Overseas break for investors
News Article Date: Wednesday 22nd of July 2009
When it comes to buying property in Europe, be it in France, Germany, Cyprus or anywhere else, investors may be able to draw on a long tradition of British purchasing, well established tourism sectors and the benefits of investing in a part of the world with stable government.
At the same time, Europe has produced a few pitfalls, the main one being that some of its much-vaunted boom markets (such as Spain and the Republic of Ireland) have plunged as the credit crunch has exposed their weaknesses, while others have suffered from the general economic constriction, even places like Cyprus where the domestic economy is still growing.
For some investors, the recent economic problems may also raise doubts about the viability of buying into holiday lettings, since the number of people taking a trip overseas has fallen. Of course, it could be countered that this is only a short-term thing and that when the economy gets better so will the levels of holiday rental demand. But in the meantime, investors may be keen to get some financial relief from any problems.
It seems that good news has emerged on that front. PKF Accountants & Business Advisers has noted that until now the government has been offering furnished holiday lettings tax relief to people renting out holiday homes in Britain. This has meant that where income from rent is less than the cost of a mortgage, this can be offset against tax to cut landlords' losses.
Until now, however, this has not been applied to overseas property, but the European Union has now ruled that it is unlawful not to offer this same relief on homes in the rest of the European Economic Area (EEA). In response to this, the government is to axe the relief, but that move will not take effect until April next year. In the meantime, the tax relief will apply to holiday homes in the EEA.
Discussing this, spokesperson for overseas property lettings website holidaylettings.co.uk Kate Stinchcombe said: "It's come to light that that contravenes EU law because it doesn’t cover people in the UK with holiday homes within the EU, specifically the European Economic Area. To get around the law, the government has opened it up to anyone UK based with a home in the EEA until April 5th 2010. And then thereafter they're withdrawing it completely.
So for investors, the next few months will provide a window of opportunity to protect themselves against any losses they do make. For some, this could help them to make acquisitions now and ensure they are financially secure enough to reap the benefits as better economic times emerge and bring greater demand for tourist lettings.
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