With the dollar trading at over $1.30 to the euro, the US property market is increasingly attractive. A two-bedroom townhouse in West Palm Beach can be had for $168,000 (€125,112), according to Mr Tony Macaluso, an international real estate agent with Portside Properties in Florida.
Ms Kati Hughes of New World Real Estate has a three-bedroom house in Celebration, Florida (just south of Disney World), for $380,000. A five-bedroom house can be bought for $590,000.
It would be rash to expect massive capital gains in the short term from buying in the US. Residential housing there looks overvalued on most measures, if not as overvalued as in the Republic. There are also wide regional variations in the US. It is unlikely that all areas would suffer from a downturn to the same extent at the same time.
Many buyers might be tempted to buy a holiday home which they can use for part of the year. Ms Hughes points out that many counties in her state do not allow short-term rentals. In Celebration, the minimum rental period is six months. Then there are risks you do not face with a property in Ireland. Is the house in a hurricane zone? Does it face termite damage?
After that, there is the issue of tax status. There is a dual taxation treaty between the Republic and the US, but what this means, according to Mr John Whiting of professional services firm PricewaterhouseCoopers, is that you will end up paying the higher of the rates in the two jurisdictions.
That might seem bad enough, but there is another twist. Linger too long in the US and you could be required to pay US tax on your worldwide income.
The official period is 183 days a year, but the complex rules include time spent in previous years. So the rough rule is that you can spend no more than four months a year.
A few states also have restrictions on foreign ownership. According to the National Association of Realtors, foreigners can own property in Nebraska for no more than five years at a time, while in Wisconsin, the largest property a foreign national can own is 640 acres.
Assuming you can find a property the authorities will allow you to buy, what charges will you face? Estate agents fees tend to be higher in the US - around 6 per cent of the value of the property - but these are normally paid only by the seller.
If you are buying a holiday home to rent out, then running costs can be quite high. The property taxes, the equivalent of council tax, vary substantially from county to county and can be quite sizeable. These taxes will normally be included with the mortgage payment. The taxes on a condominium in Miami could easily run to $10,000 a year.
Add it all up and, Ms Hughes says, the cost of running the place is normally more than the owner receives in rental income.
This cloud has a small silver lining, however. Given the costs, the homeowner is unlikely to face any US income tax. And the costs can be set against any tax payable when it comes to selling the house.
If the property can be let full-time, the owner will not have to pay utility bills or furnish the house. Rent will be received all through the year rather than just during holiday periods. The obvious drawback, however, is that it will not be possible to use the place for your own trips. - (Financial Times Service)
