Author: Premela R.

Real Estate Capital Gains Tax – A Global Comparison

Singapore Mortgages

Real Estate Capital Gains Tax - A Global Comparison

This week, in our "Wealth Planning" series, we analyse and compare the capital gains tax for the major real estate investment destination countries. This is a follow-up article from last week's "Global Stamp Duty Comparison."

This week we take a closer look at the real estate market and the capital gains tax in 13 countries around the world:

Australia
France
Japan
Spain
USA		Canada
Hong Kong
Portugal
Thailand		Dubai
Italy
Singapore
United Kingdom

What is Capital Gains Tax?

Capital gains tax (CGT) is a tax levied on the profit from selling an asset, including real estate. The rate for foreign national investors in 2023 can vary between countries and may also depend on the specific circumstances of each transaction. 

Global Comparison

Here's a list of Capital Gain Tax for the countries we offer mortgages to:

Australia: In Australia, the CGT rate for foreign nationals is determined by the investor's marginal tax rate, which ranges from 0% to 45%. A discount of 50% is available for individuals and trusts if they have held the asset for more than 12 months.

Canada: In Canada, 50% of a capital gain constitutes a taxable capital gain, which is included in the corporation's or the individual's income and taxed at ordinary rates.

Dubai: There is currently no personal income tax in Dubai. As such, capital gains tax is not imposed on UAE nationals or resident individuals.

France: In France, the CGT rate is 30% plus exceptional income tax for high earners at 4%.

Hong Kong: Hong Kong does not have a CGT on real estate.

Italy: Capital gains are subject to separate taxation at 26% (normal PIT rate applies in certain instances).

Japan: In Japan, gains arising from the sale of real estate property are taxed at a total rate of up to 39.63% (30.63% for national tax purposes and 9% local tax), depending on various factors.

Portugal: 50% of capital gains arising from the sale of real estate by tax residents and non-tax residents in Portugal are taxed at marginal rates varying between 14.50% and 48% (plus the solidarity rate, if applicable).

Singapore: In Singapore, the CGT is not applicable to the sale of residential property.

Spain: In Spain, the CGT rate is 26% for residents and 19% for non-residents.

Thailand: Capital gains on the sale of investments derived from or in Thailand by a foreign company not carrying on business in Thailand are subject to a tax of 15%, withheld at source by the purchaser, unless otherwise exempt under a DTT.

United Kingdom: The rate of CGT is 10%, where the total taxable gains and income is less than £37,700. Any excess gains are taxed at 20%. Where business asset disposal relief applies, the rate of tax on the whole gain is 10%, subject to a £1m lifetime allowance.

United States*: In the U.S., the CGT rate is 0%, 15%, or 20%, depending on their tax-filing status. Individual taxpayers will not pay any CGT if their taxable income is $44,625 or below. If their income falls between $44,626 to $492,300, the CGT rate is 15%. Above $492,300, the rate increases to 20%. A flat tax of 30% is imposed on U.S. source capital gains in the hands of non-resident alien individuals physically present in the United States for 183 days or more during the taxable year. 

*How to Defer Capital Gains! 

“1031 Exchange” is a type of tax deferral strategy used in the United States for real estate transactions. It allows investors to defer paying capital gains taxes on the sale of a property by "exchanging" it for a similar "like-kind" property. The idea behind this strategy is that investment in real estate can continue to grow tax-free until the final sale, when taxes are ultimately paid.

In Summary 

Real estate can be a valuable investment, providing a place to live and the potential for capital gains. Currently, some of the top markets for real estate capital gains include the United States, Canada, Australia, and the United Kingdom. The global real estate market in each of these countries offers its own unique opportunities and challenges, and a range of factors, including economic growth, interest rates, demographic trends, and government policies, influences it. 

At Global Mortgage Group, we understand the complexities that international investors face when it comes to capital gains tax. We provide tailored advice to meet our client's specific needs. Our team of experts is dedicated to providing personalised solutions to help our clients maximize the return on their investments while minimizing their tax liabilities.

Contact us today to learn more about how we can help you get the most out of your capital gains tax and learn all about GMG's financing solutions for foreign national investors at [email protected].

Global Stamp Duty Comparison For International Real Estate Investors

France Residential Mortgages

STAMP DUTY COMPARISONS FOR INTERNATIONAL REAL ESTATE INVESTMENT DESTINATIONS

For international real estate investors who intend to use the property to earn income, the numbers have to make sense. The definition of Stamp Duty is a tax that the government places on legal documents, usually involving the transfer of real estate or other assets, and having them legally record those transactions.

In reality, it's a tool governments use to control housing prices. When housing prices rise too aggressively, governments increase stamp duties to cool prices and vice versa if governments want to promote property purchases. In some countries like Singapore, stamp duty can be as high as 30% for first-time buyers - yes, 30% just to prepare some documents!

How It Works

When it comes to property transactions, stamp duty charges are typically based on the purchase price of the property and vary depending on the property's location, with some states and territories having higher rates than others. In addition, different rates may apply for different types of properties, such as residential or commercial properties. On top of property transactions, stamp duty charges can also apply to the transfer of shares and certain other types of transactions. The rate and applicable transactions can vary depending on the jurisdiction.

Overall, stamp duty charges are an important consideration for anyone, especially foreign national investors looking to buy property.

Global Comparison

Here's a list of stamp duties for the countries we offer mortgages to:

Australia:

  • Stamp duty varies for each state in Australia but as a rule of thumb, it's 3-4% of the property value.

Canada:

  • Canada has no stamp duty. Instead, the country imposes a tax on the occupation of properties.
  • As of January 1, 2023, Foreign nationals are banned from purchasing property in Canada. The law provides exceptions for home purchases by immigrants and permanent residents of Canada who are not citizens.

Dubai:

  • If the target company or a subsidiary holds real estate in the UAE, then registration fees would be payable. The rates vary depending on the emirate.
  • In Dubai, a registration fee of 4% is payable on the value of the property where there is a transfer of either freehold title or a long-term lease of 10 or more years, with 2% being typically borne by the buyer and 2% by the seller.

France:

  • The French government imposes a property transfer tax on the sale of real estate.
  • The rate of tax varies depending on the location of the property and the type of transaction and can range from 2% to 12%.

Hong Kong:

  • Ranging from HK$100 for properties under HK$2 million up to 4.25% of the sale price for property over HK$21,739,120.
  • The stamp duty rate jumps to 15% for non-permanent residents and Hong Kong permanent residents buying a second property.

Italy:

  • This tax is between 2% and 9% of the cadastral value of the house.
  • However, it will never be less than 1000€ regardless of the value of the property.
  • If you are buying from a private person, you do not pay any VAT. In addition, if this property is your primary residence in Italy and you spend more than 6 months per year in Italy, the tax will only be 2% of the property's value.
  • On the other hand, if this is your second property and you are not a permanent resident, this tax rises up to 9% of the cadastral value.

Japan:

  • 3% of the sales price + 60,000 yen + consumption tax in accordance with property transaction regulations.
  • For registering ownership transfer or mortgage on a property.
  • Fee for conducting ownership transfer and necessary related registration.

Portugal:

  • The duty is paid by the buyer and charged at a fixed rate of 0.8% of the property's registered fiscal value.
  • Stamp Duty is charged for all documents and arrangements in respect of real estate, including deeds, contracts, and mortgages.

Singapore: 

  • Singapore Citizens: The second (17%) subsequent (25%) property purchases.
  • Singapore Permanent Residents (SPRs): On all purchases, rates start from 5% for the first purchase. The second purchase will be 25% third, and subsequent purchases will be at a rate of 30%.
  • Good news! Under the respective FTAs, Nationals or Permanent Residents of the following countries will be accorded the same Stamp Duty treatment as Singapore Citizens: Nationals and Permanent Residents of Iceland, Liechtenstein, Norway, or Switzerland and Nationals of the United States of America.
  • Foreigners: 30% rate for any property purchase. 
  • Entities (companies or associations): 35% for each property (plus an additional 5% non-remittable ABSD for developers)

Spain:

  • Stamp duty at 1.5% of the purchase price.

Thailand:

  • There is a stamp duty if signing or bringing original share transfer documents into Thailand, which is 0.1% of the paid-up value or of the purchase price, whichever is higher.
  • The parties can agree that the buyer is solely responsible for stamp duty payment or that the stamp duty be shared between both parties.
  • Unless agreed otherwise, the seller is responsible for stamp duty payment.

United Kingdom:

  • First-time buyers pay no SDLT on purchases up to £425,000 
  • First-time buyers pay 5% SDLT on the portion from £425,001 to £625,000
  • Second-home purchases attract a 3% premium for valuations over £40,000

United States:

  • There is no stamp duty in the United States.

In Summary

Stamp duty rates vary greatly across the globe, and it's important for investors to be aware of the costs associated with purchasing property in different countries. While some countries have relatively low stamp duty rates, others have very high rates that can significantly increase the cost of purchasing property. As you can see, the United States has no stamp duty compared to other countries like Dubai, U.K., or Australia. It's important for investors to factor in stamp duty costs when comparing investment opportunities in different countries. 

GMG has a team of qualified professionals who can help navigate the process and provide guidance on the costs associated with purchasing property in a specific country. By considering stamp duty and other costs, foreign national investors can make more informed decisions and potentially save thousands of dollars on their real estate investments.

Get in touch with us to learn more about global real estate investing and all about GMG's financing solutions for foreign national investors today. [email protected]

What does JP Morgan and Blackstone’s multi-billion dollar U.S. real estate buying spree mean for you?

Bridging Loan Canada

More than $1 billion worth of single-family rentals will be acquired by JPMorgan Chase & Co.'s asset management division, while Blackstone is looking to invest $120 billion in real estate. Notably, most of Blackstone's investment is in REITs. This is a sign that the current U.S. housing market hasn't scared investors away from suburban housing.

Here's why you should care

This move by JP Morgan and Blackstone is the most recent sign that big investors are resolute by the unstable real estate market.

That's why all investors, though particularly those looking to invest in U.S. real estate, should be very interested in JP Morgan & Blackstone's real estate investment spree. Institutional investors have many advantages over retail investors. They have the backing of sometimes billions of dollars that allow them to accumulate properties at a high rate and profit from the rental income. They can also set the tone for the specific market by acquiring inventory where they believe rental yields will be the highest. 

If you are curious about institutional buyers and how buying single-family homes affect average investors, this article discusses why institutional investors buy single-family homes and what it means for you this year.

Coronavirus and real estate investing

The Coronavirus pandemic changed how we live, work, and act in many different ways. For instance, most corporate jobs now come with remote-optional benefits that allow employees to work from anywhere – including their own homes. This means that the demand for housing is increasing and contributing to a major change in home ownership.

Institutional investors continue buying real estate in major metropolitan areas such as Los Angeles, Dallas-Fort Worth, and New York City. In particular, institutional buyers target single-family homes, which now make up over 13% of the residential real estate market.

U.S. housing market shortage

How bad is the U.S. housing shortage? According to Nadia Evangelou, the Senior Economist of the National Association of Realtors, "There doesn't appear to be an end in sight." Despite rising interest rates, the current shortage will likely worsen to more than a 5.5 million home shortage. With developers pulling back due to market uncertainty, rental yields are expected to see all-time highs in many markets. Large investors such as JP Morgan and Blackstone see these as opportunities; perhaps so should you. 

What does it mean to you as an individual investor?

Institutional investors bought almost 25 percent of all single-family homes sold last year. So how can you compete with institutional investors in today's market? Below are our top tips for competing with big investors today:

Get pre-approved

As a U.S. expat or foreign national, in order to compete with other buyers, one of the best ways is to get pre-approved for the mortgage before you start your home search. This shows the seller that you've had the foresight to get a mortgage in place prior to looking for a property. With America Mortgages, you can get pre-approved within 48 hours, there is no application fee or charge for pre-approval, and we approve over 97% of all applications. 

Write a note to the seller 

Although this may seem "quirky," in some markets, intense competition forced buyers to do anything they could to stand out among sometimes dozens of other offers on the same home in 2021. Writing a handwritten note to the seller is one way that buyers try to compete with institutional investors by persuading the sellers to choose them over others.

Work with a realtor that focuses on investment properties

Just as it's important to work with a mortgage company that understands clients living outside the U.S. buying investment property in the U.S., a realtor that understands this is crucial. These realtors know the properties with the best yield potential in neighbourhoods with the best tenant profile. America Mortgages' Concierge Service is a free service created to put our clients in touch with vetted realtors in specific markets to assist with finding a property that matches their requirements. 

Location. Location. Location. 

It may be cliché, but location is key when buying properties. Following similar locations that large institutional investors are looking at, gives you similar insight without the team of researchers and analysts they employ. Homes in cities that have little room for expansion tend to be more valuable than in cities that have a lot of room. Factors such as accessibility and proximity to parks, schools, railways, and public transportation can increase property values and rental yields. 

Tricks of the trade

Knowing what works with an offer to purchase real estate is important. There are often clauses or requests that can be added to a contract to lessen the cost out of pocket for the buyer. As an example, seller concession is a common clause used by many U.S. real estate buyers but is not well-known to global real estate investors. If a seller concession is approved, the buyer can significantly reduce the cost out of pocket as the seller of the property will pay for a lot of the buyer's closing costs. These funds can be used to "buy down" the interest rate, make required improvements to the property, or as simple as paying for the appraisal report. 

Date the rate. Marry the property.

The idea is relatively straightforward. You buy a home you really want, regardless of available financing terms.
 
The mortgage rate you receive, even if it's high today, isn't your forever rate because you can always refinance down the road.
 
There will always be a time to refinance in the future once mortgage rates go down again. The property, on the other hand, may not be available. It's a buyer's market now. Take advantage of it.

Why work with our subsidiary, America Mortgages?

As a company, America Mortgages' only focus is providing U.S. mortgage financing for U.S. expats and foreign nationals. 100% of our clients are living and working abroad but buying U.S. real estate. We know exactly what is required to ensure your mortgage journey is stress-free by qualifying 97% of our clients for a U.S. mortgage.

Schedule a call with our U.S. mortgage specialist to determine your options today.

High Net Worth Focus: GMG U.S. Super Jumbo+ & LADMI

World's Most Expensive Home - Global Mortgage Group Asia

Direct from our Loan Development Team – we have created a solution which allows our international high-net-worth clients to use their liquid asset portfolio to qualify for a U.S. mortgage loan without pledging or encumbrance, nor the requirement of any minimum deposit held at a bank (AUM).

Introducing “GMG U.S. Super-Jumbo+" & "LADMI"

  • Are you a businessperson with low reported income?
  • Are you retired with little to no fixed income? 
  • Are you self-employed but with little to no “provable” income? 
  • Are your assets held in a bank with a U.S. branch or presence?
  • Do you have Trust assets with completely unrestricted use?

If you answered Yes to any of these questions, you will qualify for this program. 

Asset Rich, but Cash Poor?

It’s a common issue for high-net-worth investors who report low income but have sizeable asset portfolios including stocks, bonds and other liquid securities.  

Traditional banks require pay stubs, employment letters, and credit scores (we have fantastic programs for this as well), but many of our clients are not in the corporate world and require more flexible programs to suit their specific needs.

Separately, private banks will undoubtedly require Assets Under Management (AUM) and normally at least the amount of the mortgage.

We are seeing a trend that high-net-worth investors are now open to looking at financing options outside of their private bank, even if the rate is higher than the subsidised rate they would get from their private bank.  

“A small price for freedom,” as one of our European clients recently told us. 

Introducing: Liquid Asset Derived Monthly Income “LADMI”

Salient Points:

  • Qualify for a loan using your liquid asset portfolio instead of income from employment.

  • No AUM (Assets Under Management) or encumbrance of your portfolio at all, rather, it is ‘only’ to qualify for a loan. 

  • Liquid Asset Derived Monthly Income (LADMI) is calculated by taking total liquid assets and dividing by the duration of most mortgage loans, 360 months (30 years). 

  • LADMI allows you to prove your ability to service the debt without regular income from employment – great for entrepreneurs and high-net-worth investors! 

  • No need to show any other sources of income or employment.

  • If your LADMI is sufficient to service the mortgage – as well as regular living expenses – you can qualify based solely on this calculation.

  • No need to cash-in your portfolio or encumber in any manner. 

  • Your assets are used “only to demonstrate” an ability to make the mortgage payments. 

Commonly-used Liquid Assets:

  • Checking or savings accounts 
  • Money market accounts 
  • Certificates of Deposit (CD) 
  • Investment accounts such as stocks, bonds, crypto, and mutual funds
  • Liquid retirement accounts

[Note] All accounts, banks and or brokerages will be required to have a U.S. presence. IE Fidelity, Capital, Coinbase, Charles Schwab, HSBC etc.

Here is an example:

59-year-old mortgage borrower has:

  • Cash: $750,000
  • Investment portfolio: $3,500,000
  • Cryptocurrency: $300,000
  • Liquid retirement fund: $500,000

    = Total Liquid Assets: $4,300,000 (2+3+4)

This is how we calculate LADMI:

  • Cash: $750,000
  • Total Liquid Assets: $4,300,000
  • Discount Factor: 30%
  • Discounted Liquid Asset Value: $4,300,000 x 70% = $3,010,000

    = Total Allowable Assets: $3,010,000 + $750,000 = $3,760,000

    = LADMI = $3,760,000/360 months = $10,444

In this case, we will calculate the borrower’s maximum mortgage payment based on a monthly ‘income’ of $10,444.

The next question you will ask is, what kind of property can this get me?

If we assume a minimum 43% debt to income ratio (DTI) for most lenders and use the current market mortgage rate, you can qualify for a US$1M home (approximately $4,000 P+I monthly payment).

[Note] This is just an example and there are many factors that go into qualifying for a mortgage. This illustration is show that you do not need a salary to qualify for mortgages anymore thanks to our program. 

If you have any questions about our GMG U.S. Super-Jumbo+, LADMI or any of our international mortgage or asset-backed financing solutions, please contact us at: [email protected] or send me a confidential Whatsapp at +65 8499-3229.

Hong Kong Businessman required financing for a private jet

Hong Kong Businessman finances private jet

The Client

Given the COVID-19 pandemic, our client decided to invest in a private jet for his future travels when countries begin to open travel restrictions. Referred to us by a former customer of GMG, the client required US$10M to purchase a G550 normally valued at US$20M.

How We Helped

Given the slowdown in global travel, the agent was offering the pre-owned 2011 vintage plane at a steep discount of US$13M, which would normally be unavailable.

Our team found aviation financing from a specialist lender at favorable terms of 3.5% on a 5-year loan. The entire transaction was completed in 30 days.

NationalityResidenceIndustryAsset ValueLoan Amount
Hong Kong Citizen​​Hong Kong​ ManufacturingUS$20,000,000​US$10,000,000
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Asian Family Office required a loan on their existing commercial fleet of vessels towards a distressed asset purchase

Asian Family Office loan

The Client

A friendly competitor in our client's industry faced financial difficulty and needed to raise cash to pay off a loan coming due and offered his commercial vessels for sale below market prices. Our client required US$15M to purchase Supramax vessels at a price significantly below their FMV broker valuations.

How We Helped

Since their traditional financing options have been very restrictive over the past 12 months, the client needed flexible options quickly.

We were able to secure a bridge loan at 45% of the FMV value with terms that met the client’s requirements.

NationalityResidenceIndustryAsset ValueLoan Amount
Asian Family Office​Singapore ShippingUS$35,000,000US$15,800,000
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Great Real Estate Reshuffling

Great Real Estate Reshuffling

According to a survey by Zillow, 1 in 10 Americans has moved in the past 12 months. With the COVID-19 vaccine implementation and the economy and housing market recovering, Zillow predicts that this number could increase to more than 40 percent in 2021; this means that millions of households could enter the housing market in 2021.

What prompted the Great Reshuffling?

A significant cause of the Great Reshuffling is due to the fact that work-from-home became a norm during the pandemic. Homebuyers quickly caught on to the fact that they can live and work in their dream home and location as long as they have an internet connection. Approximately 75% of those surveyed reported moving for positive reasons, such as being closer to their family, friends, or simply living in their desired part of the country.

Many cities, known as "secondary cities" across the country, have seen a massive influx of movers looking to take advantage of bigger homes with lower prices. According to Zillow, there has been an uptick in the number of people moving to the South over the past year.

The rise in people moving to more affordable areas has triggered a wave of first-time buyers. This is especially true in Phoenix, Charlotte, N.C., and Austin. Zillow's data also showed the highest for-sale inventory climb in 4 major real estate areas – Los Angeles, Chicago, San Francisco, and New York.

We see this as an excellent opportunity for real estate investors, as over the past couple of months, the housing markets outside of the urban areas have flourished. "We have created a process specifically for our overseas clients which is easier, faster, and more transparent than international banks." Robert Chadwick, Co-Founder of GMG and America Mortgages.

At GMG, we understand our global clients' needs, and we provide solutions to match their needs. We make investing in U.S. real estate easy. Schedule a call with our mortgage specialists today.

Sources: Housingwire.com & Realtrends

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Hong Kong citizen buys apartment near Cambridge for son during University

International Mortgage Lenders

The Client

Our client's son was recently accepted to Cambridge for university and wanted to purchase an apartment.

How We Helped

Our client saw our ad online in Chinese and came through our website. Our Cantonese-speaking team talked through the various loan programs available and why using our services would be better than the local international banks. We found our client a 25-year loan at 1.79% + Base Rate!

NationalityResidenceOccupationProperty ValueLoan Amount
Hong Kong CitizenHong Kong Lawyer GBP 950,000GBP 570,000
Loan to valueRateTermProperty Details
60%2 year tracker rate 1.79% + BOEBRUp to 25 yearsApartment, Cambridge, UK
NationalityHong Kong Citizen
ResidenceHong Kong
Occupation Lawyer
Property ValueGBP 950,000
Loan AmountGBP 570,000
Loan to value60%
Rate2 year tracker rate 1.79% + BOEBR
TermUp to 25 years
Property DetailsApartment, Cambridge, UK
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Russian businessman buys a bungalow in Sentosa, Singapore

Russian businessman buys bungalow in Sentosa, Singapore

The Client

The client was referred to us by a friend who was also Russian and owned several condos in Sentosa. Our client wanted to purchase a home with the intention of moving his family over when their son was to start school.

How We Helped

Our team understood that the client was a Foreign National living overseas with no Singapore footprint. The challenge was to find the appropriate lender for his specific situation. His plan to move his family over was a big help in coordinating with the lender. In the end, we found an investor offering 60% LTV with a 1.35% floating rate mortgage.

NationalityResidenceOccupationProperty ValueLoan Amount
Russian NationalMoscow BusinessmanSGD 25,000,000SGD 15,000,000
Loan to valueRateTermProperty Details
60%1.35% pa3 year fixedBungalow, Sentosa
NationalityRussian National
ResidenceMoscow
Occupation Businessman
Property ValueSGD 25,000,000
Loan AmountSGD 15,000,000
Loan to value60%
Rate1.35%
Term3 year fixed
Property DetailsBungalow, Sentosa
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