How BEPS will affect cross-border real estate investment
For real estate investors and developers, certainty about the long-term tax costs of a project or investment is critical to accurate underwriting and pricing. Where tax costs move significantly, there is likely to be a knock-on effect on the returns achieved on individual investments, which will ultimately feed through to real asset pricing. An example of this is the impact of the recent changes of the UK stamp duty land tax regime, which has added three percent to the acquisition cost of residential property (for those who already own a home). The regime has dampened activity, and anecdotally is reducing values both for completed stock and for land, particularly in London. The impact here is readily apparent as the tax cost is clear and the additional bill falling on buyers easily computed.
The real estate investment market is, however, also facing a number of tax changes where the impact is less easy to calculate. Investors therefore need to think hard as to the likely effects and how any increased tax costs may bear on investment underwriting.
REflexions issue 5 - May 2017
REflexions is a bi-annual digest, dedicated to the real estate investment management professionals, which brings you the latest articles, news and market developments from Deloitte’s professionals and clients.