Thanks to recent tax changes, many landlords are considering their options. Some have decided to pull out of the buy to let market altogether whereas others are downsizing their portfolios. One alternative that you may be thinking about is investing in overseas property, but is this a viable option?
Overseas Investment a Challenge
Online letting agency, PropertyLetByUs, has surveyed 500 property investors and found that a large number are seriously considering the merits of the overseas property market, with France and Spain the most popular would-be destinations. However, PropertyLetByUs is warning would-be investors that investing overseas is not without its challenges and if landlords are tempted, they need to think very carefully about the type of fiscal regime they face.
Jane Morris, managing director of the agency warns: “Each country has different tax laws relating to property and they can change quickly, with little warning. For example, in 2012 the French Government imposed a 15.5 per cent social charge on capital gains from the sale of second homes or rental income – a measure which was estimated to bring in €250 million a year. Tax on rental income rose overnight, from 20 per cent to 35.5 per cent, while capital gains tax on property sales rose from 19 per cent to 34.5 per cent.”
Investors were hit hard by the ‘social charge’ and it wasn’t until 2015 that the tax measure was overturned by the EU on the basis that it was illegal.
Think Carefully!
Morris advises landlords to think very carefully before investing overseas, as it may not always be a bargain.
