Has anyone invested/thought of investing in Amsterdam?

[z106]

A friend of mine bought an apartment in the city centre of amsterdam exactly 3 years ago.
He just got it revalued and it was revalued at nearly 50% higher.

That's a location that went under the radar foir most of us.

Has anyone invested/thought of investing on amsterdam?

 

[murphaph]

Re: amsterdam

A valuation is just a valuation of course. If he sold it for 150% of what he paid for it I'd take notice alright. Certainly a city/country nobody talks about wrt residential investment.

 

[thomsk]

Re: amsterdam

qwerty...you say it was valued at NEARLY 50 % more after 3 years. Lets assume that a bid is accepted at 45% more.
Now divide 45 by 3 years = 15% per year. Now take that 15% and multiply it by CGT 20% and subtract to give the net return per annum, which is a 12% gain per year.
It's good, but not out of this world.
This, remember, is based on the OFFER being that good.

 

[z106]

Re: amsterdam

qwerty...you say it was valued at NEARLY 50 % more after 3 years. Lets assume that a bid is accepted at 45% more.
Now divide 45 by 3 years = 15% per year. Now take that 15% and multiply it by CGT 20% and subtract to give the net return per annum, which is a 12% gain per year.
It's good, but not out of this world.
This, remember, is based on the OFFER being that good.

I think most people would be very satisfied with 45% returns over a 3 year period in a realatively low risk country with a stable economy and a mature mortgage market - unlike some speculative countries like romania for insatnce which may deliver more but there is far greater risk.

 

[Martin77]

Re: amsterdam

Dutch residential property seems boring but stable to me.

I have been looking myself. I would say 50% in 3 years is pretty exceptional. Amsterdam is a very big city, and as always is a very variable market. Or maybe someone is telling porkie pies. If you happen to be in places like Sloterdijk or Bijlmer, I'm not convinced you would have seen any worthwhile appreciation at all over the last 3 years. Remember also that the prices quoted are "kost te koper" there is around 10% on top of this including 6% stamp duty etc. Rental yields are not great as far as I can see. A typical flat seems to go for 280-300K ktk. ~ 320-350K furnished and ready to let. For that you should get around 1500-1600 per month rental. That yield is around the cost of a mortgage (currently approx 5.5%) which considering you have agency costs of up to 8% of rental will not be a huge cash cow IMHO.

Also bear in mind the effects of the tax treaty which can be found here [broken link removed]

There is 0 CGT in the Netherlands. Instead you pay Box 3 taxation on the average value of an (investment) property per year (vermogensbelasting) if you have to pay Dutch tax on investments. I presume since the property is located in the Netherlands that it will be subject to vermogensbelasting. This is so called box 3 income from investments and assumes the property is let for most of the time (I can't recall the exact conditions off the top of my head.) On my (amateur) reading of the treaty it should be allowable to offset Dutch Box 3 tax against Irish CGT for Irish residents investing in Dutch based property. It is not clear to me how this would carry over tax year boundaries, because Dutch box 3 is charged every year, whereas Irish CGT is only levied when the property is sold. You should certainly check this out.

All properties are registered via the government land registry: the Kadaster. If you speak Dutch, you can get detailed information about recent and specific house prices online at http://www.kadaster.nl/ for €1.40 per transaction. So you can see how much the previous person paid for that property and when. It is a very transparent market.

An excellent site for judging current prices and the general market can be found at . "Koop" is buy. "huur" is rent. "Nieuwbouw" is new build. "bestaande" is existing. "Appartement" is a flat. I'm sure you can work out the rest. Postcodes can be looked up online too.

If there are any other questions, just ask.


Here's the average prices for Amsterdam Singel since 1999 from : so there's plenty of market data out there
<very long list in Dutch removed by moderator>

 

[MichaelDes]

Re: amsterdam

12% gain per year. It's good, but not out of this world.

I worry about some posters ability to assess these matters. If the investment has a LTV of 90% plus, which more than likely it does, then returns are exceptional . The basic return on initial investment of 12% p.a. should be 12% / .1 = 120% per year [after investment CGT taxes]!

The purity of property allowing LTV over equity, is what provides this astounding edge. Also, if the property is located in a strong rental area it should pay for itself against all associated costs. Is there any other type of investment vehicle as a correlation to risk, that can provide such exceptional returns? That is, if managed properly.

 

[Martin77]

Re: amsterdam

I worry about some posters ability to assess these matters. The return is exceptional if the investment has a LTV of 90%+ [which more than likely it does]. The return on initial investment of 12% should be 12% / .1 = 120%. The purity of property allowing LTV over equity, is what provides this astounding edge.

Well to be honest, whilst I agree with you that it is a leveraged play, calculating 12%/.1 does rather neglect costs, taxation, and the small matter of paying the mortgage. Hats off to the guy if he really has achieved this result. My view of the market does suggest that you'll struggle to cover the mortgage at current purchase prices/interest rates/rental income. There are some signature properties in Amsterdam, that if you find the right buyer, could buck the market of course.

 

[IFT]

Re: Amsterdam

edit..

 

[Martin77]

Re: Amsterdam

I work occasionally in Amsterdam so am somewhat familar with the market.

The yields appear to be good as an apartment costing about 180 can be rented out for about 900/1000.

I dont know the tax implications but the government has put on a big drive to build more apartments so i would be wary of looking for capital appreciation.

An apartment in an uncoming area (pijp) is over 200K but rents at about 1250
example
http://www.funda.nl/woningaanbod/ko...af86-c6ab74388957&objecttype=DetailKoopObject

funda.nl is a good site to gauge the prices.

Don't think that you can divide 12*1000 by 180K to get the rental yield.

Using your example of 180k @ 1000 per month rent.....

I assume that property is 180K ktk, so that's 180 + 6% compulsory stamp duty (Overdrachtsbelasting) + 1% buying fees + 1% compulsory notaris = 194.4K purchase price before you pay any mortgage arrangement and valuation fees which are a couple of thousand. Then you've almost certainly got to furnish the place to achieve 1000 per month rental. You probably do not want to rent unfurnished as sitting tennants have lots of rights. So 194.4K is probably an underestimate of the cost to get a place rental ready when you see it advertised as 180K ktk.

rental income @1K per month = 12K - typical agency fees of 8% = 11040 pa.
rental income @ 900 per month would translate to about 9936 pa after agents fees.

minus the annual box 3 income tax on the average total value of the property @1.2% of 194.4K which will be 2333 assuming 0 capital appreciation over the year. I suspect that this can only be offset against Irish CGT when you actually sell the thing, so I don't know what happens in the intervening years. I guess you'll have to pay the cash to the Dutch inland revenue until/when you can claim it back if at all.

so that's 8707 nett of Dutch income tax = 4.48% for 1000 per month rent
or 7603 nett of Dutch income tax = 3.9% for 900 per month rent.

Mortgage rates in the Netherlands are currently 5.5 - 6 % for a 2nd house (without NHG) see http://teletekst.nos.nl/gif/images/546-01.gif You need the effective rates in parenthesis on the right under the "zonder NHG" column.

So a 90% mortgage (if you can get one) will cost you between 9623 - 10498 for interest only for 10 years fixed. You cannot offset mortgage interest payments on an investment property as a cost against the box 3 investment income tax of 1.2% as far as I know if acting as a private individual in the Netherlands. There is generous (full) tax relief on your first owner occupied house, but 0 relief on investment properties. You'd need proper professional advice on whether you could offset any Dutch taxes against your Irish taxes [I posted a copy of the relevant tax treaty in an earlier post].

Then there'll probably be a compulsory life insurance for the mortgage on top of that of ~€200 pa. And I haven't yet mentioned the owners portion of OZB onroerend zaak belasting (property tax) ~€200 pa ... and the costs of doing a Dutch tax return ~€500 pa etc. etc.

So in Summary: the rental income does not compare favourably to mortgage costs in this example.

You can do the math yourself for 215 ktk & 1250 rental -> 4.7% nett of costs and tax or so, which is still below the mortgage costs.

As I said previously, I'd do my sums very carefully before committing to such a deal, especially if you cannot guarantee to find the tennants yourself and need to go through a letting agent, and in your own words you are not expecting much capital growth. I'm sure there are possibilities, but they are not to be found in the run of the mill apartments funded by 90% LTV buy to let mortgages IMHO.

 

[z106]

Re: Has anyone invested/thought of investing on Amsterdam?

For the record it cost him 672,500 and he got it valued at 960k - which is 42.77% in 3 years - while not as good as my earlier rounding of nearly 50% it still very very good.

The apartment is in a great location directly overlooking the canal in a very good central area of amssterdam (Don't know the street name but i have visited and it is in a very central upmarket area)

 

[Martin77]

Re: Has anyone invested/thought of investing on Amsterdam?

The apartment is in a great location directly overlooking the canal in a very good central area of amssterdam (Don't know the street name but i have visited and it is in a very central upmarket area)

Well hats off. That looks like a very good return.

As you said. Great location. Good central area. Overlooking a canal (preferably with direct sunlight in the afternoon). Up market. Not your run of the mill place. And at 960K at the upper end IMHO. General market is up ~26% in Amsterdam city in the last 3 years. 42% is clearly better than that.

And as I said, signature properties, with the right buyer, can buck the market.

 

[IFT]

Re: Amsterdam

edit..

 

[Martin77]

Re: Amsterdam

Tnks...as i had stated i did not do any research on the tax implications but your post certainly puts it all out there. Cheers, not that i was looking to buy but its good to know all the tax impliciations.

I have learned a lot from this discussion forum, so if I can provide some information back then that's good.

I phoned up the Dutch tax office this morning to check my assumptions. Of course you should get professional advice as I am not a tax professional. But they confirmed the way I explained it to them that you would have to pay box 3 income tax in the Netherlands if the house was located in the Netherlands, you were Irish resident, and you owned the house as an investment property from within your private portfolio.

 

[IFT]

Re: Amsterdam

I have learned a lot from this discussion forum, so if I can provide some information back then that's good.

I phoned up the Dutch tax office this morning to check my assumptions. Of course you should get professional advice as I am not a tax professional. But they confirmed the way I explained it to them that you would have to pay box 3 income tax in the Netherlands if the house was located in the Netherlands, you were Irish resident, and you owned the house as an investment property from within your private portfolio. It is the income tax on the value and the lack of tax relief on the mortgage that seem to break this. One way around this is to set up a management company to own the house. Then you can offset mortgage costs as a business expense against rental income (if you can get a mortgage) and you would pay corporation tax on the company profits rather than box 3 income tax on the asset value. But that is not going to be cheap either and for one property might actually cost more in accountants bills per year than you might save.

Dutch residents can offset most of the mortgage interest against income tax here.

Now here is one for any 'pending' expats............Many european countries are not happy re our 10% corportation tax but they have a hidden incentive over here.

If you are seconded to holland from ireland you could buy a house here....avail of the high mortgage relief against income tax.......but also for the first 10 yrs of your working life in holland your first 30% income is tax free.......yep for 10 years....!

now that is a nice incentive!

 

[Martin77]

Re: Amsterdam

Dutch residents can offset most of the mortgage interest against income tax here.

Now here is one for any 'pending' expats............Many european countries are not happy re our 10% corportation tax but they have a hidden incentive over here.

If you are seconded to holland from ireland you could buy a house here....avail of the high mortgage relief against income tax.......but also for the first 10 yrs of your working life in holland your first 30% income is tax free.......yep for 10 years....!

now that is a nice incentive!

Yes, owner occupiers in the Netherlands get FULL tax relief on a mortgage at the marginal rate (up to 52%) on box 1 income, which makes it very attractive to have a huge interest only mortgage.

The 30% rule is indeed nice But it is becoming harder to get. It only applies to certain industries and is officially only granted for 5 years (with a possible 5 year renewal). You also have to find the job from outside the Netherlands, rather than coming first to the Netherlands to live, and then finding the job. see [broken link removed] for more info. disclosure: I am not connected with this company in any way.

So whilst it can be extremely attractive in the personal sense to live and work in the Netherlands as an ex-pat, and also to buy an owner occupier home as a nest egg, the question was about overseas property investment..... which falls under a completely different set of rules.

See the following (in English) [broken link removed]

Also be aware of a down side. If you become fully Dutch resident, you will also pay 1.2% box 3 tax on the average value of your World wide investments..... including those located in Ireland. This sort of tax planning can be very lucrative. There are plenty of people who live in Belgium and drive to work in Germany and Holland for 4 months of the year each. But that is getting very off topic.

 

[IFT]

Re: Has anyone invested/thought of investing on Amsterdam?

that full tax relief is why it is so easy to get sublets over here......

 

[Martin77]

Re: Has anyone invested/thought of investing on Amsterdam?

that full tax relief is why it is so easy to get sublets over here......

I guess that could well contribute to sublets. It certainly pushes up prices for purchasing places. Renting out a single room in your own property where you actually live also has special treatment for tax. There are also very powerful housing corporations with billions in assets that build affordable rental properties. But these usually have long waiting lists.

Now it's time for a red face. Whilst it is correct that I applied the Box 3 income to the above example , I miscalculated the Box 3 liability due to an incorrect assumption. Apologies. But I'd rather 'fess up and have a little embarrassment than give bad advice, even on an Internet forum.

Here's the example recalculated and the complete list of assumptions.

assumption:
Flat costs 180K ktk
Bought by a single Irish tax resident in sole name
Flat is permanently available to let (investment property)
No other investment interests in the Netherlands
70% LTV mortgage @ 6%

I assume that property is 180K ktk, so that's 180 + 6% compulsory stamp duty (Overdrachtsbelasting) + 1% buying fees + 1% compulsory notaris = 194.4K purchase price before you pay any mortgage arrangement and valuation fees which are a couple of thousand. Then you've almost certainly got to furnish the place to achieve 1000 per month rental. You probably do not want to rent unfurnished as sitting tennants have lots of rights. So 194.4K is probably an underestimate of the cost to get a place rental ready when you see it advertised as 180K ktk.

rental income @1K per month = 12K - typical agency fees of 8% = 11040 pa.
rental income @ 900 per month would translate to about 9936 pa after agents fees.

minus the annual box 3 income tax (which is what I calculated incorrectly).

Box 3 income is calculated as 30% * 4% fictional yield * (((asset value January - liabilities January ) + ( asset value December - liability Decemember))/2 - personal allowance).

The outstanding _value_ of the personal mortgage on an investment property DOES count as an applicable liability for box 3. The actual size of the interest payments do not count. i.e. it does not matter if you pay 5.5% or 6% on the mortgage for tax purposes in NL.

Assuming:
zero capital growth
interest only mortgage
no other assets in the Netherlands
personal allowance

Box 3 liability is thus
= 1.2% * (((194.4K - 70%194.4) + (194,4K - 70% 194.4))/2 - 19,698)
= 1.2% of (0.3*194.4K -19698)
= 463.50 per annum

I suspect that this can only be offset against Irish CGT when you actually sell the thing. I think you'll have to pay the cash to the Dutch inland revenue until/when you can claim it back if at all. It is unclear to me if you can offset the Dutch tax against Irish CGT with retrospective effect. e.g. you sell after 10 years, can you take the previous 10 years Dutch tax and offest that in year 10 against Irish CGT?

Anyway for cash flow it looks like:

(11040 - 463.50) nett of Dutch income tax = 10576.50 cash income from rental.

or 9472.50 cash income from rental nett of Dutch income tax for 900 per month rent.

Mortgage rates in the Netherlands are currently 5.5 - 6 % for a 2nd house (without NHG) see http://teletekst.nos.nl/gif/images/546-01.gif You need the effective rates in parenthesis on the right under the "zonder NHG" column.

So a 70% mortgage will cost you between 7484 - 8164 for interest only for 10 years fixed. You cannot offset mortgage interest payments on an investment property as a cost against the box 3 investment income. You CAN offset the outstanding value of the mortgage against the value of the property as shown above. You'd need proper professional advice on whether you could offset any Dutch taxes against your Irish taxes and what other Irish taxes would be applicable [I posted a copy of the relevant tax treaty in an earlier post].

Then there'll probably be a compulsory life insurance for the mortgage on top of that of ~€200 pa. And I haven't yet mentioned the owners portion of OZB onroerend zaak belasting (property tax) ~€200 pa ... and the costs of doing a Dutch tax return ~€500 pa etc. etc.

So in Summary: the cash rental income could compare favourably to cash mortgage costs in this example but it could be marginal depending on your other costs and if you have a higher LTV than 70%. You are not going to get rich on the cash yield. But I dont think that is the case in most countries.

Just shows that a full calculation with professional tax advice is really necessary when assessing an investment of this magnitude. So easy to make a wrong assumption!

 

[dc151066]

Re: Has anyone invested/thought of investing on Amsterdam?

This is a very interesting and useful thread. Can anyone help with my Anglo/Dutch question below. When you invest in Dutch property - how do you get proceeds form the sale of the asset back into the UK, and what UK CGT need to be paid?

I've lived back in the UK since returning from Netherlands in 2004 after working away for a number of years. I own a residential property in Amsterdam, which has been rented since my return to the UK. This has not generated any income as the rent has always just about covered the mortgage and maintenance costs, and therefore I've never declared any foreign income for my UK tax return since 2004.

I'm thinking of selling the property soon, which could yield a substantial gross profit. I understand there is no CGT on this income in Netherlands. So even after notary/makelaar fees, I guess I could actually end up with almost all of that gross profit sitting in my Dutch bank account. Great!

I'd like to use that cash to put a significant deposit on a property in the UK.

I understand it's possible to transfer up to Euro 50K free of charge, per transaction, via SWIFT (using IBAN and BIC). I'll have to pay either the sending or recieving bank for currency conversation, but no worries there.

It's the next bit where I start to struggle....

What exposure do I have to UK CGT ?

Is the UK tax-man entitled to some of the profits from sale of my in the Netherlands?

If so, when does this tax become payable? At the time of the sale of the house? whe the money is transfered to the UK? What happens if I just leave the money in the bank Holland ?

Aside from bringing the cash into the UK in a suitcase and using it to buy sterling over the counter, what are my options for minmising the exposure the UK CGT?

 

[POD1]

Be good fun if nothing else !!! LOL .. make sure you keep the address in your wallet

 

[Martin77]

Re: Has anyone invested/thought of investing on Amsterdam?

This is a very interesting and useful thread. Can anyone help with my Anglo/Dutch question below. When you invest in Dutch property - how do you get proceeds form the sale of the asset back into the UK, and what UK CGT need to be paid?

I've lived back in the UK since returning from Netherlands in 2004 after working away for a number of years. I own a residential property in Amsterdam, which has been rented since my return to the UK. This has not generated any income as the rent has always just about covered the mortgage and maintenance costs, and therefore I've never declared any foreign income for my UK tax return since 2004.

I'm thinking of selling the property soon, which could yield a substantial gross profit. I understand there is no CGT on this income in Netherlands. So even after notary/makelaar fees, I guess I could actually end up with almost all of that gross profit sitting in my Dutch bank account. Great!

I'd like to use that cash to put a significant deposit on a property in the UK.

I understand it's possible to transfer up to Euro 50K free of charge, per transaction, via SWIFT (using IBAN and BIC). I'll have to pay either the sending or recieving bank for currency conversation, but no worries there.

It's the next bit where I start to struggle....

What exposure do I have to UK CGT ?

Is the UK tax-man entitled to some of the profits from sale of my in the Netherlands?

If so, when does this tax become payable? At the time of the sale of the house? whe the money is transfered to the UK? What happens if I just leave the money in the bank Holland ?

Aside from bringing the cash into the UK in a suitcase and using it to buy sterling over the counter, what are my options for minmising the exposure the UK CGT?

hhhmmmm.

I suspect that you are now considered "resident" and "ordinarily resident" in the UK, because you have spent 3 consecutive tax years living mainly in the UK. And equally you are "not resident" in the Netherlands. If you were born in the UK I suspect that you are also considered "UK domiciled."

You've done a Dutch tax return on this property since 2004, right? Even though you are not resident, if you were renting the property out, you should have really declared it as a "box 3" investment in the Netherlands, since it is physically located in the Netherlands, and it was rented out, and it was not your primary residence, nor a holiday home. You've also told your mortgage lender that the property is let, and that it is no longer your primary residence, and that you no longer qualify for a tax rebate on the mortgage payments at source (if you ever where Dutch resident)?

It has certainly generated income (it has not generated profit, which is a completely different matter), so it should be considered as a commercial investment letting according to the way I read the tax treaty and Dutch tax law. Box 3 taxation is calculated as 1.2% of total mean nett asset value (market value of the house = "WOZ waarde" - remaining outstanding mortgage) averaged over the year, and is payable per year. There is NO personal allowance of €20014 for non residents unless they choose to declare their entire worldwide income in the Netherlands. You cannot discount any costs such as the mortgage repayments or maintenance. This could be a considerable sum if it is in the centre of Amsterdam, depending on how much mortgage is remaining to pay off.

So you've also declared this rental income in the UK already for UK income tax, right? You probably wouldn't have to pay much as you can offest mortgage payment costs against rental income for UK tax. Then you could also have claimed some or all of the Dutch box 3 tax back against UK income tax anyway.....

It is my very humble opinion that as a UK resident, ordinarily resident, and domiciled, you are liable to pay _full_ UK capital gains on the sale of this Dutch property, probably with the gain calculated from the moment it ceased to be your primary residence. But you can reduce this by the amount of dutch box 3 income you have paid..... there is NO Dutch CGT: it was replaced by "box3".

The liability for capital gains is made when you actually sell the property (irrespective of whether the money is actually in the UK or not.) Of course you could wait until your next tax return, but then you might just be liable for interest over the intervening period.

It is probably too late to put in place any tax efficient structures now. Dutch law states that it is the actual facts of the case that count, and not any fancy contracts that you may have.

Check out the treaty [broken link removed]

and the UK taxes



and the Dutch taxes

[broken link removed]

here's box 3 in detail (in English)

[broken link removed]

You can contact the dutch tax office on +31 555 385 385. It is possible to retrospectively "correct" your own tax returns for previous years in the Netherlands if you find you've done something incorrectly. You will have to pay the tax and back interest, but you then avoid all penalties and fines.

As for electronic transfers, you can transfer more than 50K euros in one go, but most banks limit this in their systems to 50K. I once got a letter from the Bank of the Netherlands asking me to clarify why I was making such large overseas transfer, so they do keep an eye on these things.

Of course you should get professional advice to confirm this. I am not a tax advisor! I also do not work for the tax office.