Property

Investing Overseas: Australia, Canada, Singapore & UK

In the last issue we gave you the basics of what to expect — at the very least — if you choose to invest here at home in Hong Kong, as well as perpetually popular destinations Thailand, the United States and Malaysia, and newcomers in Germany and Japan. Here we offer up four more spots that rank high on investors lists.

AUSTRALIA

Freehold or leasehold property:
Property in Australia is leasehold for foreign nationals.

Stamp duties, capital gains and rental income taxes:
Stamp duties are set at state levels, and so vary. New South Wales’ stamp duty on AU$500,000 homes is roughly 4%, Queensland charges approximately, 3% and Victoria added a 7% levy for foreign (FIRB) buyers as of July 1 bringing to total to around 11%. In transactions involving land, it is the land the stamp duty is calculated on. Taxes are levied on the federal level by the federal Foreign Investment Review Board, which approves all purchases by overseas buyers, as well as at the state level. Capital gains taxes apply to the net selling prices less the total purchase cost. There is an offset for carried forward losses since purchase, which is set-off against the capital gains to reduce the taxable income. Income tax for non-residents is flat 34%, and investors can claim depreciation for rental properties, which then creates a loss so there is no tax payable on the rental income.

Escrow system:
Funds are held in trust accounts by solicitors.

Down payments and refunds:
Australia has constantly shifting rules for deposits, but on off-plan purchases down payments are generally 30%, including refundable booking fees. Mortgage brokers are crucial. In primary sales, there are no drawdown payments and buyers settle on completion and when titles are issued.

David Brown
Méridien Group, www.meridiengroup.com.au

CANADA

Freehold or leasehold property:
Canadian property with few exceptions is freehold.

Stamp duties, capital gains and rental income taxes:
There is no stamp duty on property sales in Canada, only taxes, which varies from province to province. Sales tax is levied at approximately 0.4% in British Columbia and 0.7% in Ontario — or CA$20,000 to $35,000 on a $500,000 property. Capital gains taxes run approximately 12.5% and taxes on rental income at roughly 25% depending on costs, depreciation and maintenance.

Escrow system:
All jurisdictions in Canada use a third-party escrow system for down payment funds and deposits. The funds are held by the lawyer’s trust account.

Down payments and refunds:
Down payments in Canada are simple, with non-residents paying a fairly standard 35% on both primary and secondary market properties. In the event of non-closure the buyer forfeits any deposit funds.

Concord Pacific
www.concordpacific.com

SINGAPORE

Freehold or leasehold property:
In Singapore, the typical tenure is freehold, 999-year leasehold or 99-year leasehold.

Stamp duties, capital gains and rental income taxes:
Stamp duties are scaled in Singapore at 1% of the purchase price up to SG$180,000, 2% on the second SG$180,000 and 3% thereafter. An additional buyer’s stamp duty of 15% is applicable for foreign purchasers. In general, the gains derived from a property sale are not taxable unless the owner’s primary source of income derives from property trade. Profit on rental property is subject to income tax, which depends on the owner’s tax bracket.

Escrow system:
The deposit of 1% of the option money goes to the vendor. Additional down payment funds go to an independent depository set up by the government.

Down payments and refunds:
In the secondary market, down payments are at 1% of the purchase price, payable once an Option to Purchase is issued, after which a further 4% is due with signed Sales and Purchase agreements. In the primary market the purchaser pays a booking fee of 5% of the sale price and another 15% due with the signed Sale and Purchase agreement. Subsequently, progress payments are made according to the construction schedule. The option money of 1% of the purchase price will be forfeited if the purchaser does not proceed to exercise the option to purchase. The additional deposit of 4% of the purchase price will also be forfeited if the purchaser does not complete the sale.

Gareth Hart
Director, International Properties, Colliers International, www.colliers.com

UNITED KINGDOM

Freehold or leasehold property:
New build tends to be leasehold. Conversion apartments are sometimes leasehold and sometimes freehold.

Stamp duties, capital gains and rental income taxes:
For properties purchased at prices up to £125,000 the stamp duty is 0%, with a buy to let home rate of 3% (introduced in April 2016). In the £125,001 to £250,000 bracket the levies are 2 and 5%; at £250,001 to £925,000 they are 5 and 8%; and at £925,001 to £1.5 million the rates are 10 and 13%. An additional 12% duty applies to the balance of the purchase price above that. Capital gains taxes are 18% or 28%, depending on whether owners in basic or high tax level bracket. Rental profits are taxed at the same rates as income received from business or employment: 20%, 40% or 45%, depending on which tax band the income falls into.

Escrow system:
Funds for overseas purchasers are held by third parties, usually lawyers administering transactions.

Down payments and refunds:
Down payments are, on average, 10 to 30% in both the primary and secondary market, and is most often 20% but the amount can vary depending on completion dates in the primary sector. Deposits are forfeited in the event of incomplete transactions.

Mimi Capas
Director, Head of International Project Marketing, Knight Frank