July 2011
The Jersey government passed new rules designed to make it even more attractive for incoming 1(1)k residents. The purpose of the new rules is to make the Island more attractive for new 1(1)k residents, to encourage them to run businesses from the Island and hold income producing assets within the Island.
The new rules only apply to people receiving 1(1)k status from today. At this point existing 1(1)k residents cannot take advantage of the new rules. This means that there will be 3 different regimes for taxing people holding 1(1)k status. There may be further news on this position later in the year.
The new rules are as follows:
- there will no longer be a distinction between the rates of tax charged on Jersey source income and non Jersey source income
- all Jersey property income will be subject to tax at 20%
- with regard to other income the first £625,000 will be subject to tax at 20% and the balance at 1%.
June 2011
What next?
Property today....
The first thing to remember when selling your house is that there continues to be a surplus of houses on the market with not enough buyers in a position to complete which, in turn, has gradually led to the point where properties are achieving prices of 15 - 20% lower than 2 or 3 years ago, when they do eventually sell. I must add that more recent instructions should already have taken the state of the market into account and should be more suitably priced. As long as we all remember that we live in a different world today than that of the time running up to the financial crisis of 2008, progress should be made.
What of the future?
So, here we are nearly 6 months gone and what is happening to the market? Certainly there had been an almost identical number of sales from the beginning of January until the middle of April this year compared with last (this being the period that I have accurate data for). Essentially, we feel that the market bottomed out last year and continues to bump along in the same way. Gut feeling tells me that it may be 2-3 years before we see any real lift in prices. If we look at the economies of the UK and the whole of Europe as well as the US, even though interest rates remain at record lows Western economies remain in the doldrums with the average householder being hit by continued inflation of daily staples and fuel; it's not a great recipe for a fast recovery.
On a positive note...
I am pleased to report that ECPW have enjoyed reasonable success in the first 6 months of the year with sales ranging from £400,000 to £10M.
We have a strong reputation for being the leaders in high end property and are also looking to expand our share of the middle market. We set great store by our reputation for hard work and honesty in property deals and it is our belief that these principals will be greatly appreciated in all sectors of the market.
If you would like any advice please do not hesitate to contact us.
November 2010 - In response to a letter in the Jersey Evening Post
As a firm we were interested to read Keith Shaw's response to Clifford Wilson's letter of November 20th.
We are not in disagreement with Mr Shaw's view that the Guernsey "local/closed market" system is excellent for the local purchaser. Our own thoughts of abolishing the current 1(1)K system and allowing a high net worth person to purchase a house of £2.5M and above, or an apartment of £1.5M surely works to the same end? - Houses and apartments at that level being generally out of reach of local purchasers.
We have had a great deal of discussion in our office with various, well informed sources, from within the island's business banking and legal community and the common denominator that appears to concern all, is that our government has on this issue, too narrow a view. To them, it seems a wealthy immigrant is little more than another annual tax statistic. This is demonstrated when allowing 1(1)Ks to rent, which confirms their total lack of interest in the welfare of the Jersey housing market, for the sake of tax revenue.
We have always believed that the 1(1)K market is the key to a prosperous housing market creating non-recycled money to enter the market beneficially lubricating it and creating ripple effects down the line. We have all seen over the past years the devastating effect on the whole housing market when new money ceases to enter from the top level. Everything becomes completely stagnant causing long property chains purely and simply because nobody has got any cash. The whole of the housing market in the UK is suffering because the banks will not lend money and here in Jersey we have would be residents with vast amounts of cash to spend yet,for some unaccountable reason we are asking these individuals to metaphorically jump through too many hoops, with the inevitable consequential results that a substantial number elect not to take up Jersey residence but rather decide to take up domicile in jurisdictions such as Guernsey, where there is perceived to be a much more friendly and less intrusive immigration system in place.
Guernsey clearly sees the bigger picture, placing less importance on tax revenue but calculating the benefits from wealthy people living in their island, which is an advertisement in itself to say nothing of the benefits from spending large sums of money on their houses, investing in the island's activities, donating to local causes, tax planning for their businesses, personal wealth and day to day living.
Our Jersey government has always had a tendency to move the goal posts when it suits them. As soon as the island starts to attract unusual amounts of rich people the entry level is raised and at one time the annual 1(1)K allowance was restricted to five people. This was chaotic and resulted in people queuing to come in and the housing committee unable to decide who they wanted. Word soon got around that Jersey was closed for business so once again Guernsey who have always benefitted from an open housing market sat on the pigs back.
We believe that the present financial climate will lead the States into adopting a much easier and far less intrusive system aimed to attract wealthy residents of high personal calibre, to our shores but, if this does prove to be the case then let us hope that governmental greed does not yet again come to the fore and strangle the golden goose.
The Partners
October 2010
Prices Falling
I have been fascinated to hear of some estate agents claiming to be "exceptionally busy". Well, this may well be the case but it certainly is not through selling property! Taking new instructions Yes, selling houses No.
I am certain that you will have noticed that trading conditions, in many areas, remain extremely tough. This is especially true in the local housing market where sales activity remains slow. There is an over supply of property and a lack of able buyers at all levels of the market, which in turn is leading to an easing of prices. Those that are able to secure funds for their purchase hold the trump card and serious vendors are having to accept lower offers as a consequence. The only positive is that someone accepting a lower than hoped for price on their own property can expect to negotiate a similar discount on the property they are wanting to buy. Of course there are exceptions to this rule and these are properties that are in A1 condition, in good locations and sensibly priced; the few real purchasers out there will always go for this type of property first.
Cash is King
The harsh reality remains that it will probably be between 12 and 24 months before prices start to recover. I think that it can also be expected that any recovery will be somewhat slower than previous cases as the banks lending criteria is unlikely to loosen up much given the fact that they were largely responsible for the crash and will not have the appetite (at least in the time scales we are talking about) to be blamed for fueling another boom and bust scenario.
The 1(I)K Market
The upper end of the market has also been affected by the recession. If business owners are unable to sell their businesses in the current economic conditions they are unable to realise the sort of sums that they are required to have under the current 1(I)K regulations.
Hard To Meet Current Criteria
That does not mean that there are not potential 1(I)Ks who can afford to purchase a property of £2M and upwards or that they couldn't pay £100,000 or so of tax per annum, only that there are a limited number able to meet the current criteria to achieve 1(I)K status.
Strong Competition From Other Jurisdictions
The competition is very strong to attract High Net Worth individuals looking to move offshore, not least from our sister island and Switzerland.
Two things in particular surprise me; first of all, that the island government has not yet reviewed the application process and the requirements to achieve 1(I)K status and, secondly, that they do not robustly defend the benefits to the island of attracting greater numbers of HNWs to the island.
Jersey has so much to offer these people with the high quality of life in a safe environment and excellent links to England and Europe.
Is it not perhaps now time, that consideration be seriously given to the abolition of the 1(I)k system altogether and to Jersey adopting the alternative of an ‘open market’ policy to suitable HNW individuals, with perhaps minimum purchase price stipulations of say £3m for a house and £1.5m for an apartment?
Is it not perhaps now time, that consideration be seriously given to the abolition of the 1(I)k system altogether and to Jersey adopting the alternative of an ‘open market’ policy to suitable HNW individuals, with perhaps minimum purchase price stipulations of say £3m for a house and £1.5m for an apartment?
Conclusion
It appears to me that the island benefits substantially from every 1(I)K type to settle on the island; they buy expensive houses, they pay large amounts of stamp duty on those purchases, the fees earned by estate agents, lawyers and accountants all generate income tax receipts, not to mention the GST. The children go to fee paying schools, there is employment for domestics, gardeners etc, etc and they generally spend a great deal of money with local restaurants, retailers and on cars, boats and landing fees, not to mention their generosity towards local charities and causes. Surely we should be looking at ways to attract more of this group to the island, after all, it is hard to see a downside.
James de la Cloche
End of Year Newsletter 2009
Well, here we are at the end of 2009 and certainly at the top of the property market; what a non-event of a year it was until the last quarter. Basically, the first quarter was extremely quiet with only one significant deal (£5 million+) which in fact was a transaction that had been in negotiation from around the last quarter of 2008. Telephone and email enquiries were at an all-time low.
There was a glimmer of hope at the beginning of April, when the telephones started to ring and email enquiries soared, driven by the realisation that the UK Chancellor would have to increase taxes in order to address the vast financial black hole created by the banking crisis. How many generations will it take to re-balance the books with a deficit of £175 billion?
By the beginning of the third quarter we were extremely busy, not with sales but with people making the trip to Jersey to take a look at the island for themselves. For me this highlighted two problems. Firstly, it is amazing that so many people still think that Jersey is a sleepy 1950s seaside resort. Thankfully, they are pleasantly surprised by the cosmopolitan atmosphere, the shops, restaurants and schools, marina and airport facilities and, of course, the natural beauty of the island. If Jersey wants to attract the cream of the financially successful along with the expected UK exodus of fund managers, it really needs to shout about what it has on offer. There is a lot of competition out there, yet Jersey’s geographic location, infrastructure and the fact that we speak English is really attractive. How do we get the message out there? Certainly Jersey Finance and Nigel Philpott do a great job, but there is only so much they can do. I would imagine that if everyone who has contacts in the UK and Europe spreads the word about how wonderful the island is and the advantages of living here, then the message will gently filter outwards. All of us islanders should take a real pride in Jersey. We are our own ambassadors and such positive attitudes will always bring about good results.
The second problem is the quality of the current housing stock. A good proportion of the current properties on the market have not been refurbished for years, but this is not necessarily reflected within the price. It is heartening to see that a number of the island’s developers have realised that there is a market for properties in the £2-3 million bracket that are finished to a high specification and, indeed, for stock at a far higher level. In my own experience, the vast majority of the people I see do not want to undertake a project. However they often find that the older properties they view may well have a great location, or be very pretty from the outside, but were last refurbished 10 to 15 years ago. Clean modern finishes and the latest electro-technology are definitely in favour and unless current owners wish to undertake a major refurbishment they need to keep in mind that the price of their property must be realistic and offer value for someone else to carry out the work.
Thankfully the last quarter has seen a turn around in sales at last! There has been movement in the £2-3 million category and one exceptional sale at £8.5 million, Jersey’s largest house sale to date.
It is interesting to note that, with some notable exceptions, the houses that have sold have seen a fairly stern adjustment between the asking price and the actual transaction price. Many of these properties had been on the market for at least 12 months and the correction in price simply reflects where the market was, compared to where the market is now. The purchasers have been a mixture of 11K, J category and local professionals.
My feeling is that the tide has reached it’s lowest ebb and is already on the turn. This will not lead to any immediate increase in values but, dependent on the number of people fleeing London and the UK in general, there should be enough movement at the top of the market to lead to a natural increase. Certainly from all of the recent publicity in the national and local press, Jersey appears to be perfectly placed to take advantage of any UK exodus.
In summary, we have all come through a very difficult period but thanks to Gordon and Alistair the island would appear to have been gifted a marvelous opportunity to attract a new intake of high net worth families and businesses. This will benefit all islanders through the increased tax revenue and retail spending that accompanies such an intake, not to mention the inevitable entrepreneurial talent.
For Edge it has been a good year. Earlier in the year, when there were no purchasers around, we used our time to tighten up our marketing both here and in the UK. Our adverts in Gallery Magazine have been highly effective. I like to think outside the box and, when everyone else is swimming with the tide, I prefer to be running on dry land! Our reputation as the island’s top end property specialist has spread to the extent that we are now recognised by the national press and that is something that makes us very happy as this will lead to tangible benefits for our clients.
In closing I would like to thank all of our clients and contacts for their support. No one can stand alone without the help of his fellow man (or woman!) and it is only because of all of you that we continue to flourish.
We wish you a happy Christmas and a healthy, happy and prosperous New Year.
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June 2009
With the UK government in a state of total disarray following the MPs’ expenses fiasco and the large hike in taxes due to take effect in April 2010, it is little surprise that fresh inquiries from potential 11K applicants continue apace. Jersey's stable government and tax regime, along with its proximity to London and the continent, low crime rates, excellent education system and the fact that we all speak English, plus our mild climate and cosmopolitan feel, all stand us in good stead.
With regard to price, it has to be said that in our experience, the new influx of "Ks" are generally price conscious and will only offer what they feel, or their advisors feel, to be the "right" price. This situation probably will not change before September/October when I would predict that the number of applicants will start to ramp up, the closer their new tax year becomes. As you will see within this newsletter, we have a genuine requirement for exceptional property and I would be delighted to hear from anyone who can help in this regard, confidentiality guaranteed.
May 2009
It is with a lift in my step that I greet you in this addition of the news letter. Why? Quite simply, since the beginning of April we have been busy with enquiries from people looking to move offshore, mainly from the UK, with some from further afield.Several applicants have already visited the island this month and more are due to visit before the end of May. There is no typical profile and target purchase prices for the applicants range from 2-3 million up to the high teens, with one or two special cases prepared to pay whatever it takes. The majority of people we talk to are not just casual calls, these are people who have decided that Jersey is the place for them over and above the (stiff) competition. Of course, the escalating tax situation in the UK is a major driving force behind such decisions to move in the first place but it is the overall quality of Jersey life and the fact that we are essentially “British” that makes us the preferred destination for many applicants. And, with such a financial black-hole, UK taxes can only escalate; not only income tax but surely death duties and inheritance tax along the way, not to mention VAT.
Sadly it is not just tax that is escalating but crime too and, when you put this all together and then compare what Jersey has to offer it is not too difficult to see why enquiry levels are up.Of course, we are not out of the woods yet, however, with such serious interest at this time of the year it is very likely that by Christmas, those of us dealing with top-end real estate will be extremely busy and January through to April is likely to be manic.
September 22nd 2008
With the World's financial markets in a state of turmoil one would be forgiven for thinking that bad times are around the corner, however, from the enquiries I have had during the last week, the message would seem to be anything but gloom and doom for our extraordinary little island. Wisdom dictates that time will tell but, from this commentator at least, it would appear that the top end of the Jersey market, where we focus,will remain buoyant.
July 2nd 2008: PRESS RELEASE
Following an article in the Jersey Evening Post on 30th June titled “Interest falls in prime properties”; Edge Properties Director James de la Cloche says this is not the case due to the constant flow of high value residents coming to the Island.
In line with comments made by Nigel Philpot, Director of High Value Residency at the Economic Development Department, James emphasises that Jersey has seen little or no effect of mainland trends in the Jersey property market.
“Our enquiry levels are at the highest they have ever been and it seems the bleaker things become in the UK, the more attractive the Jersey market gets. Lifestyle and tax advantages remain the key factors drawing most newcomers to Jersey, and the lack of death duty and inheritance tax will always remain a factor in their decision making process”, says James.
Edge Properties recently launched a new website, specifically targeted at its 1(1)k and top end J-category customers,with an emphasis on discreet and confidential sales. Whilst the website gives potential customers a taste of what is available, a dossier of confidential properties is available to genuinely interested registered clients to peruse on a one-to-one basis.
“Edge offers a service unique to Jersey.As the only estate agency to focus solely on home finding, acquisitions and sales of properties over £1million, our in depth knowledge of the property market and a love for property generally, means we are ideally placed to service the exacting requirements of the higher spending client. Because we are concentrating on a niche market, we also don’t feel the brunt of the mid-market slump”, says James. “Typically, “K” applicants will be looking for properties in the range between £2m and £10m and due to a continued flow of high value residents, we anticipate the levels of sales continuing to increase for the foreseeable future.” ENDS.
1(1)K Property Bulletin: June 2008
The influx of new 1(1)Ks continues apace.
I am sure you will have seen the recent articles in the JEP highlighting the strong growth in property values. At the top end of the market it is my belief that property will continue to out-perform other sectors. Our enquiry level is at the highest it has ever been and the bleaker things become in the UK, the more attractive our island becomes.Lifestyle over tax is the driving force for most seeking to make the island their home, although the lack of Death Duty and Inheritance Tax will always remain significant in the decision making process.
Typically, "K" applicants will be looking for property of between £2M and £10M. That said, it will only be a matter of time before the island sees some far higher values on property sales. Jersey is only now waking up to the value of what it has to offer.
The Edge service specialises in property of £2M and above with a minimum entry requirement of £1M; many of our instructions are of a confidential nature and do not appear on the website. The service offered is 100% tailored to this market and, just as important as the way such prestigious properties are handled, is the way that the incoming applicants are looked after. It is our aim to excel in both areas.
James de la Cloche