Monday, October 8, 2012

A Land Rush in Puerto Rico

Buyers of new homes on the island this year will pay no property taxes for five years. The result: a luxury building boom. Can Puerto Rico recapture its onetime glamour?

Wall Street Journal
Oct 5th 2012
By: Alyssa Abkowitz
No property taxes for five years. No closing fees and no capital-gains taxes. With a blitz of housing incentives set to expire Dec. 31, Puerto Rico is courting high-end home buyers—and sparking a real-estate revival.
The Puerto Rican government introduced the aggressive incentives two years ago to boost the island's flagging housing market. The stimulus seems to be working: New-home sales were up 51% by volume in 2011 and 38% for the first six months of 2012, compared with 2010, when the incentives were enacted, according to the Puerto Rico Federal Affairs Administration.

The stimulus means a buyer who purchases a $1 million home will save about $25,500 in closing costs and property taxes. And a homeowner who rents out the property can waive rental-income taxes through 2020.

The incentives apply only to new homes, and the buyer must hold on to the property for a minimum of six months in order to waive capital-gains taxes upon selling. (There are also some incentives for buyers of existing properties.) Currently, the Dec. 31 expiration date targets only buyers of second homes; the incentives will continue for primary-home buyers.