Tax rule changes to apply to overseas holiday homes

August 24, 2010 – 10:55 am

tax rules changes on second homes will have implications on rentals in Tenerife,the Canary Isles and Spain.

Proposed tax rules changes on second homes will have implications on rentals in Tenerife,the Canary Isles and Spain.

Proposals announced by the Government last week, on changes to the tax rules on furnished holiday lets (FHL) will also apply to the owners of properties in the European Economic Area if they are UK tax payers, warns accountants James Cowper

The changes proposed for April 2011 bring the taxation of FHL into line with EU law, whilst at the same time limiting the effect on the holiday industry, and include: An increase in the number of days a property needs to be let before it can qualify as a FHL. This will restrict the extent that owners will be able to use their second home and still retain the tax breaks.

Removing the ability to offset expenses against other income. For many this will increase the cost of running their second home. Stephen Barratt, private client director at James Cowper comments: “Currently a property only has to be let for 70 days and be available for 140 days to qualify for tax breaks under the FHL rules.  These had been due to be scrapped from April 2010 but were saved in the Emergency budget on 22 June.  If the current proposals are implemented, the tax breaks will be restricted or removed altogether as the letting requirements rise to 105 and 210 days respectively. 

“Many in the industry think this is a way of penalising second home owners and it could force many to choose to sell their properties ahead of the April 2011 rule change.  If many people come to the same conclusion this could see a glut of properties on the market in holiday home hotspots both in the UK and overseas.”

Stephen continues: “Whilst the thrust of this consultation will cause concern for many, property investors who operate on a more commercial basis are unlikely to be affected by the proposals as they are clearly aimed at those who let their property for close to the minimum of 70 days per annum and also use it for their own holiday benefit at other times.”

“We must wait and see what is in the detailed rules, but even at this stage we can expect them to have an impact on both the industry and property prices. It will certainly impact the affordability for those who are thinking about purchasing a second home.”

The headline rate of capital gains tax is 28% for higher rate taxpayers and 18% for basic rate payers, but the profit on a sale of a FHL generally attracts a rate of just 10%. There might also be an element of main residence relief in the case of a second home where the necessary tax election has been made. Depending upon the scale of the business and the timing of the sale, it might be that a sale after 5 April 2011 will still qualify for the 10% tax rate. The rules are complex and so those looking to hold on to the property beyond that date but still benefit from this favourable rate should seek proper professional advice.

Stephen Barratt concludes: “As always the detail in the legislation is crucial and at this stage we only have proposals for consultation. That said, change is in the air and it seems clear that the coalition government is looking to raise the bar before the owners of these types of properties get the tax benefits of ownership. I would urge anyone with a holiday property, or looking to buy one, to keep a close eye on developments over the coming months and on the impact any changes will have on their individual circumstances and plans. The consultation period ends on 22 October 2010 so more detail should be available shortly after.”

Clearly this will have an impact on those who own or are looking to buy with rental income in mind in Tenerife, the Canary Isles and Spain in the not too distant future. 

By Angela | Posted in Economy, General, Health, Holiday, Inspirational, Miscellaneous Articles, Property, Tenerife, Things to Do, Uncategorized, Weather | Tagged , , , , , , , , , , , , , , , , , , , | Comments (0)

Fewer holidaymakers taking to the sky this year.

August 22, 2010 – 4:40 pm

Less holidaymakers flying to Tenerife, the Canary Isles and Spain

Less holidaymakers flying to Tenerife, the Canary Isles and Spain

Substantially fewer holidaymakers have flown abroad this year than last, official figures have shown.

In the 12 months to June the number of visits abroad by British residents fell by 12 per cent from 63.3 million to 56.0 million - a drop of 7.3 million on the same period in the year before.

The figures from the Office for National Statistics are the latest data to indicate consumers and businesses are still being very cautious about spending money on travelling abroad.

The biggest drop came from businessmen cancelling trips or deciding to stay at home, with business trips falling by 19 per cent.  Holiday visits decreased by 12 per cent to 36.9 million. This shows once again how important it is to market your rental property in Tenerife in a professional manner, using a reliable agent and most important, at the right price point.

Earlier this week, both Thomas Cook and Tui, the two biggest tour operators in the country, said they were experiencing a very difficult summer. Thomas Cook admitted it had been forced to cut the price of holidays between May and July and its still had 160,000 unsold summer holidays.

Last month, The Daily Telegraph reported how camping in Britain had officially overtaken bed and breakfasts in popularity, as millions of families opt for the cheaper option of sleeping under canvas, with more than five million camping trips undertaken last year.

By Angela | Posted in Economy, General, Health, Holiday, Inspirational, Miscellaneous Articles, Property, Tenerife, Things to Do, Uncategorized, Weather | Tagged , , , , , , , , , , , , , | Comments (0)

Trim the costs of owning a property overseas.

May 14, 2010 – 4:25 pm

Over a million Brits currently own a home overseas, with France and Spain being the most popular destinations. However the global economic slowdown has hit homeowners not only at home, but also abroad as the cost of maintaining a property has increased -over a fifth of owners (21%) are struggling to meet the increased costs, according to latest research from a currency firm.

Trim the cost of maintaining your property in Tenerife by following a few simple steps

Trim the cost of maintaining your property in Tenerife by following a few simple steps

85% of overseas property owners say the cost of maintaining their property has gone up in the last 12 months, so you should attempt to reduce the cost of being an overseas property owner.

 

 

Whilst mortgage rates may have gone down for many owners, the overall cost of owning a property overseas (including local taxes, utility bills, maintenance costs etc) has continued to grow and the rising costs of ownership have been magnified by sterling’s depreciation and the continued market nervousness over the hung parliament following the General Election  Many homeowners are also seeing their rental income from a holiday home hit, as the number of potential tenants decreases with more people opting for ‘stay-cations’ in their home country. 

Two years ago the average overseas home owner transferred £10,000 a year to meet maintenance costs (including overseas mortgage payments) and provide spending money when they visit their second home. However as the pound has taken a beating against all the world’s major currencies, they now have to convert significantly more in order to meet the costs associated with their international property such as maintenance costs, mortgage payments, utility bills and local taxes. 

For example, in October 2008, £10,000 would have bought you €12,900.  To receive the same amount of Euros today, a Brit has to transfer £11,896, almost £2,000 more.  People making regular currency transfers should set up a Regular Payment Abroad plan with a currency broker  such as Moneycorp that allows you to lock into an exchange rate for up to 12 months ahead so you know know exactly how much is being transferred every month.”

According to the research, almost 70% of holiday home owners are missing out on vital income by not renting out their overseas property. Almost half of those that do rent it out only do so to friends and family who traditionally pay less than other tenants.

Overseas home owners have to pay ongoing taxes on ownership, such as local taxes or even tax on rental income.  This is usually payable in the country where the property is located, but if you are a UK resident, such income also needs to be recalculated into Sterling and is taxable in the UK, regardless of where it is paid, with any appropriate relief given in the UK for taxes paid abroad. Each country will tax the income according to its own rules, so sometimes more allowances are available abroad than in the UK or the tax rates abroad may be lower, but the higher tax liability will be due.  However, there may be ways of reducing your tax bill, but whatever you do, you only pay tax when you make money. Spending money unnecessarily to save tax can often be a false economy It is important to make sure that you claim whatever allowances you are entitled to.

People who take advice before buying their property abroad often manage to make their purchase more cost-effective than those who buy without taking advice so you should at the very least check the advice of a reliable estate agent.  

By Angela | Posted in Economy, General, Holiday, Inspirational, Miscellaneous Articles, Property, Tenerife, Things to Do, Uncategorized | Tagged , , , , , , , , , , , , , , , | Comments (0)

Confidence grows for overseas buyers

April 12, 2010 – 1:42 pm

 

Confidence grows for overseas buyers in Tenerife

Confidence grows for overseas buyers in Tenerife

 There’s a growing feeling of confidence amongst prospective overseas property buyers, according to overseas mortgage firm Conti. The firm just had its busiest month for almost a year in terms of mortgage ‘go aheads’, the point where prospective buyers take their mortgage quotes through to the application stage. These increased by 48 per cent during March, compared with the previous monthly average. 

The proportion of prospective buyers progressing from the quote stage to the go ahead stage has also increased, suggesting that buyers are becoming more serious about their intended investment.

Despite the turbulence unleashed on the UK mortgage market by the global banking crisis, Conti says that overseas mortgage providers have a healthy appetite for lending to foreign investors. But a combination of factors, not just mortgage availability, are contributing to the attractiveness of this market. Falling property prices, in some cases by up to 50 per cent, and historically low interest rates are making it much more affordable, despite the current strength of the euro. 

Clare Nessling, Conti’s Operations Director, says, “Falling property prices across many European destinations mean that the chance of owning a place in the sun may never be better, and historically low interest rates mean it’s become even more affordable for British buyers. The most popular destinations amongst our clients are still France and Spain, both of which come with easy access and good rental opportunities.

“Confidence is definitely growing, but there’s also an element of buyers snapping up bargains in traditional hotspots while they have the chance.”

Beating the poor exchange rate

According to Conti, an increasing number of British investors buying second homes in Europe are taking out euro-denominated mortgages in order to beat the poor exchange rate. This not only allows them to take advantage of cheap interest rates, but could potentially save them significant sums of money if, as experts predict, sterling appreciates against the euro over the next few years, as this will reduce the sterling cost of the property purchase.

Clare Nessling says, “A euro mortgage could be a good idea, even if you thought you didn’t need one. As you’ll only need to transfer money for your deposit and fees for now, it minimises the amount of sterling you have to exchange for the property purchase. Even if you’re lucky enough to be a cash buyer, it may be worth taking out a mortgage until the exchange rate improves, at which point you can pay it back, and ultimately reduce the price you pay for the property.”

“There are a number of other benefits associated with euro mortgages. If, for example, an investor is going to rent out their property, having a euro mortgage means that their rental income and mortgage repayments are in the same currency, and they can therefore avoid exchange rate fluctuations.

By Angela | Posted in Economy, General, Holiday, Inspirational, Miscellaneous Articles, Property, Tenerife, Things to Do, Uncategorized, Weather | Tagged , , , , , , , , , , , , , , , , , , | Comments (0)

Tenerife and Canary Islands take climate change seriously.

January 30, 2010 – 1:35 pm

Tenerife and the Canary Islands taking climate change and recycling seriously.

Tenerife and the Canary Islands taking climate change and recycling seriously.

As we all become more environmentally responsible and start to take climate change seriously, a new holiday destination website has launched in the Canary Islands to help holidaymakers to continue their day to day green living habits and find unique ‘carefully selected’, luxurious ‘eco-friendly’ villas and retreats on one of the World’s most picturesque archipelagos. A family run business set up to help like-minded families,  promotes the finest selection of privately-owned properties in the Canary Islands.

Over the last few years we’ve witnessed a growing number of rental properties in the Canaries converting to renewable energy sources and turning environmentally-friendly.  Almost all  UK tourists are contributing in some way to helping the environment in their everyday lives back at home, from the bare basics of recycling their paper, tin and plastic, to being aware of water or electric conservation. It is just as easy to continue these living habits even when we are on a holiday, especially here in the Canary Islands. There are recycle points on almost every street.

Eco-tourism is not just a growing trend but more a way of life for those of us who live in the Canaries and we hope to convince holidaymakers to go green and show support to the local people so that future generations may share the wonderful natural beauty that the Canary Islands has to offer.

By Angela | Posted in Economy, General, Health, Holiday, Inspirational, Miscellaneous Articles, Property, Tenerife, Things to Do, Uncategorized, Weather | Tagged , , , , , , , , , , | Comments (0)

Property prices starting to rise in certain areas of Spain

January 10, 2010 – 12:23 pm

Property prices on the rise in parts of Tenerife,Spain and the Canary Isles.

Property prices on the rise in parts of Tenerife,Spain and the Canary Isles.

 

Property prices are starting to rise in some parts of Spain, according to a new report from one of the country’s largest savings banks. These include the Canary Islands,Cantabria, the Basque region, Asturias and La Rioja, says the report.

The much awaited real estate recovery is underway in locations where there is no glut of property such as  the

‘House and land prices have touched bottom in some cases. The adjustment is almost over, if not already,’ said Eduard Mendiluce, head of Caixa Catalunya’s property division Procam.

Indeed the report points out that there are between 660,000 and 1,040,000 homes on the market. This represents between 2.6% and 4.1% of the country’s housing stock. They expect the glut to fall slightly to between 640,000 and 1,070,000 in 2010, down to between 2.5% to 4.2% of housing stock.

The Caixa Catalunya report estimates that there will be an annual demand of 220,000 homes between now and 2015, almost half the level of 300,000 to 450,000 estimated by developers. At this rate it could take five years for the market to digest the glut.

But there is more good news for the luxury end of the Spanish market with one  buyers agent  reporting that transactions in prime areas around Marbella were increasing as early as the first quarter of 2009. ‘Secondary areas lagged behind with the first green shoots only appearing about nine months later and the worst locations are still in total paralysis in 2010,’ she said.

Currently the typical person looking for property is a cash buyer, buying for their own use, with a medium to long-term perspective, not dependant on rental income and only interested in buying in prime locations, she explained.

‘And those that require a mortgage need a maximum of 50% relative to value. In other words, the right purchasing parameters are in place again. Spain’s property market managed very well without a mass market before the boom of the Noughties and will do so again, returning I hope to the stability and long-term growth that held for four decades but this time going for quality rather than quantity,’ she added.

She also points out the uselessness of official statistics. ‘The official Ministry of Housing figures, based on registered transaction prices and supposedly objective, are distorted by under declarations of the sale price in the past and only once we have had several years of full price declaration will this distortion be washed out of the system, while the oft-quoted TINSA stats are based on subjective market appraisals. Either way, they are unreliable and, therefore, are meaningless,’ she explained.
‘There is only way to get good information about what prices are doing in 2010 and that is to talk to someone who is actively involved in putting deals together right now. When I’m asked about price falls, if they have hit bottom or if they have further to go my reply is that it all depends and there is no one answer but it seems to me that there are two main factors influencing outcomes: location and how badly the seller wants to sell. I would say there is a shortage of top quality properties in the best locations at the right price level for 2010,’ added Wood.

By Angela | Posted in Economy, General, Holiday, Inspirational, Miscellaneous Articles, Property, Tenerife, Things to Do, Uncategorized, Weather | Tagged , , , , , , , , , , , , , | Comments (0)

Problems with the property market in mainland Spain

December 12, 2009 – 4:53 pm

 

Problems remain in Spain's property market

Problems remain in Spain's property market

The residential property market in Spain has not yet reached the  bottom and could drop another 27% in 2010, according to a new report.

Overall property transactions in 2009 dropped by around 41% compared with 2008, the report by Spanish property consultants and analysts Aguirre Newman, also shows.

The report, Coyuntura Global del Mercado Inmobiliario Español, also warns that bank valuations continue to overestimate the true worth of property in Spain.

In the report analysts says that there is no easy solution to the problem other than a substantial overhaul of Spain’s banking regulations to ensure future house valuations are done at a more realistic level.

It also warns that the housing market in Spain will remain depressed while banks continue to sell off huge stocks of repossessed homes and regional authorities continue to finance the purchase of unsold homes with government grants, such as Andalucia’s 2010 plan.

“Current home price estimates do not reflect true market values. Banks and real estate companies that own or have financed unsold new homes will have to accept price cuts of around 27%,’” said Javier Garcia-Mateo, director of analysis and investigation.

However, the report does expect office and retail rental prices to stabilise in 2010, ahead of any possible recovery in 2011.

The housing slump tipped the Spanish economy into the worst recession in 60 years, and Spain’s unemployment rate is the highest in the European Union. Home sales fell about a third in the 12 months through September, the latest government data shows.

Real estate companies including Martinsa-Fadesa have filed for protection from creditors in the past 18 months after falling behind on debt repayments when the market collapsed.

By Angela | Posted in Economy, General, Holiday, Inspirational, Miscellaneous Articles, Property, Tenerife, Things to Do, Uncategorized | Tagged , , , , | Comments (0)

Marketing properties in Tenerife require the right level of exposure

December 5, 2009 – 12:49 pm

The number of holiday rental properties in Europe is increasing and the right level of exposure is essential, especially when the global economic downturn is taken into account. Property owners should make sure that they give a very detailed and interesting description of their holiday rental and surrounding area.

Market your property in Tenerife whilst long winter nights in the UK cause people to think of holidays and warmer climes

Market your property in Tenerife whilst long winter nights in the UK cause people to think of holidays and warmer climes

Owners of overseas self-catering holiday homes are reminded that the long dark evenings of winter are just the time when people think about next year’s vacation and therefore property owners should think about marketing the properties via estate agents in Tenerife.

In related news, Britons who let out holiday homes in the UK will need to maximise on lettings in 2010 as they are likely to lose their furnished holiday lettings tax relief in April of next year.New legislation, details of which are expected in this month’s pre-Budget report, are expected to outline changes to the tax rules for furnished properties available to let for at least 140 days a year and actually let for 70 days year.

The new measures could affect around 60,000 individual second-home owners, who form the core of the UK’s holiday lets market, and can currently offset the cost of furniture and fittings against tax.

By Angela | Posted in Economy, General, Holiday, Inspirational, Miscellaneous Articles, Property, Tenerife, Things to Do, Uncategorized, Weather | Tagged , , , , , , , , , , , , , | Comments (0)

Economic recovery indicates better real estate markets.

November 15, 2009 – 12:33 pm

Tenerife property prices set to improve?

Tenerife property prices set to improve?

As parts of Europe enters economic recovery mode many real estate markets are also improving but at markedly different rates, according to a new report on trends in the investment, office, retail, industrial, hotels and residential sectors.

In Europe improving investor sentiment is driving activity forwards for a specific band of prime real estate but financing remains difficult to obtain, according to the Jones Lang LaSalle CEE City Report for the third quarter of 2009. ‘Occupier activity across all sectors has slowed compared to previous years as similar financing issues prevent or delay relocation and expansion plans.

Rental levels are beginning to bottom out in most of the core CEE markets and we expect stability to fully return throughout 2010 once the supply and demand levels rebalance,’ said John Duckworth, Managing Director of Jones Lang LaSalle in the CEE.  
‘These green shoots of recovery in the economy will still take some time to filter into the real estate markets,’ added Duckworth.

However, forecasts also suggest that the core CEE4 countries will gather momentum in 2011 and register average year-on-year growth of over 3% which is somewhat higher than the overall Europe forecast of 1%.

‘We believe that the lack of liquidity and the fall in positive sentiment that has affected CEE over the past 12 months, does now appear to be slowly changing. ‘Despite the recent positive news in the global economy, this will still take some period of time to work through into actual business confidence.

As the development pipeline continues to remain low again across all sectors, we expect a shift in balance from an occupiers market to a more balanced market in the second half of 2010 and then into a landlord’s market as we go through 2011,’ it concludes. If this report is correct that is great news for  the property sector inTenerife, Spain and the Canary Islands.

By Angela | Posted in Economy, General, Holiday, Miscellaneous Articles, Property, Tenerife, Things to Do, Uncategorized | Tagged , , , , , , , , , | Comments (0)

Expats and problem tenants in Spain

November 3, 2009 – 5:14 pm

Problems with tenants in Spain and Tenerife may be reduced by using an agent

Problems with tenants in Spain and Tenerife may be reduced by using an agent

According to Paragon España , part of the Paragon Advance group of companies offering tenant referencing and rent warranty in Spain, reluctant landlords in Spain are increasingly experiencing problems with bad tenants hit by the economic downturn.

It is claimed that the number of defaulting tenants and evictions have tripled in the past two years and many of the landlords who are experiencing problems are expats who moved to Spain for a better lifestyle and then became reluctant landlords. They have been forced into letting out their homes in order to be able to pay the mortgage and, for those investors who jumped on the Spanish property market, buying off plan, only to see it go into freefall before they could offload their investment, they have had their fingers burned and are having to let long term and ride it out.

Many expat landlords are unaware of the different mechanisms in place to secure rental income and often fail to implement them in their rental agreements which can leave them unprotected if the tenant does not, or cannot, pay the rent, according to Paragon España. This is where the use of a rental agent pays dividends and Tenerife is no exception to this rule.

By Angela | Posted in Economy, General, Holiday, Inspirational, Miscellaneous Articles, Property, Tenerife, Things to Do, Uncategorized | Tagged , , , , , , , , , , , | Comments (0)