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The international property market

publication date: Mar 15, 2007
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An international NAEA member – on Gibraltar

Solomon Levy is a member of the National Association of Estate Agents and he is also a Fellow of the Royal Institution of Chartered Surveyors. In 1999 he was awarded the MBE for 40 years service to the Community – service which has included his role as a Justice of the Peace.

Solomon is a Gibraltarian who began to practiise there in April 1960. Prior to that he was in London where he spent 3 years working for a property company before going to study full time for 2 years at the College of Estate Management in Kensington. He is the longest established estate agent in Gibraltar. Unfortunately there are no regulations in Gibraltar and anyone can set up as an estate agent. When Solomon started in 1960 there were four estate agents – now there are forty seven!

As a Valuer, Solomon has seen prices of commercial properties rise from £10.00 per square foot per annum to the present values of £42.00 per square foot per annum.

As the only Auctioneer in town he does auctions of all types of cars, yachts and furniture but it is interesting to note that in the last forty-seven years he has only done one property auction and that was because there was a court order.

He says that Gibraltar should be called the new Monaco with the amount of development that is going on of residential properties; flats now vary between £245,000 to £845,000 with a 99 year lease. These flats are situated in prominent parts of the town where there is a good sea view.

Lots of outsiders come to live in Gibraltar because if you have a minimum capital of £2million and you buy a suitable flat you can get residence there and benefit from Gibraltar’s friendly tax regime. That means that however much money you make all over the world you only pay £14,000 a year in tax. This of course is attracting lots of high earners and consequently flats of high value are being built for this type of purchaser.

As far as office accommodation is concerned it is mainly rentals and this varies between £16.00 to £22.00 per square foot per annum with leases granted up to 21 years with rent reviews every three years. Gibraltar has a population of 30,000 people and although the official language is English the majority of Gibraltarians are bilingual and speak English and Spanish due to our proximity to Spain.

Recently relations with Spain have improved tremendously and after almost 30 years there is now a direct flight from Gibraltar to Madrid and visa versa and it only takes 50 minutes. This service started in December 2006 and prior to that Gibraltarians had a one hour drive to Malaga in the south of Spain to get a flight to Madrid. It is expected that soon there will also be direct flights to Barcelona.

Apart from the attractive tax regime the other joy of Gibraltar is the weather – warm and sunny most of the year. Who will be first on the plane?

First-time buyers would leave Britain to save for a house back home

25% of British people attempting to get onto the property ladder in this country would consider moving abroad - even as far as Australia or New Zealand - to live more cheaply so they could save for a deposit to buy their first home in Britain. The findings are revealed in the latest Quarterly Savings Survey from National Savings and Investments (NS&I).

Top locations abroad

The Quarterly Savings Survey asked more than 1,000 people who do not own or are not currently buying their own home, “Would you consider moving abroad where the cost of living might be cheaper in order to save to get on the property ladder back in Britain?”

The results show that Spain, Australia or New Zealand and the USA were the top choices for those people who would consider moving abroad for a cheaper life so they could save for a deposit on their first home in Britain. A fifth would also consider moving to Eastern Europe.

  • Spain: more than two in five (43%)
  • Australia or New Zealand: one in three (33%)
  • USA: more than one in five (22%)
  • Eastern Europe: one in five (20%)

More young people willing to move:

  • One in four (25%) would move abroad
  • More than a third (36%) of 25-34s would relocate
  • Just under a third (32%) of 35-44s would emigrate for a cheaper life.

Moving within Britain also an option While a quarter of British people would consider moving to another country to live more cheaply in order to save for a deposit on a home in Britain, an almost equal number (24%) would be happy to move to a cheaper part of this country for the same reason.

Again, younger people are most mobile, with more than a third of 16-24s and 25-34s (35% respectively) saying they would move to a cheaper part of the country for the sole purpose of saving money for a deposit on their first home.

Dax Harkins, senior savings strategist at NS&I, said: “British people clearly have a great appetite for buying a property in this country but find it difficult to save for a deposit while living here. It seems many will go to extreme lengths to achieve their goal, even if it means moving to the other side of the world in order to save up for a deposit back home.”

Investors Welcome New French Property Law

Investors in Britain and Ireland have welcomed a new French law which, in effect, substantially boosts the value of leaseback properties for owners who decide to sell.

The leaseback scheme, a French Government incentive designed to encourage tourism, enables purchasers to buy a freehold apartment and then lease it back to an approved management company to let for an 11-year term. Prior to the introduction of the new law, the payment of VAT - currently 19.6 per cent - was waived but, if the property was sold prior to completion of the 11-year term, the vendor was obliged to pay a proportion of the VAT back to the state.

Under the new law - which gained little attention in the UK and Eire when it came into effect last year - and subsequent recent revisions, the investor is no longer required to repay any VAT at all when selling the apartment, even if he or she re-sells within the first five years of ownership. The only condition is that the residence must be ‘classified’ with an official tourism star rating.

Most residence de tourisme developments built by MGM, a major developer in the French Alps, have four-star ratings. Says Richard Deans, sales consultant in MGM’s London office. “The new law represents a significant and immediate increase in capital value for investors who are being attracted in increasing numbers once the scheme is explained to them.”

“Typically an investor who buys a two-bedroom apartment priced at E350,000 only pays E292,600 if he does so under the leaseback scheme, but the value of the property remains at E350,000 or more, as prices increase every year.”

Leaseback explained . . .

Lease with rental income

- The buyer pays no VAT (currently 19.6 per cent) on the purchase price.
- The buyer receives a guaranteed annual rental income (the amount varies according to development and the type of property).
- The owner retains three weeks use of the property each year.

Lease with price reduction

- The purchase price is reduced by 30 per cent. The discount consists of the non-payment of VAT (19.6 per cent) and a one-off lump sum equivalent to rental income paid in advance.
- The owner has six weeks use of the property each year.
- No rental income is received by the owner.

Under both options, owners can sell at any time and, at the end of the 11-year term, can choose to enter into a new lease agreement on mutually agreed terms or opt out of the scheme and retain full use of the property.

In a few resorts in the French Alps, where local authorities are worried about the shortage of rental properties, laws have been introduced making renewal of leaseback arrangements for a further seven years compulsory at the end of the initial 11-year term. Purchasers of leaseback apartments say that attractions for them include the way in which the rental and management of the property is handled, and maid and laundry services are provided.