Discovering Western Sweden

Most Irish investors need rental income to cover down borrowings rendering it all the more bewildering that people have an uncanny ability for picking out the least rental friendly countries on the planet as potential investment locations and avoiding a few of the more obvious locations, for instance Sweden.

As a rental income investor there are a few very key factors that must be present in a location before consideration of a purchase. The most obvious one of these brilliant is that there surely is a solid rental tradition in the united states in question. From a residential property viewpoint this rules out nearly all of eastern Europe for all however the more high-risk investor. The second necessity is a double taxation treaty so you don't lose most of your hard-earned cash to tax by paying it in two different jurisdictions. The next most important factor is the option of local mortgaging facilities at reasonable interest rates, a factor which, again, rules out a significant swathe of countries that might potentially turn to enter the EU. Other factors which have to be considered are political and economic stability, the easy carrying out home transaction and the efficacy of the legal framework for purchasing. It's obviously also imperative that there be described as a reason for stable property price inflation and the capacity to purchase property at a high price level that'll allow an acceptable return in your investment.

On the basis of all these factors you've to wonder how we have all was able to miss out on Sweden? It includes a culture of rental, a double taxation treaty with Ireland, mortgages are available at about a percent under Euro rates, it is one of the most stable countries in Europe, has the most transparent property industry on the planet and treats foreign investors the identical as locals.

Economically, Sweden is just a unique entity in so it seemingly have successfully straddled capitalism and socialism to a qualification unknown in any other nation. The effect is a nation with a very good standard of living and much less of the extreme highs and lows experienced by most entirely capitalist or socialist societies. There is an opportunity that this might change slightly due to a change in government last year, each time a four-party centre-right coalition won power following 12 years of Social Democratic minority rule. Swedish locals say the'new moderates'want Swedes to take some responsibility for their particular long term financial affairs and the newest government have intimated that they could look at abolishing property tax. It also seems that there surely is potential that their regulated rental system will soon be looked at included in a lesser tax regime. Sweden is, however, nothing if not reliable therefore the changes are unlikely to be sweeping or calamitous whatever happens.

Western Sweden is surprisingly close, just 2 hours flight from Dublin to Gothenburg with Ryanair. Much of its southernmost coastline, where the majority of the population live, is obviously on a single line of latitude as southern Scotland, with some of it as far south as Northern Ireland. It is also a shock to discover that the Swedish cost of living is not actually that high, specially when taken in the context of average income levels. The cost of property is also significantly less than the Irish are used to in the home, even however cities. Sweden comes on top of the UN's Human Development scale for their high quantities of education, democracy, income and public health. The country has a mere nine million citizens, which can be incredible considering that six of the firms regularly featured in the world's top 100 companies are Swedish.

One thing that is a deterrent for smaller property investors is the propensity toward urban residential property being sold in blocks as opposed to individually. This obviously ensures that the entry threshold is a lot more than a number of other countries which really only makes it an selection for individuals with EUR150k plus to invest. You can buy individual properties in the event that you move into rural areas but those wanting this kind of unit generally own as opposed to rent so potential income and market stability is vastly reduced. It is also difficult to boost bank finance for the purchase of individual units. There is not a lot of new build property in Sweden as the cost of building is significantly more than the cost of existing product. Consequently, when new property does come on the market it is often at a high price level that attracts a very poor yield.

Sam Roch-Perks of Swirish Property AB, a Swedish registered company focusing on sourcing and managing property investments for Irish investors, says that, Sweden includes a unique variety of property micro-markets as a result of system of rent control where the tenant organization and individual municipalities agree rate changes based on factors such as for example house prices, costs and indexation. Residential property investment only makes sense in secondary markets as rentals often don't reflect the high prices of property in major residential centres such as for example Stockholm, Gothenburg and Malmo. Smaller feeder cities where prices haven't spiraled, he says, offer better potential and stronger returns. The business targets cities with populations of 50,000 plus close to a main urban centre, he therefore made a decision to base his company in town of Trollhattan, just outside Gothenburg, the primary base manufacturing and logistics in Sweden. Other cities of interest, based on Roch-Perks, are Uddevalla, Vanersborg, Skovde and Boras. The business is particularly active in Trollhattan as it has attracted a new university, infrastructure to town has been greatly improved and manufacturers such as for example Volvo and Saab have bases there, although you will find worries for the manufacturing side of Saab which is a result of be switched to Germany.

Roch-Perks says the organization make an effort to source product with yields around 2% more than Swedish interest rates and bank gearing of between 75% and 85%. Clients can generally borrow as much as 80% for commercial purchases and often as much as 90% for residential, as long as the client includes a credit history with the bank as a solid cash flow statement may be presented for the investment. Property price rises are slow and steady as opposed to spectacular, however the property market does appear stable and sustainable having an average 7% upsurge in values over 2005.

The Swedish base rate is generally a half percent or so less than the Euro. You'll obviously be crossing currencies because the Swedish Krona is not pegged to the Euro. It's, however, generally a really stable currency, although recent worries about sub-prime lending in the US has cause for more movement than usual. Residential rental in Sweden is regulated with a unique system where the tenant organization and individual municipalities agree rate changes based on factors such as for example house prices, costs and indexation.

The Swedish property market had a very large price crash in the early nineties. Those active in the real estate market during the time claim that irresponsible activities by the banks, extremely out of character for the Swedes, were the cause of a lot of the damage. The market has, therefore, been very chastened since and the banks have cleared up their act significantly. Purchasers are asked showing the origin of all cash used to fund a transaction therefore the attraction for money of dubious origin is virtually nil.

Frank Greene, who handles Swedish transactions at Mazars says; "Purchasing being an individual in Sweden means you will soon be taxed there and allowed because of this tax payment in Ireland. You may also form a Swedish company which raises gearing levels with the area bank and depreciation can be utilized to lessen tax payments. Swedish corporate taxation is presently 28% which can reduce to approximately 10% allowing for depreciation. These choices are unavailable if you are investing directly being an Irish citizen. Due to the double taxation treaty between Ireland and Sweden, Irish investors will soon be only liable to Irish CGT, presently at 20%, on exit if correctly structured."