For a buyer looking to invest in a $10 million property in another global market a key consideration is not just the price of the property but the associated costs of buying, holding and then selling that property.
Vancouver, Hong Kong and Singapore have the highest associated costs for an international purchaser. In these markets the costs of buying, holding and selling a $10 million property can equate to 38.6 per cent, 33.4 per cent and 25.3 per cent of purchase price. The majority of these costs are weighted towards buying the property, particularly as all of these markets have large transaction taxes for international investors.
But while these three markets remain the most expensive globally regardless of the property price, some markets see more variance in associated costs depending on the value of the property.
For example, to buy a $650,000 property in New York would see an associated cost of 14.0 per cent relative to that price. But to buy a $10 million property, those costs increase to 20.1 per cent. This is primarily driven by the progressive rate of 'Mansion Tax' for properties over $2 million.
London also sees a significant variation due to the Stamp Duty Land Tax paid at purchase increasing on a sliding scale relative to the purchase price. Taking into consideration the 3 per cent surcharge for those buying a second home, it’s only 6.1 per cent for an international investor purchasing the equivalent of a £500,000 property but increases to 13.9 per cent for an £8 million property.
And in Paris, the wealth tax means the cost of holding a property increases in line with its value. A buyer purchasing a property around €600,000 would only pay 0.7 per cent in holding costs over a five-year period, compared with 5.4 per cent for a property around €9 million.
Yet in markets such as Berlin, Dubai and Shanghai the associated costs are the same proportion of your property price regardless of how much the property is. In Berlin this is due to the flat rate of property transfer tax of 6.0 per cent and no associated costs to sell, which can increase in relation to the property price in markets such as Madrid.
For Dubai and Shanghai this means that they are the cities with the lowest effective costs of buying, holding and selling no matter the price of the property you’re buying.
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