Home economics: Sinead Ryan answers your property questions
Myself and my husband have been living and working in Dubai for the past four years and we are considering investing in property in Ireland, which we may use as our primary residence when we return in a couple of years. We think it's preferable to do this now rather than have to start the mortgage application process while renting on our return, and begin to move our money back home. What options do we have?
A. On the money side, I would strongly advise you engage an accountant in Ireland. You have most likely earned this money tax-free in Dubai and there is a tax implication in shifting it back home, for whatever reason.
There are specialists in this area who will guide you on the best option so that you are not overly hit for tax on its arrival in an Irish bank.
On the mortgage side, Joey Sheahan of Sheahan Financial says, "There's definitely a resurgence of investors dipping their toes back in the property waters with strong results. "Anecdotally, we've seen clients who invested in property three or four years ago, see returns on their investment of 50pc and above.
"For Irish citizens living abroad, the hardest part of acquiring a property in Ireland is logistical, and managing the property can also be challenging.
"To start, I would say that your choice of lender will be limited because you are earning in a non-Euro currency, which is a no-go for some banks.
"However, others are more flexible. The fact that you will be applying while not resident in the country will mean the loan-to-value (LTV) you can secure will be reduced to around 65pc or less, so you'll need a bigger deposit.
"Another option would be to trade Irish property directly or indirectly through a Real Estate Investment Trust (REIT). Green REIT, for example is listed on the ISEQ and currently trading at around €1.49 per share, which is up about 33pc since the fund launched in 2013. Zurich also offers a diversified REIT fund with returns around 11pc in the past year."
Q. Is it possible to purchase property from a non-relative, below market value and escape any tax liability? My query is for a property worth €500,000, which I would in theory buy for €250,000 and the owner gets a sum that they are happy with and I avoid paying a higher price than I can afford.
A. Whether you buy from a relative or not, my first instinct is to ask why anyone would sell a property for half its value in the first place? Your email has no more details, but it is one of the stranger questions this column has received.
In any event, there is no tax issue arising on the sale of a residence which is a principal private dwelling. It can be sold free of Capital Gains Tax (CGT) to the owner.
If it is not a principal dwelling, but an investment property, than CGT is payable by the vendor on the profit made between the purchase and selling price (less some Revenue-allowed deductions for inflation etc).
In terms of a tax liability to the buyer, the question is whether the transaction could be deemed a gift to you, and this is a distinct possibility. S.548 of the relevant Act contains rules for determining 'market value' of an asset. Essentially it is "the highest price that anyone with sufficient resources would reasonably be prepared to pay for the asset", given prevailing conditions.
If the open market value of the property is reasonably deemed to be €500,000 and you only pay €250,000, then it could be assumed that the price not paid, i.e. the remaining €250,000, was a gift. If so, then a liability could arise. In Capital Acquisitions Tax terms, this is 33pc on any amount over €16,250 for non-relations, creating a potential tax of €77,137.
The Ryan Review
Despite bank lending being back to normal and punters finding little difficulty in getting loans, chasing down low-interest rates can cause some to look at less, ahem, traditional lenders. It's true, our interest rates on mortgages and personal loans are much higher than other EU countries, so you can forgive a borrower seeking to keep his repayments low, but week after week the Central Bank has to issue warning notices over unauthorised firms attempting to transact business here.
It has 3,150 such firms listed on its website - an extraordinarily large list. Although many may simply not be registered here (itself a no-no) but are otherwise generally above board, others are complete scams. They work by offering an ultra-low interest rate, with little or no financial underwriting but requiring upfront payments for insurance, tax, or a deposit guarantee. You're asked to put this in an overseas bank account or cryptocurrency wallet, and too often it is never to be seen again.
The latest addition to the list is a French operator called Vesus Loans. The CB is warning Irish people not to borrow from it. Too late for one - a Mr Adrian Conor, who calls himself a 'Consultant from Ireland' and appears in a testimonial on the company's website. "I thank you so much", his glowing reference begins, "It must be recognized that I no longer believed but I had so much debt that I could not not [sic] try. Five days ago that I discover your services and I already receive my transfer. God bless you".
To fall back on that oft-quoted adage... if it seems to good to be true, then it probably is.