Walking through the beautiful streets of Dublin, Ireland
The Dublin housing market is beginning to stabilize after experiencing a period of rapidly rising prices. Residential property prices in Dublin rose in some places from 50% to 100% or more since the 2012 housing bust through 2015, but then moderated when changes were made to Central Bank rules. Over the past few years through 2018, Dublin housing market prices have been rising even higher. Through the second quarter of 2018, residential prices in Dublin rose year-on-year by 6.2%.
Overall, housing in Ireland continues to face strong demand and weak supply. New construction in Dublin generally focuses on new homes in the form of housing estates. Most demand is for apartments located in the city, indicating a mismatch between supply and demand. However, the new home construction in the Dublin housing market has helped prices stabilize.
As the Ireland economy continues expanding with growth forecasts in some cases doubled, the Dublin housing market will experience continually higher demand. New construction adding to the supply will help keep price increases from overheating too rapidly.
There are concerns that the Ireland economy is growing too fast. Growth estimates of over 9% in the first half of 2018 may be high due to multinational currency transfers. However, the underlying economic momentum appears to be two and a half times the European Union average.
What should employers expect?
Employers should expect that the Dublin housing market will continue to experience price increases. Both residential home prices and rents are expected to continue rising. Conversely, employers looking to relocate employees from the Dublin market may experience shorter timeframes for property sales.
What should employers do?
Employers should review their hiring plans and determine how to mitigate the impact of the Dublin housing market price increases. Employers should examine their relocation policies to determine if they would benefit from enhancements that assist transferees looking to relocate into Dublin.
Conclusion
Global Mobility Solutions’ team of global relocation experts has helped thousands of our clients with their country-specific employment, visa, and residency requirements. We can help your company understand how to respond effectively to the Dublin housing market. Our experts can help your company understand the impact on transferees and their ability to accept relocations as housing prices continue to rise.
Learn how housing markets impact relocations from Global Mobility Solutions, the relocation industry and technology experts who are dedicated to keeping you informed and connected. Contact our experts online or give us a call at 800.617.1904 or 480.922.0700 today.
A yellow note pad rests on top of a 1040 tax form with a reminder of the new tax laws implemented for 2018.
Homeowners in the United States should be aware of changes to home tax deductions. These changes are important to understand for when they prepare their 2018 tax returns during the 2019 tax preparation season. They stem from the federal Tax Cuts and Jobs Act of 2017. Changes to home tax deductions were implemented to reduce the ability of homeowners to deduct interest on Home Equity Lines of Credit (HELOC) Loans. When HELOC loans are not used for home purchases, building, or substantial improvements, the interest on these loans will no longer be deductible. There are also dollar limits on the total qualified residential loan balances allowable for deductions, an increase in the standard deduction, and a $10,000 limit on the federal deduction of state and local taxes.
Internal Revenue Service (IRS) Issues Clarification for HELOC Loans
The IRS issued a clarification on February 21 of this year in response to several questions from taxpayers and tax professions. IR-2018-32: Interest on Home Equity Loans Often Still Deductible under New Law describes several examples to demonstrate the effects of the new rule. Important points of clarification include the following:
Interest on a home equity loan used to build an addition to an existing home is typically deductible
Interest on a home equity loan used to pay personal living expenses, such as credit card debts, is not deductible
The loan must be secured by the taxpayer’s main home or second home (known as a qualified residence)
The loan must not exceed the cost of the home and meet other requirements
Additionally, the new tax reform law imposes lower dollar limits on mortgages in order to qualify for the home mortgage interest deduction. The IRS notes that starting in 2018:
Taxpayers may deduct interest on $750,000 of qualified residence loans, down from the previous $1 million limit
There is a limit of $375,000 for a married taxpayer who files a separate return. This is down from the previous $500,000 limit
The new limits apply to the combined amount of all loans used to buy, build, or substantially improve the taxpayer’s main home and second home
Itemizations Must Exceed New Standard Deduction
To itemize for 2018 taxes, taxpayers must understand the impact of the new standard deduction. The tax reform law states that total home tax deductions must exceed the new standard deduction. The new standard deduction amounts are:
$12,000 for singles
$18,000 for heads of household
$24,000 for married couples who file jointly
$1,600 additional deduction for singles 65 and older
$2,600 additional deduction for married couples both 65 and older
Limit on State and Local Tax Deductions
The tax reform law places a limit on the federal deduction of state and local taxes to only $10.000. Homeowners in areas of the United States which experience high taxes include those in the Northeast and the West Coast. As a result, these homeowners may experience an increase in their tax liability.
What Should Homeowners Do?
Homeowners planning to file for home tax deductions on their 2018 tax returns should be aware of the changes to allowable deductions on their HELOC loans. They should also be aware of the new lower dollar limits on qualifying mortgages imposed by the tax reform law. Homeowners should be aware of the requirement that deductions must exceed the new standard deduction if they plan to itemize. Homeowners in states with high taxes should be aware of the new $10,000 limit on federal deduction of state and local taxes. In all cases, homeowners should consult a qualified tax professional for guidance on this issue.
Conclusion
Global Mobility Solutions’ team of corporate relocation experts has helped thousands of our clients understand the importance of obtaining professional guidance when it comes to changing tax regulations. We can help your company understand how to communicate the potential impact of these changes to your new hires and transferees. This will ensure they have relevant information as it applies to their relocations.
GMS is not a tax advisor and is only disseminating public information. You should always consult your own tax professional prior to making any decisions.
Man and woman smiling towards camera in modern living room, both in their 30s, confident and cheerful
The United Kingdom housing market is experiencing a period with annual price growth in decline. Annual price growth through August 2018 declined to 2% from July’s rate of 2.5%. Additionally, house values on a month to month basis declined by 0.5%, the largest monthly decline on record since July 2012.
What is causing the annual price growth to decline?
The annual price growth is declining due to a number of factors:
In the UK, an increase in stamp duty on second homes to 3% has also hurt demand. Stamp Duty Land Tax (SDLT) is a tax on land transactions in the UK arising from the Finance Act of 2003. SDLT is not a stamp duty, but a form of self-assessed transfer tax charged on “land transactions.”
The market typically experiences a period of slow activity during the summer months as well, with many people on holiday.
The UK housing market currently has too much stock on the market, dampening prices. The market has the highest amount of stock since September 2015. Up to one third of houses have had at least one price reduction, the highest percentage in summer since 2011.
These factors combined are creating a faster rate of annual price growth declines. The declining rate of annual price growth is further hampered by falling UK home prices.
Employers should expect that the UK housing market may present favorable conditions for relocations to the UK market, as buyers may be able to obtain good quality properties at better prices. Conversely, employers looking to relocate employees from the UK market may experience longer delays for property sales. They may also experience some transferees not desiring to relocate in the short term due to lower home selling prices.
What should employers do?
Employers should review their hiring plans and determine if there are opportunities to relocate transferees to the UK while the housing market is presenting favorable buying opportunities. Employers should examine their relocation policies to determine if they should be amended to assist transferees looking to relocate out of the UK as the housing market experiences annual price growth declines and home prices decline overall.
Conclusion
Global Mobility Solutions’ team of global relocation experts has helped thousands of our clients with their country-specific employment, visa, and residency requirements. We can help your company understand how to understand and respond effectively to the UK housing market’s impact on transferees and their willingness to accept relocations as annual price growth declines.
Learn how housing markets impact relocations from Global Mobility Solutions, the relocation industry and technology experts who are dedicated to keeping you informed and connected. Contact our experts online or give us a call at 800.617.1904 or 480.922.0700 today.
Many of Global Mobility Solutions’ clients have transferees who want to build a new home as part of their relocation and need a new construction loan. GMS spoke with two experts at TIAA Bank who agreed to share their advice and guidance on this topic:
Matt Canfield, Senior Vice President, Relocation and Affinity Lending
Tim Hofmann, Vice President, Construction Lending Administration Manager
New Construction Loan
A new construction loan for a transferee who will be relocating is not the same as a traditional home loan, or mortgage. These are two different lending vehicles that are used for very different purposes.
Length is the time it takes to build a home (usually 12 months).
Is similar to a line of credit for a specific amount.
Borrowers/builders submit draw requests to lenders.
Interest is paid only on what is drawn starting at the time of the draw.
Loan remains in the lender’s portfolio and is not sold to investors.
At completion, a mortgage is granted for the new home.
New mortgage pays off the balance of the construction loan.
How Should a Transferee Start the Construction Loan Process?
According to Tim Hofmann at TIAA Bank, transferees should:
Obtain preliminary approval from their lender.
Submit an application for a construction loan.
Transferees should determine if they want to lock their rate in.
TIAA offers an extended rate lock option.
This may be helpful if interest rates are expected to rise.
Choose a contractor and a building plan
What does a Transferee Need to Obtain Approval for a New Construction Loan?
Tim shared the following three items required for approval:
The contractor must be acceptable to the lender. They should have the requisite experience to build a home according to the plans.
The lender will review the contractor and the budget. The budget must:
Be reasonable for the proposed project.
The home’s square footage/size is normal for the area.
Construction costs are reasonable for the quality, size of the home, and the general area.
Lenders approve credit files for the amount of the loan.
If transferee will rent their former home, what is the rental?
For the transferee who will carry both mortgages for the former and the new home, can they carry that debt?
If transferee plans to sell the former home to help finance construction, what is the viability of having the sale occur in the necessary time?
Tim notes that there are a lot of factors to consider for new home construction. Important areas that may impact the process and the timing include:
Will the new home require tearing down an older structure?
Is the building lot included in the cost of the new home?
Will the construction be an extensive renovation of an older structure such as a center-city townhouse?
Are there specific architectural guidelines the project must follow?
Do Transferees Need to Sell Their Current Home Before Applying for a New Construction Loan?
Transferees who are relocating and who currently own a home may want to build a new home. They may want to keep living in their current home until their new home is ready for occupation. Everyone’s situation is different, and what is possible depends on a number of factors:
Is there a mortgage on the current home?
If yes, what is the amount of the current home mortgage?
Will the transferee also be buying the land, or do they already own the land?
What are the amount and terms of the new construction loan?
Can the transferee receive approval for the total debt load of their current mortgage and the new construction loan?
TIAA Bank offers a unique product for new construction loans: OTC. OTC is TIAA Bank’s “One-Time Close” new construction mortgage loan (available only in AZ, CA, CO, CT, DC, DE, FL, IA, IL, IN, MA, MD, MI, MO, MT, NC, NJ, NV, NY, OH,OR, PA, SC, UT, VA, and WA.; other restrictions and limitations may apply).
With OTC from TIAA Bank, the customer only goes through one closing process. During construction, the customer and builder request draws to fund the project. At completion of the home, TIAA Bank only requires a two-page conversion. The customer is able to quickly move into their new home without having to wait for a second closing process. If the customer requires an extension, the two-page extension only requires notarization. TIAA Bank’s OTC new construction mortgage loan speeds the process for customers, and keeps them from having to go through a second, time-consuming closing.
What does this mean?
Transferees who want to obtain a new construction loan to build a home should review their current financial arrangements with a qualified lender. Transferees who have a mortgage on their current home may be able to obtain a new construction loan. However, this depends on their financial circumstances. Importantly, transferees should understand that they must receive approval for the total amount of current mortgage debt and new construction loan amount.
What should employers do?
Employers with transferees looking to build a new home as part of their relocation should direct them to speak with qualified lenders and financial advisors for guidance. They should also direct them to speak with a qualified Realtor® who can assist the employee in determining where they want to live in the new location. Employers should also review their relocation policies to determine if enhancements can be made to allow for exceptions that may arise from transferees who want to obtain a new construction loan.
Global Mobility Solutions is proud to be named and ranked #1 Overall, and #1 in Quality of Service by HRO Today’s 2019 Baker’s Dozen Customer Satisfaction Survey.
Contact our experts online to discuss your company’s relocation program needs, or give us a call at 800.617.1904 or 480.922.0700 today.
GMS is sharing public knowledge and can help companies more clearly understand new construction loans for relocations. However, GMS is not a CPA firm or a lender, and is not giving financial advice. Everyone’s financial situation is different; individuals and employers should consult their lenders and financial advisors prior to making any decisions.
Shot of a happy young couple holding the keys to their new home
Why should your company encourage transferees to buy instead of rent? Our team of global relocation experts review thousands of relocation policies on a regular basis. We work with our clients to incorporate best practices, so they can gain a competitive edge with their relocation policies and attract the highest caliber of talent.
Consistently, many relocation policies have not offered home purchase benefits to current renters. Instead, current renters received benefits that directed them to remain as renters. Recent consultation with several clients provides new insight into this practice.
Many clients are now offering home purchase benefits to current renters, to encourage transferees to buy instead of rent. This trend is increasing, as clients are learning that home purchase benefits for current renters return several benefits back to the client in terms of employee retention. As we examine this trend, a new best practice is appearing in relocation policies.
There are 7 distinct benefits for clients when they encourage transferees to buy instead of rent:
1. Transferees establish strong roots in a neighborhood and community.
Think of the time you may have taken a job and moved to a new location. You may have spent time finding a new home and exploring neighborhoods. Your family members may have expressed what was important for their needs as well. Factors may include nearby schools, or amenities like parks and shopping centers.
Each facet of a community becomes a part of a transferee’s life. As a result, those who put down strong roots by establishing home ownership are more likely to remain committed to their neighborhood, their city, and their employer.
2. Transferees can personalize a home so they can settle in comfortably, so encourage transferees to buy.
Transferees who buy can easily personalize a home to meet their distinct preferences. Everything from painting their front door to match a favorite color to decorating interior spaces to their liking can lead to greater transferee satisfaction with their living arrangements. Satisfaction with their home is more likely to lead transferees to feel satisfied with their relocation as well.
Renters, on the other hand, often are limited to moving into an apartment, and cannot easily customize the space. Even if they do some customization such as interior painting, they often must return the apartment to its original condition if they were to vacate. Renters face a strong disincentive when it comes to personalizing their living space. Living in a space they cannot personalize often makes renters feel as if they are nomads. The end of their lease is already defined, which seems to put a mark on their time in a specific location. This may lead transferees to believe they can easily move to another apartment, or another position.
Corporate talent acquisition should work in tandem with employee retention so relocation policies offer home purchase benefits. This will help encourage transferees to feel as if their relocation is permanent, and not a temporary state.
3. Monthly mortgage costs are consistent year to year, while rents can increase dramatically.
One of the benefits to buying a home versus renting is the stability of mortgage payments. Monthly costs for a mortgage tend to be consistent year to year, defined by the terms of the mortgage upfront. As a result, this allows buyers to know their monthly housing costs and provides for better budgeting and financial planning.
Renters could face a rent increase as soon as their lease expires. There are many reasons why landlords would increase rent, including higher property taxes, inflation, or higher building maintenance costs. They might just want to make more money, and if demand for rentals in the area is high, then rent increases are easy to implement because those who move are easily replaced with other renters. Increases in rent could be exceptionally high. Therefore, renters need to make a decision on a regular basis if they want to absorb the cost of the rent increase, or take on the additional expense of searching for a new rental, and paying to move their belongings.
Overall, transferees who rent often are subject to somewhat volatile conditions that can impair their job performance. If they must worry about their housing options in the face of rent increases on a regular basis, transferees certainly cannot easily focus on corporate objectives.
4. Home mortgages are similar to saving plans and investments, and owners can more easily move up to a larger home at a later date.
There are numerous benefits to home ownership, and transferees can gain greater satisfaction with their relocation with home purchase benefits. Home ownership lets transferees build financial equity, and a home is an investment that will increase over time. Homeowners have tax benefits they can claim as well. Mortgage interest, property taxes, and other items may provide tax deductions on an annual basis. As a home gains value over time, and as the homeowner builds greater equity each year as their mortgage balance declines, homeowners have a built-in savings and investment vehicle in real estate they can use in the future.
Employers benefit if they encourage transferees to buy instead of rent by reinforcing the high value homeownership returns to the transferee, cementing their interest in staying in a location.
5. In many markets, rentals are extremely competitive to secure and the costs exceed homeownership. Security deposits can often exceed a home purchase down payment.
Brooklyn
Several markets have seen the cost of rentals rise far beyond the cost of homeownership. A recent example can be found in Brooklyn, New York. A three bedroom, one bathroom apartment at 378 Grand Avenue is listed on Zillow at $3,900 per month (not including renter’s insurance costs).
A house located at 575 Jerome Street with five bedrooms and two bathrooms is listed for $599,000. Using a mortgage calculator, over a 30 year time period at a rate of 3.92%, with a mortgage balance of $575,000, taxes of $6,000, insurance of $1,500, and Private Mortgage Insurance (PMI) of 0.5%, the monthly mortgage costs for the house are $3,583.27.
In Brooklyn, a renter at 378 Grand Avenue can get a receipt for the rent they pay each month. Also, they may face a rent increase at the end of their lease. A homeowner can get more space, tax benefits, and an equity-building investment vehicle with a home on Jerome Street. It is easy to see how offering home purchase benefits can help transferees feel more satisfaction with their relocation.
Denver
Another recent example can be found in Denver, Colorado. A three bedroom, three bathroom apartment at 2590 Welton Street is listed on Zillow at $3,855 per month (not including renter’s insurance costs). A house located at 90 N. Lincoln Street with three bedrooms and two bathrooms lists for $610,000. Using similar parameters as the other example, with a mortgage balance of $585,559, taxes of $6,000, insurance costs of $1,500, and PMI of 0.5%, the monthly mortgage costs for the house are $3,637.59
6. If a transferee does not commit to their new community, they often view their opportunity as a job and not as a career.
Companies go to great lengths to acquire highly skilled talent. Often companies design relocation packages to highlight the benefits of an employment opportunity, to encourage prospects to accept job offers. In reality, it is in the company’s best interest to have the transferee think of the opportunity as a career offer. Finding and acquiring talent can be challenging.
Companies should have a career plan for the new hire, so they view the opportunity as a career, not as a job. This perception helps transferees commit to staying with their employer. Home purchase benefits let transferees commit to staying in their new community. Transferees that commit to their community are more likely to commit to their career.
7. A transferee who buys is more committed than a transferee who rents. Also, if a client offers home purchase benefits, then the employee knows the company is more committed to the employee.
A company can reinforce employee retention by showing employees they commit to them and their future. Employers should encourage transferees to buy instead of rent. This sends the message that the company wants the transferee to stay. If a company gives the impression to a transferee that they are temporary by only providing rental assistance, the transferee will get that message and feel as if they are a temporary employee.
Employers that give the impression to the transferee that they want them to join their company and their community by putting down roots and buying a home, will have transferees who believe they are part of the company’s future. In talent acquisition and employee retention, the message from the company should always be one of acceptance, inclusion, and permanence. Acquiring highly skilled talent is a difficult challenge. Companies that are successful in this endeavor should make employee retention efforts even more successful by offering home purchase benefits to transferees.
Rent Versus Buy Calculator Will Help Encourage Transferees
Global Mobility Solutions has a wide range of online tools and resources for clients and transferees. GMS’ Rent Versus Buy Calculator is an easy to use, step-by-step program. This program compares the cost of renting versus the cost of buying a home. Employers that encourage transferees to buy instead of rent can use this online tool to encourage homeownership. This in turn helps the transferee make the decision to buy in their new community. This decision will help the transferee feel like a part of the company. As a result, they will be more willing to stay with the company on a long term basis.
What Should Employers do to Encourage Transferees to Buy Instead of Rent?
Global Mobility Solutions’ team of global relocation experts has helped thousands of our clients design relocation policies that reflect best practices to promote employee retention. We can help your company understand how to leverage home purchase benefits for current renters to encourage transferees to buy and help ensure successful relocations.
Global Mobility Solutions is proud to be named and ranked #1 Overall, and #1 in Quality of Service by HRO Today’s 2019 Baker’s Dozen Customer Satisfaction Survey.
Learn best practices from Global Mobility Solutions, the relocation industry and technology experts who are dedicated to keeping you informed and connected. Contact our experts online or give us a call at 800.617.1904 or 480.922.0700 today.
