New pension rules regarding property ownership have some very attractive implications for those who want to buy overseas, according to Assetz
The change in pension rules to allow investment in residential property through self-invested personal pensions (SIPPs) will trigger a wave of new overseas buying, according to Assetz, a property investment specialist dealing with properties in France, Spain and Cyprus.
Assetz believes that second homes in favoured holiday destinations such as Spain are likely to be top of the shopping list after ‘A’ Day, when the rules change on 6 April 2006. Research from the company shows that Spain’s mature market makes an excellent choice for SIPP investors, with capital growth still high and forecast to grow at ten per cent a year for at least the next five years. Year-round sunshine and the high numbers of world-class golf course developments makes 30 weeks or more annual rental a realistic goal, with potential gross yields of ten per cent plus. This rental income would be immediately reinvested back into the SIPP and used to pay off any mortgage.
Stuart Law, Managing Director of Assetz comments, ‘Off plan purchases at discounted rates still offer the best opportunity to maximise profits. It is possible to buy off-plan today and then assign the contract to the pension after the rule changes, as long as the completion date is after ”A Day”.’
SIPP investors will benefit from full UK income tax relief on the purchase price of the property, before going on to collect rental income tax-free in the pension fund. Any profits made from the sale of the property will also be free from UK capital gains tax but may incur Spanish tax. However, there are ways to reduce this to 15 per cent of the gain. What’s more, says Assetz, the pension fund will be able to borrow to invest, so buyers will be able to gain access to holiday homes that would otherwise have been out of their reach.
One Spanish hotspot is Murcia, with its abundance of world-class golf resorts, which is an excellent choice for SIPP investors who are looking to pay off a mortgage with rental income.
The acclaimed Hacienda Riquelme Golf Resort in Murcia will be the main focus for major golfing ceremonies and events in the area when completed in 2006. The development is built around an 18-hole golf course designed by Jack Nicklaus with shops, restaurants, spa and swimming pool complex, tennis courts and gym.
One- and two-bedroom apartments are priced from €155,000, with rental income expected to reach £500 plus in June and £700 plus in August.
Stuart Law continues, ‘Investors should be aware that they will need to pay rent at the going market rate when they make use of the property themselves, but this money will be pouring straight back into their own pension pot. It needn’t even be an additional cost, since investors can simply pay their pension contributions for that year in the form of rent.’
For more information about Hacienda Riquelme or other Spanish buying opportunities call 0161 456 4000 or visit assetz.co.uk.