UHY tax professionals studied tax and compulsory property registration charges in 25 countries across its international network, including all members of the G7, as well as key emerging economies.
The network found that the average cost of stamp duty and other compulsory property purchase fees for a property worth $3.5m is now 3.4%, compared to the average 2.6% tax burden on more modest properties with a purchase price of $150,000.
According to the survey, fees have been pushed up by recent purchase tax increases on high end properties in countries such as the UK and Spain which have seen some of the highest property taxes targeted at prime properties which attract many wealthy international buyers.
The UK levies 7% stamp duty on property purchase over $3.1m, following a new top rate of stamp duty which was announced following politicians’ demands for a so-called “mansion tax.”
The report also argues that Spain’s average taxes and charges of 7% mask a shift towards higher marginal rates for the most expensive properties. In regions popular with wealthy local and foreign buyers, including the coastal provinces of Andalucía, Cantabria and Asturias, and the Balearic Islands, rates vary from 8% to 10% for more substantial properties.
Bernard Fay, co-managing partner of UHY Fay & Co, the Spanish member firm of UHY, said: “Since 2010, regional governments in Spain have made much greater use of their discretion to set their own stamp duty rates, with the result that rates have gradually shifted upwards, especially in areas popular with high net worth individuals and international buyers.”
He added: “Combined with other tax requirements, targeted at wealthy international families, it is starting to make Spain look unwelcoming towards exactly the sort of people who have sustained the economy of many coastal regions of Spain for the last few decades.”
In Asia, meanwhile, Hong Kong is another region that has seen a property tax hike with the government there doubling the rate of stamp duty on properties of over HK$2m to 8.5%.
In mainland China, the most expensive properties attract stamp duties and other taxes of 5% of the property’s value, compared to 3% for lower value properties. India too is a consistently costly place to buy a property with stamp duties varying between 8 and 8.6%.
Ladislav Hornan, chairman of UHY commented that while charging top rates of stamp duty was one way of plugging government deficits, she warned that they could be in danger of “killing off their property market altogether”.
She added: “Economies benefit from the added value that wealthy buyers and an active property market bring to the economy, from spending on refurbishments, to legal fees and employing domestic staff. Once High- Net- Worth individuals leave, it is hard to attract them back.”
