Taxes and international buyers
Florida has always attracted a lot of international buyers, and why not? The state has the weather, the beaches and great properties that are frequently bargains to international buyers. Some countries around the world encourage these buyers' others don't and some even punish them financially.
Unfortunately for us, foreign buyers appear to be pulling back from the United States housing market. According to the National Association of Realtors, purchases of U.S. residential real estate by foreigners who aren't residents fell by $10 billion in the year ending March 2016, the lowest level since 2013. The strong U.S. dollar and rising home prices as well as weakening economies in other parts of the world like Europe, South America and China are the probable reasons. In particular, this could impact the Miami luxury market but could also spill over to our coast, where we are already seeing fewer Canadian and United Kingdom buyers.
Although we might like to see more international buyers, the Canadian city of Vancouver is taking steps to keep them out. Starting in August Vancouver is charging an additional 15 percent property transfer tax for foreign buyers. This is on top of the already hefty general transfer tax of 1 percent on the first $200,000 of a home's value and 2 percent on the remaining value up to $2 million Canadian. This is an effort to keep in check the skyrocketing housing market, which has been exploding due to foreign buyers, particularly Chinese buyers. The price for a Vancouver home increased 39 percent in a year.
Just to keep these tax rates in perspective, Florida's real estate transfer tax or as we call it the Documentary Stamp Tax or doc stamp is conservative by comparison and there is no special assessment for foreign buyers. The real property transfer tax is $.70 (70 cents) per $100 of the total cost of the property. Miami-Dade County is an exception where the rate is $.60 (60 cents) per $100, but don't ask me why. For example, on the sale of a $250,000 property, the tax would be $1,750, typically paid by the seller.
In addition, there is also a mortgage doc stamp fee typically paid by the buyer on the amount of their mortgage. This fee is $0.35 (35 cents) per $100 of mortgage and would be $700 on a $200,000 mortgage.
Vancouver British Columbia, Canada, may be discouraging foreign buyers, but there are two other countries I recently read about who want everyone to come. New Zealand, one of the most beautiful places on earth, is welcoming new foreign buyers. New Zealand's relaxed attitude toward foreign buyers, its strong economy and friendly image are major selling points. In addition, the country does not include a stamp duty tax, capital gains tax or visa requirements. This has placed New Zealand in third place after Hong Kong and Sweden in Christie's International Real Estate survey of the top 10 housing price increase between 2012 and 2015. New Zealand had a 36 percent increase, and the Unites States, placing fifth, had a 32 percent increase.
And if you want to go a little more exotic, try another island country, Cyprus. Cyprus is offering an array of government incentives, including tax breaks for homeowners, half price title deeds and the opportunity to obtain a European Union passport. Also Cyprus passed legislation that allowed anybody who spends more than 183 days a year in the country to become a tax resident with additional tax incentives.
International real estate buyers have a variety of places to choose from with even more of a variety of tax structures. Florida, of course, wants more buyers and hopes that losing them is the bad news to our home values improving good news. Aren't you glad you're already here?