and sit vacant. Currently, there are 621 ghost estates across the Irish Republic.
The public debate on what to do with this housing surplus proposes a range of uses, from housing the homeless to bringing in the bulldozers. It's a complete about-turn from the dizzy days when you could double your money in a year by buying a home in Ireland. According to government ministers, the blame lies partly with tax breaks given to developers and buy-to-let owners alike in the boom years, and a complete disregard for the normal laws of supply and demand. Developers over-built--and often with poor-quality construction, or in areas with a lack of demand for housing.
We've always said when buying pre-construction, you should understand your end-user. Who will buy or rent your unit from you on completion? How much competition will you have? How will demand measure against supply? Moreover, you should choose the best quality units in prime locations for maximum appreciation potential.
Over in Costa Rica, they're trying to figure out why Costa Ricans live so long. More than 10,000 Costa Ricans are over 90 years old, a very high figure considering that the average annual income is $6,900. Researchers believe that a good diet, a close social network, and daily exercise all contribute.
Perhaps Costa Rica's healthy outdoor lifestyle helps, too. One Times reporter seeking the perfect surf wave in Costa Rica discovered some of Costa Rica's outdoor attractions: rappelling, zip lining, and swimming in both ice-cold waterfalls and hot springs. It certainly beats worrying about ghost estates and tax hikes...
Margaret Summerfield
P.S. If you'd like to experience Costa Rica's great outdoors for yourself, why not join one of our chill weekends in the Southern Zone? You'll find dramatic lush landscapes, pristine beaches that run for miles, and huge national parks. You can swim, surf, sport fish, bird watch, or hike...or relax in a hammock, rocked by gentle ocean breezes. For $250, you'll spend four days exploring this unique place, and checking out the best real estate project in the area. The trip includes accommodation, meals, and airport transfers from San Jose. It's the perfect way to check out Costa Rica's laid-back lifestyle...and see if it's right for you. Click here to discover more.
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