Set your sights on a bargain in the US
Stocks, shops or even a home... our guide to all things Stateside
THE UK’s special relationship with America runs deeper than just a political understanding. Britons like to buy American branded goods; invest in the shares of their most successful companies; and even own property there. The Mail on Sunday shows you how to shop, invest and live in the US.
SHOPPING
EVERY year thousands of Britons pick the US as a holiday destination with shopping very much on the itinerary.
Many visit New York on ‘Black Friday’, the last Friday of November when stores offer massive discounts to drum up pre-Christmas sales.
US brands, from designer handbags to gadgets, are usually cheaper in America because there are no nasty export costs or taxes to add. Distribution bills are less because petrol is the equivalent of just 43 pence a litre compared to more than £1 here.
Eight years ago, before the financial crisis hit, shoppers flooded across the Atlantic because the pound went a long way. At $2 to the £1, tourists could stuff their suitcases with bargain price luxury brands. A pair of Ugg boots that cost £100 in London could be picked up for the equivalent of £50 in New York.
Angus Bond of Virgin Holidays, says: ‘New York is particularly popular around Black Friday. But Boston is also attracting British shoppers due to its lower sales tax.’
Even though the rate is less attractive today at about $1.50, it still gives Britons the power to buy luxury brands cheaper than in the UK. Luxury US goods prices are also creeping up over here as US makers seek to protect their profit margins in the wake of the dollar strengthening against the euro.
Mari Shor, senior retail analyst at investment group Columbia Threadneedle, says: ‘Big brands are increasing their prices in the eurozone and this is filtering through to the UK.’
Bagging an American bargain need not involve the cost of a flight and a hotel. You can make purchases from the comfort of your own sitting room.
But without a US delivery address, there will be hefty shipping costs and duties to pay – while some companies will not ship certain brands at all.
Using the website of upmarket department store Bloomingdale’s, for example, a US-based consumer can purchase a Minetta Crossbody Coach handbag for the dollar equivalent of £206 – and shipping is free. But a UK purchaser will pay £278, including shipping and taxes.
Florida-based shipping company MyUS, promises to shrink some of these costs for Britons. It provides buyers with a US shipping address – its warehouse in Florida – and then ships your shopping from there using courier firms such as DHL.
Chief executive Ramesh Bulusu says: ‘Most UK customers tend to buy toys, electrical appliances and cosmetics from the US as many named brands tend to be more expensive in the UK. It’s not just about price though, it’s also about availability. The choice of colours and sizes of jeans and shoes is broader, which appeals to many shoppers.’
Customers can order today and the item will be with MyUS within two days. Bulusu adds: ‘We hold items for 30 days free so that shoppers get the best rate for shipping if they have ordered several items at different times.’
Bulusu adds: ‘We find that when customers buy from shops online the estimates for duty and taxes can be high – because shops are fearful of underpayment errors.
‘If you have made three separate purchases that all adds up. The first kilogram of weight is the most expensive, but to add a second or third is substantially cheaper. We bill on actual weight rather than volume.’
Slavica Vojinovic uses MyUS and reckons she saves a fortune by shopping for both personal and business items in the US – but from her home in Battersea, South-West London.
The 42-year-old and husband Alex, 45, run Silver Archery, a supplier of bows and arrows. But most of the equipment they sell is sourced in the US – so they needed to find a cost-effective way of importing.
Slavica, who also buys perfumes and clothing for herself this way, says: ‘I reckon the savings are as much as 20 to 30 per cent.’
INVESTING
INVESTORS in US shares have enjoyed a golden period with the stock market more than doubling in value over the past six years.
But the stock market has wobbled recently over fears that the economic downturn in China will damage America’s growth prospects – a worry that last month led the Federal Reserve, the US central bank, to postpone an interest rate rise.
Yet with stock markets around the world looking sickly, the US still appears a relatively safe bet, according to experts – and there are ingredients for growth.
Colin Moore, global chief investment officer of Columbia Threadneedle, believes that the 2.6 per cent economic growth expected this year looks ‘awesome’ when compared to what is predicted for the eurozone and Japan. He says: ‘The US looks like the prettiest horse in the glue factory.’
Columbia reckons the country’s 310million consumers will drive economic growth on the back of improving jobs figures, falling energy costs and cheaper imports – thanks to the strong dollar.
For example, growing demand for upmarket athletic clothing to be used as everyday wear, means it is a buyer of L Brand’s Victoria’s Secret and Canadian firm Lululemon. Another sector with potential is biotechnology, reckons Columbia fund manager Diane Sobin.
She says: ‘Large pharmaceutical companies have been reluctant to invest heavily in research and development as prior experience suggests they did not see big enough returns.
‘They have been happy to let small and medium companies take the R&D lead and then buy them if their drugs have good trial results. This can be rewarding for investors in smaller biotech companies.’ Maike Currie, associate investment director at Fidelity Worldwide Investment, is optimistic about the US. She says: ‘The bull market is maturing but not coming to an end.’ She adds that the US is wellplaced to offer both income and growth options for investors. She says: ‘Although the US is not one of the world’s most highyielding equity markets, it has many cash generating companies that continue to pay a growing dividend stream.’
Investment funds recommended by experts include, for growth investors, Natixis Loomis Sayles US Equity Leaders, T Rowe Price US Smaller Companies Equity and Dodge & Cox Worldwide US stock fund.
For investment trust enthusiasts, there is JP Morgan US Smaller Companies. And income seekers could consider Aviva Investors UK Equity Income II fund.
Bold investors who think they can spot the next Apple or Amazon, the kind of companies that helped drive the stellar growth of the market in recent years, can also purchase individual shares.
Many UK stockbrokers let you buy US shares direct. Some will convert sterling at the point of purchase, while others, such as Charles Schwab, require a dollar account to trade in US shares and you need a minimum $10,000 to open an account. The broker charges £8.95 per online trade, while Barclays charges £12.95 and TD Direct £12.50.
Kully Samra, managing director of Charles Schwab UK, says: ‘The first thing to do before getting started is to complete a W-
8BEN form enabling UK residents to benefit by paying a reduced rate of dividend withholding tax on dividends – down from 30 per cent to 15 per cent – from their US shares.’
Alisdair Macdonald has been building his exposure to the US market through his self-invested personal pension held with fund platform Tilney Bestinvest. He reckons about 10 per cent of his overall portfolio has a US flavour.
He believes that the world’s biggest stock market – even if it has barely moved in the last 12 months – cannot be ignored.
Alisdair, who is 60 and an actuary from Cheltenham in Gloucestershire, says: ‘It’s an innovative economy. I have a tax-friendly Isa that is very UK focused so for my pension I’ve chosen a more global approach.’
He invests using Invesco’s PowerShares, low-cost exchange traded funds. American exposure is through a fund that tracks the performance of 1,000 large American companies.
LIVING
THE US is always popular with second home buyers – although it has fallen behind key European destina- tions because of the strength of sterling against the euro.
According to website OverseasGuidesCompany, the strengthening of the dollar since early 2014 when it was at $1.70 to the pound compared to around $1.50 today means a price increase of around £13,000 on a $200,000 property.
Bargains may also be harder to come by after a steady rebound in house prices from their post-financial crash low point in 2012. But prices are still 12 per cent below their peak in 2006, leaving some room for potential growth.
Independent mortgage broker Simon Conn says Florida, California, Colorado, Texas and New York are the most favoured states among British buyers. The US mortgage market does not impose early redemption charges on fixed rate deals.
Simon says: ‘The typical five-year fixed rate is between 3.9 and 4.9 per cent, depending on the size of deposit although rates can be higher for condominiums or investment properties.’
Buyers of second homes, holiday homes or retirement homes must have a deposit of at least 30 per cent – but if they are buying to let out this rises to 35 or 40 per cent. This may be reduced for those with a permanent job lined up.
Christine Green, partner of London-based legal firm Veale Wasbrough Vizards, warns: ‘We advise clients with a US property to have a will written in the state where the home is located that deals specifically with it. This saves costs and delay following death. If it is not limited to the US property, there is a danger that a UK will could be revoked.’
Owners who are UK domiciled will pay inheritance tax on their worldwide estate. She adds: ‘The US has estate duty but there is a treaty with the UK so you will not pay twice.’