Tax rule change on holiday lets includes European properties  

Irish house prices down by 6.4% in 2010

US apartment rent levels surge

Tax rule change on holiday lets includes European properties  

Proposals announced recently by the Government on the likely changes to tax rules on furnished holiday lets (FHL) will also apply to the owners of properties in the European Economic Area if they are UK tax payers, according to accountants James Cowper.

The changes being proposed for April 2011 would bring the taxation of FHL into line with EU law, whilst at the same time limiting the effect on the holiday industry, and include:

- An increase in the number of days a property needs to be let before it can qualify as a FHL. This will restrict the extent that owners will be able to use their second home and still retain the tax breaks.

- Removing the ability to offset expenses against other income. For many this will increase the cost of running their second home.

Stephen Barratt, private client director at James Cowper, said: “Currently a property only has to be let for 70 days and be available for 140 days to qualify for tax breaks under the FHL rules. These had been due to be scrapped from April 2010 but were saved in the Emergency budget on 22 June.  If the current proposals are implemented, the tax breaks will be restricted or removed altogether as the letting requirements rise to 105 and 210 days respectively.  

“Many in the industry think this is a way of penalising second home owners and it could force many to choose to sell their properties ahead of the April 2011 rule change. If many people come to the same conclusion then this could see a glut of properties on the market in holiday home hotspots both in the UK and overseas.”

Irish house prices down by 6.4% in 2010

Average national house prices in Ireland fell by 1.7% in Q2 2010 according to the latest permanent tsb / ESRI House Price Index Quarterly Review. This is the lowest quarterly reduction since Q2 2008 [April – June inclusive] and compares to a reduction in Q1 this year of 4.8% and a reduction of 3.9% in Q2 2009.

The reduction in average national house prices in the first six months of this year was 6.4%. This compares to a fall of 8.1% in the first six months of last year [2009]. The year on year decline (Q2, 2009 to Q2, 2010) was 17.0% and compares to a reduction of 18.9% year on year to Q1 2010. The average price for a house nationally in Q2, 2010 was EUR 201,364, compared with EUR 242,593 in Q2 2009 and EUR 311,078 at their peak. National prices have fallen 35% since the price peak at the end of 2006.

In the capital city, Dublin house prices fell by 3.5% in Q2 2010. This compares to a reduction in Q1 2010 of 10.3% and a reduction of 7.5% in Q4 2009.

The reduction in the first six months of 2010 was 13.5%, and compares to -12.2% in the same period 2009.  The year on year decline in Dublin (Q2 2009 to Q2 2010) was 24.6% and compares to a reduction of 24.5% year on year to Q1 2010.  The average price for a Dublin house in Q2 2010 was EUR 242,000, compared with EUR 250,872 in Q1 2010.

House prices outside Dublin fell by 0.8% in Q2 of 2010. This compares to a reduction in Q1 2010 of 3.5% and a reduction of 6.2% in Q4 2009. The average price for a house Outside Dublin in Quarter 2 2010 was EUR 181,820, compared with EUR 183,309 in Quarter 1 2010.

Niall O’Grady, general manager with permanent tsb, said “While prices continue to fall at different levels in Dublin versus the rest of the country, this reduction in Q2 is the lowest recorded quarterly fall in almost two years. This may indicate that prices are starting to find a more sustainable level after almost three and a half years of decline”

US apartment rent levels surge

Apartment landlords in the USA are seeing a surge in rental demand as mounting foreclosures reduce homeownership, whilst an improving job market encourages young adults to find their own home.

The number of occupied apartments increased by 215,000 in the 64 largest markets in the USA in the first half of the year, according to MPF Research. That's almost twice the units added in all of 2009 and the most since the firm began tracking the data in 1992.

The vacancy rate declined to 6.6% in June from 8.2% in December. "Overall demand is pretty stunningly strong in the first half," said Greg Willett, a vice-president at the Carrollton ( Tex.) firm.

Actual achieved rents by landlords increased by 1.4% in the largest regional markets in USA in the first half of the year, according to MPF Research, who are forecasting that rents may rise 4% to 6% in both 2011 and 2012.