Knight Frank, the independent global property consultancy, launched its first-ever Global Tax Report that prepared jointly with Ernst & Young. The report analyses the buying, holding and selling costs for foreign buyers of prime residential property over a five-year period (2015 – 2020) as well as providing illustrative taxation costs in 15 key cities worldwide, including four cities from Asia (Hong Kong, Mumbai, Shanghai and Singapore).
The report analyses the costs for foreign individuals buying a US$1m or US$10m property in their own name as an investment, and renting it out over the five-year period.
According to the report, London ranks first among the 15 key cities worldwide when analysing both property costs and tax costs.Foreign investors in London are charged 7.8% and 5.4% respectively in property costs when buying at the $1m and $10m level.Looking at the tax costs – including stamp duty land tax, investors buying in their own name expect to pay 9.7% for $1m investment and 20.7% for $10m.
Sydney follows closely behind London’s statistics in property costs with foreign investors being charged 9.2% and 5.2% respectively in property costs when buying at the $1m and $10m level. With tax costs however investors expect to pay 18.0% for $1m investment and 26.0% for $10m.
When analysing those cities where property costs are highest, Knight Frank and EY have determined Paris (15.3%), Berlin (13.3%) and Geneva (12.6%) to impact foreign investors with the highest property costs at the $1m mark. Geneva replaces Paris when considering property costs at the $10m level, charging investors 13.2% of the five year sales price, followed by Berlin (11.3%) and Monaco (10.8%).
Considering the tax costs across the 15 cities, it is a different story. Taxation is highest in Sao Paulo both at the $1m and $10m level, costing investors 31.5% over the five year period. It is followed by Hong Kong. Investors here are charged 22.4% of the $1m property cost over a five year period but Sydney replaces Hong Kong at the $10m mark charging foreign buyers 26.0% in tax.
Policymakers are increasingly using tax and property costs as a means of regulating housing demand, controlling affordability and generating revenue. It will be interesting to see how the current situation in each of the 15 cities will change in the coming years.
Source: Knight Frank