Don’t steer us onto the rocks Vince
That was the week in property, by Mike Hoffa
23rd January 2012
It’s somewhat incredible, given the amount of safety technology we have these days, for a disaster like the Costa Concordia sinking to happen.
Sadly, as more and more evidence emerges it’s starting to look quite bad for Captain Francesco Schettino, with allegations of unapproved course changes and leaving the sinking ship very early on, suggesting that he abandoned the remaining crew and passengers to their fate. All will no doubt come out in the full investigation, but what started as apparently some kind of daring “maritime salute” has resulted in at least 11 deaths.
Whatever the outcome, there was clearly no intent to crash the ship and cause any loss of life, but the road to hell is paved with good intentions as they say and the “unexpected consequences” could perhaps have been predicted with a bit more foresight, despite claims that the rocks on which the ship collided are not present on any maritime charts.
“Vince Cable has just announced his intent to put into place a new ‘mansion tax’ on high value properties…”
Unexpected consequences when it comes to the economy too is a theme I keep harping on about and it’s quite pertinent this week, as Vince Cable has just announced his intent to put into place a new “mansion tax” on high value properties, as the Telegraph reports. The proposal put forward by Mr Cable (and supposedly backed by some Conservative MPs) is that a 1% tax should be levied on properties worth more than £2m.
The Telegraph goes on to quote Vince Cable as describing it as “perverse” that rich “foreigners” can buy high value UK properties and contribute nothing towards the economy other than £1,000 per year in council tax.
And this, I’m afraid is where old Vince is starting to look about as sensible as Captain Schettino.
If you consider for a moment the piece I wrote last week about investment in our capital city, where I discussed the high level of investment from wealthy foreigners in London you might start to get an idea of how misguided this mansion tax proposal is. The fact is that London has consistently bucked the property market stagnation we have seen in most parts of the country, as it continues to see remarkable growth in value and interest.
“To dissuade such investors from putting their money into UK property is quite simply barking mad…”
Much of this interest has come from outside the UK, but these wealth overseas investors bring far more with them than just an interest in a UK holiday home. They are typically successful business people themselves and it brings their business interests to the UK too, which can only have a significant positive impact on our economy.
In other words, to claim the impact of such foreign investment is limited to council tax is ludicrous. To dissuade such investors from putting their money into UK property is quite simply barking mad, with potentially disastrous consequences for the broader economy. As a bare minimum, it is almost certain such a scheme would cost us far more than it gained.
The only saving grace is that the Chancellor, George Osborne, is unlikely to approve such measures. Hopefully he will act as a “lighthouse of sanity”, but please Mr Cable – don’t steer our economy onto the rocks with your mad manoeuvres.
About the author:
Mike Hoffa has been working in the property sector for more years than he cares to remember, as a tenant, first time buyer, second time buyer, landlord, adviser and general trouble maker. He keeps his real identity fiercely secret, but some say he can often be found at the back of property auctions howling, but only when a full moon is out. He’s also rumoured to be of average height, weight, ethnicity and class, which he claims accounts for his inability to be politically correct or wear pastel coloured cardigans.
Mike’s question of the week: What do you think of a proposed mansion tax?
Mike Hoffa says “Time for some capital injection”
January 16th, 2012Time for some capital investment
That was the week in property, by Mike Hoffa
16th January 2012
Oh dear, Standard and Poor’s has been at it again and this time they’ve upset the French.
Despite much Gallic protestation, including the amusing attempt to point the finger at us as being in front of them in the queue, France has lost its AAA credit rating and is now down to AA+. They’re not the only ones to suffer though, with Austria also going the same way and numerous other countries who have already lost their AAA rating slipping down even further. Portugal now has the “junk” rating of BB, so whilst it might be good for a golfing holiday I wouldn’t go sticking too much money there right now.
So how come France has been hit whilst the UK has managed to (for the moment at least) hold onto the top credit rating?
Simple, we’ve got London.
“I’m sorry my French friends; Paris is undoubtedly a buzzing and vibrant city and a major financial centre, but it doesn’t quite stack up to London on the global stage.”
I’m sorry my French friends; Paris is undoubtedly a buzzing and vibrant city and a major financial centre, but it doesn’t quite stack up to London on the global stage. Just take a look at the three major credit rating agencies for a start – two of them (Standard and Poor’s and Moody’s) have their headquarters in the US, but the third one, Fitch, is jointly headquartered in New York and London, highlighting how important they see it on the global financial markets.
It’s also something that is highlighted by the continued investment in London property, both commercial and residential, with figures that defy the stagnant and recessionary property markets that are visible in many parts of the UK and abroad. The trend is clear from the latest Knight Frank report, covered by the Financial Times recently, which highlights the difference in property value growth between rural areas and London. If you had been in the fortunate position to invest £5m in a home in 2009, putting it into London would mean you now had an asset worth £6.75m, whereas in the country you would only have made half a million on your initial investment.
Of course, a 10% capital growth over a few years is not bad in the current climate, but the 25% growth from London investment is simply stellar. One major factor in the healthy state of the London property market is an influx of cash from foreign investors, whether they be rich Russian oligarchs or new Chinese billionaires, because the track record of London as a major commercial centre has a solidity that defies any short-term economic woes.
“…the halo effect of a healthy London on lower value properties and suburban areas on the outskirts should make it a good place for keeping an eye on investment property…”
Furthermore, the capital invested in London seems to be staying there, so people aren’t cashing in their chips for a nice country estate – they think it’s going to stay very healthy in our capital in the future.
And with the Olympics just around the corner, there is a lot (and I mean a LOT) of money being invested in our capital right now, which is going to leave a lasting legacy that can only be favourable for the future. Okay, so we don’t all deal in five million pound properties, but the halo effect of a healthy London on lower value properties and suburban areas on the outskirts should make it a good place for keeping an eye on investment property over the next few years.
It might also be a key factor in helping the whole country get back toward a healthy, growing economy. To continue the Olympic theme, think of London as our star performing Gold medallist who inspires the rest of the team, with all the world looking up thinking “I’d like to be there”.
Except maybe France, who don’t seem to like their new silver medal very much.
About the author:
Mike Hoffa has been working in the property sector for more years than he cares to remember, as a tenant, first time buyer, second time buyer, landlord, adviser and general trouble maker. He keeps his real identity fiercely secret, but some say he can often be found at the back of property auctions howling, but only when a full moon is out. He’s also rumoured to be of average height, weight, ethnicity and class, which he claims accounts for his inability to be politically correct or wear pastel coloured cardigans.
Mike’s question of the week: Can London keep us on the AAA track?
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