Understanding the implications of buying and selling real estate abroad can be complicated enough on its own, but then you also have to consider your US expat tax responsibilities. Now, if you’re thinking about buying or selling in the United Kingdom, there’s an additional thing you may want to think about: the recent Brexit decision.
What About Brexit?
Chances are, you’re well aware of the June Brexit referendum, where a majority of Britons decided separating their nation from the European Union (EU) was the best choice – with a vote of 51.9% to leave and 48.1% to stay. This is a huge decision that is changing history – after all, the UK has been a part of the EU since 1973! This decision to split is causing many extensive changes throughout the UK and EU – not to mention, it will have effects on the world’s economy.
Brexit and Real Estate
So what does Brexit have to do with buying and selling in the UK? Well, potentially a lot. One of the biggest considerations for anyone (UK nationals or expats) buying or selling in the UK is the possible disastrous effect on the British economy because of this EU exit. Not only that, but the potential for visa issues for expats may cause you to rethink your decision to buy a home in the UK. After all, you may not want to buy and settle in the UK if you face challenges finding and keeping work in the UK. There’s still much dust to settle following this decision, but below, you’ll learn about a few scenarios about how real estate may be affected by the Brexit decision.
Should We Back Out on Our Offer?
You’ve found your dream home and put in an offer, but now the Brexit decision has been reached and you’re thinking prices may drop. While true – economists are predicting that prices may decrease 5 percent by fall – you may be losing out if you choose to pass on your dream home now. Additionally, attempting to renegotiate a lesser offer after the fact isn’t likely to work, as sellers are not necessarily in a panic to get real estate off their hands at the moment.
What About Long-Term Price Effects?
Experts predict that the number of real estate transactions will be the biggest decrease, rather than the prices – although, with fewer interested buyers, prices may surely drop. For the time being, the market may be limited more to needs-based buyers and investors looking for good opportunities. Word is that there may be 20 percent fewer sales in the second half of 2016, and even a 10 percent drop in prices specifically in London by Christmas.
What About Renting?
Perhaps you’re not in a position to buy, or don’t have the desire to. While there don’t seem to be any serious affects on renting in the UK, you may find it easier to find a place to live if visa challenges do ensue for some expats. Any change to the current immigration system in the UK will certainly have an effect on expats, but to the extent of which no one knows yet.
Are There Advantages of Buying Due to Brexit?
If you plan to purchase a home in the UK with foreign currency, you are certainly at an advantage due to the weak British Pound. After all, the Brexit outcome caused the biggest fall in sterling’s value in 31 years! Even buyers from the US will find property prices about 20 percent lower than a year ago – so if you are interested in buying in the UK, it’s certainly a consideration to make at this point.
What Should I Know About Buying and Selling Abroad as an Expat?
If you do intend to buy or sell overseas, whether in the UK or another country, there are certainly expat tax implications you should be aware of. Generally, buying a foreign home doesn’t warrant reporting on your US expat tax return, unless there’s some soft of Homebuyer’s Credit in place for the year in question. However, selling a home abroad will certainly have an impact on US expat tax, so it’s important to keep accurate records and documentation to make it easy to report on your US tax return. Check out the article on buying and selling real estate abroad for more details on specific expat tax implications.
Have More Questions About How Brexit May Affect You When It Comes to US Expat Tax?
We’re here to help! Our team of expat-expert CPAs and IRS Enrolled Agents are here to help you with all of your US expat tax inquiries – contact us today!