A window of opportunity as UK hits overseas investors
IRISH commercial and residential property markets are expected to see increased in flows as investors cash in on UK properties during the next 12 months following the British government's decision to introduce capital gains tax (CGT) for overseas residents who sell British residential property after April 2015.
The move is expected to encourage some investors, including many Irish investors, to avail of a CGT window for buying Irish property as this window is due to close at the end of 2014.
The Irish window would allow those who buy either commercial or residential properties before that date, and who hold them for seven years, to avoid paying CGT on any increase in the value of the properties over those seven years.
So investors who switch from British buy-to-lets and into Irish properties in 2014 will avoid profit taxes in both countries.
The current British CGT rate is 18pc on British residents who are lower taxpayers and 28pc on higher taxpayers but the government may introduce a special rate for non-residents in its next Budget.
Two Irish estate agents, Sherry FitzGerald and Real Estate Alliance, already plan to entice Irish ex-pats and British investors here by hosting exhibitions of Irish properties in London next spring. The REA exhibition will take place on February 22, coinciding with the weekend Ireland play England in the Six Nations rugby tournament in Twickenham. The Sherry FitzGerald exhibition will take place on March 1.
Both were planned in advance of the British CGT announcement. Sherry Fitz-Gerald, has held similar exhibitions for the past two Springs and Mary Dillon, head of Sherry FitzGerald Countrywide, reports increasing interest from both British investors and Irish ex-pats.
“This year alone www.sherryfitz.ie had 79,000 visits from 829 locations across the UK. This represented a 20pc increase since 2012 and 32,000 were from the greater London area alone, a 40pc increase since 2012.
Dr John McCartney of Savills says that the tax factor adds to a range of other factors which would encourage Irish investors in the UK to switch to Irish property.
“Sterling has strengthened significantly against the Euro since last summer, meaning that now may be a good time for investors to convert their UK asset holdings into Euro cash.
“We have already seen that the CGT holiday here has been an effective measure in attracting both domestic and international money into Irish investment property,” he adds.
He also cites recent moves by Irish lending institutions to reduce their buy-to-let mortgage rates and to target overseas investors, while Irish population growth, rapid rises in house prices and increasing rents are among the other attractions for investors to switch here.
Robert Ganly of Ganly Walters believes that the British change may benefit Irish taxpayers as increased demand and property values would enable NAMA to sell Irish property and get back some of the money it paid the banks for their loans. However he also warned “it could be a negative insofar as it could further stoke up an already overheated market, especially in Dublin.”