APRIL 2011 |
www.opp.org.uk
NEWS By Geoff Hadwick
THE European Commission is squaring up for a major row with France over its residential property rules. The EC has formally asked France to amend its tax provisions which allow investments in new residential property situated in France to benefi t from accelerated depreciation … but do not allow the same for similar investments abroad. The Commission considers such
provisions to be incompatible with the free movement of capital, a fundamental principle of the EU’s Single Market. The request takes the form of a Reasoned Opinion (the second step of an infringement procedure). In the absence of a satisfactory
response within two months, the Commission may refer France to the European Court of Justice. The problem is that the French tax
provisions allow accelerated depreciation to be applied to new residential property in France which is intended for letting over a minimum period of 9 years. This results in favourable tax treatment for
France | is in a major disagreement with the European Commission over taxes
these investments. By contrast, a French taxpayer who invests in residential property to let in another Member State or an EEA country cannot benefi t from accelerated depreciation, and hence cannot enjoy these tax benefi ts. Such provisions are incompatible
with the free movement of capital as guaranteed by Article 63 of the Treaty on the Functioning of the European Union and Article 40 of the EEA Agreement says the commission, because they discourage resident taxpayers from investing in overseas property. In a
similar case, the EU’s Court of Justice (C-35/08, Busley from 15 October 2009) has confi rmed that such discriminatory tax treatment is in breach of EU rules on the free movement of capital. Speaking exclusively to OPP, Graham
Rowan, managing director of French property specialists The Leaseback Team, said that he believes that “this debate relates to the Loi Scellier, a law introduced a couple of years ago to give generous tax breaks to French investors in the buy-to-let property markets.” According to Rowan, the scheme
INDUSTRY | 07 France in row with EC over tax rules
operates by allowing French nationals to: “buy off-plan a new property which will be made available for rental (including leasebacks) for say €100,000 excluding VAT; reduce their income tax by 25% of the property price over 9 years … so 25% of €100,000 equates to a €25,000 income tax reduction, which also equates to a €2,778 income tax reduction per year.” “These tax breaks are only available to
French residents buying rental property in France. They do not apply if French residents buy rental property overseas hence the Commission feels this limits the free fl ow of capital,” adds Rowan. The leaseback specialist also told
OPP that he has been assured “that this would not impact the amortisation rules for UK investors in French leaseback property, which include offset of 100% of furniture costs over ten years and 80% of the real estate cost over 20 years.” “One upside of the abolition of the
Loi Scellier would be to stimulate the leaseback re-sales market in France, as these benefi ts currently steer French residents to off plan property investment rather than re-sales.”
Investors return to distressed Dubai market
Overseas property investors are returning to Dubai’s distressed residential market, according to the director of sales at Landmark Properties, Michael Michael. “From the end of last year onwards,”
he says, “we have seen a defi nite increase in interest from overseas clients. Such investors are mainly from countries within the GCC or Eastern Europe, indicating a growing sentiment that Dubai’s property market
is now offering investors greater value for money.” The head of valuation and advisory
at Landmark Advisor, Saeed Hashmi, added, “although the market is still relatively immature in terms of large institutional overseas investors, Dubai now seems to be back on the agenda for many parties.” “In comparison to mature western markets, investment property in Dubai attracts much higher equivalent yields,
ITALY PRICES FALL 0.3%
THE Bank of Italy has revealed that the country’s national house price index fell by only 0.3% between 2009 and 2010, with prices increasing in the cities of Cagliari, Catania and Genoa. This was despite Italy enjoying a similar property boom to Spain and Portugal in the years before the crash with prices rising 70% from 1998-2008.
i.e. a nine percent plus for prime property, albeit under differing terms, suggesting that the signifi cant yield margin and long-term growth prospect in certain sectors is re-attracting healthy investment appeal.” If this increase in interest proves to
be true, it is timely news for Dubai, with OPP last month reporting on a possible chronic oversupply problem. Tens of thousands of new properties are due to come onto a market where
AFFORDABLE CHINA HOMES
China plans to embark on a huge nationwide 1.3 trillion yuan ($200 billion) programme to build 10 million homes in a year. The hope is this will provide low-cost housing for those left behind by the speculative surge in residential property prices. In all, 36 million homes will be built in the next fi ve years.
about 40% of homes are already empty, because developers are choosing to complete projects started before the collapse rather than cancel them. Landmark Advisory says as many as 48,000 homes will be completed in the next two years, a 12% increase in supply, and agency Cluttons LLC estimates that 35,000 new houses will be completed before the end of 2010, prolonging the price slump for at least the next 18 months or so.
DUTCH HEADING DOWNHILL
THE drop in house prices in the Netherlands is accelerating, according to the latest fi gures. The prices of owner-occupied houses sold in January 2011 were 1.1% lower on average than in January 2010. The price drop was more substantial than in December, when prices were down 0.8% year- on-year.
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