|Published Articles on Real Estate - Anguilla Life Magazine|
Anguilla has an unusual system of taxation that makes the pricing of property crucial-i.e. the 5% transfer tax applicable to all land transfers and the additional 12.5% stamp duty which is applied to all Alien land transfers.
Although annual property taxes are levied not on land but on built structures only (at the nominal rate of .075% of the assessed building value for both Belongers and Aliens), the transfer tax and stamp duty cited above are calculated upon land alone if the purchased parcel is undeveloped, but are based upon both land and building values if the parcel is built upon.
As such, the pricing of developed property is especially sensitive to the impact of transfer taxes and stamp duties, which total 17 ½ % and are payable in total prior to title registration. The Alien purchaser of property in Anguilla (whether purchasing from a Belonger or an Alien) is faced with a substantial tax burden which is due immediately after the substantial costs of the purchase itself.
Of course, one way to minimize the impact of the current tax burden on Purchasers would be for Government to accept staged payments, another would be for Government to reduce the taxes due prior to title registration and increase the annual taxes due thereafter (realizing that revenue loss is not a plausible scenario).
However, given that neither of the above changes are imminent--although both have merit and could, if introduced, improve cash flows to Government without any ill effect--it is essential that Sellers come to grips with what these taxes means to Purchasers.
Essentially, taxes that are due prior to title registration are an integral part of the purchase price-they are an integral part of the closing. Therefore, once a value is established, the keen Purchaser will be prepared to pay the Seller 82.5% of that value because he must pay 17.5% of that value to Government, and all he is prepared to pay is what the property is worth, i.e. 100% of its value.<
Traditionally, on Anguilla the Purchaser pays the transfer taxes. However if the combined amount of the purchase price plus tax exceeds the value, he will not pay the taxes for he will not purchase the property.
Again, this is especially true for developed property, and a refusal to discount price below value to account for the applicable taxes is why so many developed properties remain on the market for so long, or until the price is dropped--often in desperation as Sellers wait so long for an offer that an aggressive Purchaser senses their frustration, makes a low ball offer, and is rewarded.
Sellers should separate emotional myths from market realities--unless of course they are prepared to wait and wait, while fighting frustration and desperation discounting. In order to understand how Purchasers will value property, Sellers should start with some basic rules of thumb (i.e. US$100 / sq ft for kitchens and bathrooms, US$80 / sq ft for bedrooms and living areas, US$60 / sq ft for patios and verandahs, US$1 / gallon for pools, septic tanks, and cisterns), add in comparable land values (i.e. US$80,000 per half acre coastal land, US$60,000 per half acre inland with views), add premiums for landscaping and related amenities, then discount the total value by 17.5% to establish a sales price-which will hopefully, but not necessarily, yield a gain on the asset.
Everyone believes that their property has some special elegance or feature (and often it does) but do not lose sight of what someone would be willing to pay for that feature-and do not assume that the headache of construction will entice the Purchaser to pay an extravagant premium for the joy of immediate occupancy. Everyone is intrigued by the idea of building their own dream.
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