Almost a year ago, I wrote a column about the proliferation of buyers from other countries coming into the state of Florida. Florida at that time was the national leader for international buyers at 22 percent of all international buyers in the United States. But there are many foreign countries that either prohibit foreign buyers or levy additional taxes to discourage them. These are a few:
New Zealand, in particular, has taken a hard stance on foreign buyers in an effort to make homes more affordable for its citizens. It recently passed legislation to limit foreign buyers to buying only newly built homes, and only 60 percent of units in new apartment buildings can be owned by foreign buyers.
New Zealand’s neighbor Australia has also increased the tax burden on new homes, introducing a buying tax and raising its stamp tax to 8 percent. This is in addition to annual fees for foreign owners.
Property values in the United Kingdom have been very hot, especially in London in recent years. To help cool off the market, the U.K. has added a 3 percent surcharge on the stamp tax paid by second home buyers and a 15 percent buying tax on all homes bought through a shell company. This was a previous technique frequently used by foreign buyers, which has resulted in prices falling substantially in London.
Hong Kong also has a tax stamp fee of 15 percent for foreign buyers and has extended that to include all second-home buyers as well. And Switzerland, which always has discouraged foreign ownership of property, now requires a permit to purchase property with a limit of 1,500 permits a year. There is an exception for EU buyers who have permanent homes in Switzerland. Even Mexico will technically not allow foreign buyers to purchase property within 31 miles of the coast or 62 miles of the U.S. border. There are, however, ways to get around this by having local banks hold title to the property. But there is still hope for foreign buyers who want to purchase exotic properties. The Maldives in the Indian Ocean and Thailand will be glad to take your money.
To my knowledge, I don’t believe the United States government has placed any restrictions on foreign buyers entering our real estate market. Aside from a tax ID number, foreign buyers do not have to be U.S. citizens, do not need a green card and do not require a special visa. As long as they have the cash or can obtain satisfactory financing, they are pretty much free to buy whatever and where ever they want.
The onus is on the lenders to qualify the buyer’s finances, visas and legal right to be in the country to protect their investment from buyers who suddenly leave the country with the bank becoming responsible for the property. However, almost half of property purchases by foreign nationals are made in cash, 44 percent at last count.
Foreign buyers may be boxed out of purchasing real estate in some countries in an effort to keep their real estate prices from becoming overinflated, harming their own citizens. Fortunately, the United States is a big wealthy country and will not be seriously impacted by an influx of foreign buyers. That said, there are areas of Florida, particularly on the east coast, where foreign buyers have some responsibility in running up property values.
We love real estate buyers no matter where they’re from. Tell Mexico and Australia and Switzerland and all the others to send them to us. We’ll make sure they have a merry Christmas.
More Castles in the Sand: