People buy investment property for one reason – to provide financial security for themselves and their families. Depending on their strategy, most offshore investors are looking for yield or long-term capital appreciation or a combination of both.
As an investor, if you are based in Asia you are probably all too aware of the huge amount of marketing that takes place for property exhibitions across the region. But how do you compare investments in Australia with investments in New Zealand or the UK? How do you know what is going to enhance your personal investment strategy?
There are significant differences between how various costs and expenses are treated in different countries and having a clear understanding of these is crucial to developing a successful real estate investment strategy.
Below we summarise the difference in how costs and expenses are treated in Australia, New Zealand and England and Wales.
|Management and Operating Expenses offset?||Yes||Yes||Yes|
|Finance Expenses offset?||Yes||Yes||Only 20% of the interest cost|
|Depreciation of Furniture||Yes||Yes||No, but can claim as one time event for new purchases.|
|Depreciation of Plant||Yes, only for new||Yes||No|
|Depreciation of Building||Yes for new build, no for second hand property||Not building, but chattels can be depreciated||No|
|Capital Gains Tax||Yes||Yes||Yes|
|Estate or Inheritance Tax||No||No||Yes|
Of course, when planning an investment, you’ll also have to be mindful of the purchase costs, which vary significantly between countries and on your country of residence.
Once you have mapped out all the different costs and implications, you should think about how the same investment compares in different countries.
You need to think about the purpose of the investment. Many people invest in a country because it is considered safe or because of its strong democracy or established laws. This is not a sensible way to differentiate between different property investments.
This is because as an investor in real estate you are going into an investment with a certain level of risk as a base level assumption. Real estate investment is a long-term investment. If you make an investment in real estate with the thought that there is a good chance you will be able to keep it because the country’s rule of law seems relatively safe – that is a gamble not an investment. The only two outcomes of an investment which you should consider are:
- Cashflow – both before and after tax
- Capital Appreciation – both before and after tax
In order compare investment property in different countries, you’ll need to set out the following for each property and forecast over the next 5 or 10 years (don’t forget to convert to the same currency too).
- Fee cashflow (before tax)
- Tax on income
- Free cashflow (after tax)
- Equity Position
- Net income if sold in a given year.
Once you have calculated these figures you’ll have all the information you need to compare investments in different countries. This will be invaluable in determining which investment, in which country is suited for your investment goals.
But doing this is time consuming, you’ll need to do a lot of research and set up detailed spreadsheets to help you calculate these for each country in order to make a direct comparison.
Wouldn’t it be helpful for investors if there was a tool you could use to work out these calculations and forecasts for you? To give provide you with a clear comparison of investments in different countries on an after-tax basis.
Well, now there is. We will shortly be launching the Du Val PropTech property analyser which will do exactly that. Don’t leave the financial security of you and your family to chance. Make informed investment decisions.
Soon we’ll be inviting you to trial our new features. If you’d like to know more please email [email protected]
Important notice: Proptech Pioneer and its associated companies seeks to provide investors with guides, information and tools, but we cannot guarantee this information to be accurate or perfect. You use the information at your own risk and accept no liability if you rely on this information. Proptech Pioneer is not a tax advisor, accountant conveyancer, lawyer, financial advisor or mortgage advisor. You should seek independent advice from independent professionals before making any investment decision