Property Alert 19th September 2014

Hello again, and we have some overseas news and views for you today. As
ever, if you are active in these markets, let us know. We have lots
more material for you!

Turkey – Tax Update

Berk Çektir, a lawyer focusing on the legal aspects of living and doing
business in Turkey offers some words on the current tax situation
there. ‘Turkish property tax is a long and tortuous road which
regularly changes course in amazing and unbelievable ways. The most
recent change concerns an enormous rise in benchmark values determined
by the authorities against the real life prices for properties. This
means that whatever the property price you sell or buy, the value to be
declared to the Land Registry Office and Tax Office cannot be lower
than the price determined by the authorities. The problem is that this
benchmark price set by the authorities is sometimes much higher than
the market price. This places a false and unjust tax burden on the
seller of a property in which the market price is lower than the
official benchmark price.’

‘For example, you buy a property for TL 100 and later decide that you
would like to sell it. Now you have a buyer for TL 150; this is
apparently the market price. However, the benchmark price set by the
authority is TL 300. What is the impact of this extremely high
benchmark price? You now have to declare this benchmark price as the
actual sales price; you are forced to declare it, otherwise the officer
will not commence the proceedings. The system probably does not allow
the Land Registry Officer to put a smaller value than the benchmark
price in the system for this property.’

‘This whole thing ends up with the seller paying more tax. If we take
the capital gains tax as 35 per cent, the seller, considering the
example above, would pay only 35 per cent of the gains, i.e., TL 50.
However, the gains now seem to be higher since the seller now has to
register the sales value as TL 300 and now the seller has to pay 35
percent of TL 300, i.e., TL 105 as capital gains tax. Is there any
profit in this business? Yes, of course; there is no profit for the
investor who believed in the Turkish property market and invested in
it, but there is a fantastic profit for the Treasury.’

Golden Visa Update

Agents Lucas Fox offer an update, ‘The Spanish Golden Visa has been in
force for one year and so far has under-performed when compared against
the similar scheme in Portugal – approximately 100 successful
applications in one year compared with approximately 1,000.’

‘The biggest take up in Portugal has been from Chinese clients and this
is largely down to the fact that the Canadian visa scheme closed at the
same time as the Portuguese scheme opened and Chinese immigration
companies diverted their clients to Portugal.’

‘So far in Spain the main interest has been from Middle East clients.
We have successfully processed applications for Far East, Russian,
Indian, American and South African clients. There is growing interest
from China and a number of Chinese immigration companies have started
to establish a presence in Madrid and Barcelona.’

‘The Portuguese scheme took approximately a year before it generated a
higher volume of applications and the signs are that the number of
applications in Spain should start increasing through the remainder of
2014 and into 2015 as the property market improves.’

US Foreclosures Update

Andrew Batty’s articles on foreclosures have certainly sparked members’
interest in all things BMV in Florida. (Missed the articles? Email back
for them). Talking foreclosures, we’ve some new figures in from
CoreLogic. Main headline? ‘US foreclosures down 20 per cent
year-on-year’. Florida, at 120,479, has the most completed
foreclosures, followed by Michigan (44,000), Texas (38,000) and
California (32,000).

‘The stock of distressed debt continues to rapidly decline, especially
in western states. The number of seriously delinquent loans fell by
more than 25 per cent from the prior year in 10 states and seven of
those states were in the west. Based on current trends, the overall
foreclosure inventory could trend down to as low as 500,000 homes by
year-end, which is very positive news for the housing market.’ Looking
to buy one of these properties? Sooner rather than later!

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