The numbers
The holding cost nobody budgets
A house costs something every year whether you are in it or not. The lines that make up the bill, where they are large, and the two that are invisible until the first year's end.
The brochure has a price and the lawyer has a completion statement, and between them they describe one day. The house then costs money for every day after it. On a ten-million estate on the water in Miami the second number is a quarter of a million a year before the lights are turned on; on the same money in Monaco it is a tenth of that. The holding cost is the price that decides whether you keep the house.
The lines
The same ten million, held
Annual holding cost of a ten-million house, per cent of value, desk estimate
Read the bottom of the list against the top of the last article. London and Munich are expensive to enter and cheap to hold; Miami and New York are the reverse. A buyer with a fifteen-year horizon finds that the door and the years roughly cancel across most of Europe and do not cancel at all in America, where two per cent a year over fifteen years is thirty per cent of the price.
The two invisible lines
The first is the wealth tax. A non-resident buying a fifteen-million house on the Riviera owes the IFI on it from the first January: roughly 150,000 a year with no debt, less with a mortgage, forever. A couple buying an eight-million villa on Mallorca owe the solidarity tax on what exceeds three million each. Neither appears in the listing, the survey or the completion statement. Both appear in the first tax return.
The second is the reserve. A house of eight hundred square metres with a rebuild cost of four thousand a square metre needs forty thousand a year set aside for the things that wear out, and nobody sets it aside. Then the roof, the pool shell or the plant fails, and the year costs a quarter of a million instead of a tenth. The instrument puts the line in whether you like it or not.
An empty house costs almost as much as a full one. That is the number people miss.
Every manager of every villa on every coastWhat reduces it
- Debt on the house where a wealth tax applies: it reduces the base in France and Switzerland and is the reason large houses there carry mortgages their owners do not need.
- A letting licence where one exists: twenty weeks on Ibiza or thirty in the Algarve cover the running cost and more.
- The right jurisdiction for the type: an apartment in a tower is cheap to hold in London and expensive in Manhattan; a villa is cheap in Italy and expensive in Florida.
- Honesty about the weeks. The own-or-rent instrument will tell you whether the house is a luxury or a decision, and the answer is worth knowing before rather than after.
Run the numbers
Holding Costs
What a house costs every year you own it, from property tax to the gardener, in each hotspot.
