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DeadLegs

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  1. There is an additional source of house buyers that I have not yet mentioned.. retirees from (mainly) the U.K. who see the Isle of Man as some sort of paradise island with no inheritance tax, low direct taxes, excellent services, the rule of law, and an NHS that integrates with the NHS they are familiar with. However, as with most of my doom laden posts...I feel this paradise has a definite shelf life.. the IOM Government's reserves may be spent by 2015, and so far the government has been cutting the services it provides rather than cutting the back office of government.. so the local population is getting a reduction in services and no reduction in taxes or costs. As predicted in previous posts, the central government has been pushing responsibilities out from itself (and its own budget responsibilities) to the local commissioners etc, and again not reducing its tax rates (so in effect a stealth tax rise). I'd recommend the commissioners look very carefully to make sure they also taking on the pensions and historical employer liabilities for any public servants that get transferred to continue to provide those services, otherwise the local rates will be going up even more ! On the health front, it's going to be very expensive to maintain the health of this aging population, not just in terms of providing the services on the Isle of Man, but also when specialist referral is required to hospitals a plane and taxi ride away. Hopefully someone is considering contracting with hospitals in Ireland, Scotland, Wales and Northern Ireland as well as England. Incidentally, there are no waiting list targets on the Isle of Man, so potentially it can be years before you get treatment by a specialist. I've heard of people who have decided to emigrate back to England to have the confidence of being treated in a timely manner, because they had a life threatening condition! A further development, seems to be the (impending) reduction in flights to London, which is causing concern to the local offshore businesses who are worried that they will be forced to fly to London at mid day, and back the next day, instead of out at dawn and back at dusk. This will likely have cost implications, and possibly tax implications, and since the competitors in Jersey don't have that problem, may leave them at a business disadvantage.
  2. In my opinion, some houses on the market are owned by people who don't need the money, so they are prepared to wait (the stock market is a bit volatile and interest rates for depositors are low, and its not their only home). Other houses were purchased with a mortgage, and while repayments are not too high, they can afford to keep up the repayments rather than take a loss on the sale. On a similar vein, if they purchased near or at the top of the market, unless they are being forced to sell quickly, they probably feel entitled to the same money back. In many respects the Isle of Man has been a pretty good place to leave a house unoccupied for long periods with little risk of someone vandalising it, stripping the copper, lead, roof slates etc or squatting in it. I agree that we have yet to see the penny drop.. although the Chief Minister has made statements that should send shivers down the spines of its civil servants, the government seems to have held off from significant redundancies and made up the shortfall in its income from its reserves. I'm guessing what they are hoping that by incrementally reducing head count, the Isle of Man economy will not experience a SUDDEN change. In my opinion, it is a flawed policy, as unless the lost income can be replaced, by the time the reserves are spent, it will still be in the position of needing to make harsh cuts and increase taxes, except it won't have reserves to use for any UNANTICIPATED eventualities. I understand the plans that are currently being proposed and aired in the local media are pie in the sky, because they expect growth of 6% each year. I also note the central government has been increasing every licence fee, duty and charge it can, and begun shifting responsibility for some things onto local commissioners etc. Part of the blame for the lack of downward pressure in agreed prices has got to come from potential buyers who I expect are being too generous in their offers when they make them, or are being frightened off by the asking prices and not bothering. I would also blame the Estate Agent valuation professionals for allowing owners to have unreasonable expectations. An agent told me that owners are asking for valuations from different firms and asking for the property to be marketed at the highest one, frequently exclusively with the firm that came up with that valuation because of the discount offered in fees. I once went to view a property, hated it, decided the asking price of half a million was far in excess of reasonable, so offered around 250k. Not surprisingly the owners rejected my offer (phew!) but it made them think again about what was reasonable, and I recall that not long after, they accepted an offer approximately half way between what I had offered and what they had originally aspired to. I still would not want that property at the price it sold at. At the moment I'm happy with the flexibility of renting, as more unsold properties transfer to the lettings market, so there should be a downwards pressure on letting prices (but again, similar aspirational prices being encouraged by the agents I think... lots of empty lets!). If I need to leave, then I won't have to wait for someone else to buy my house. Actually, I wonder are mortgage lenders accepting Isle of Man properties as collateral against new purchases in the UK? Perhaps the next budget we will see more CS cuts, and less mortgage relief /social spending which will affect peoples willingness to take on large mortgages. Certainly the price freezes on electricity will be expiring round about then...
  3. I'm hearing that house sellers who are getting fed up with no viewings are withdrawing their properties from sale so that they can either place them back on the market later as a "fresh" offering or so they can put them to the lettings market instead. The Isle of Man Government hasn't even started to address its spending in any meaningful way.. I don't think the market is likely to recover for many decades after if eventually reacts to reality..
  4. http://www.bbc.co.uk/news/world-europe-isle-of-man-14715863 However word from a relevant internet gossip site is that estate agents are RAISING their valuations on properties that are not selling! I suspect there are still enough estate agents who have a rather unconventional view of the way prices move in a depressed, stagnant and over supplied market.
  5. ..don't see why this might be better than just accepting a lower offer... as I presume accepting a lower offer means less estate agent fees, lower borrowing, smaller conveyancing fees, lower stamp duty.. and one less round of money changing hands.
  6. I feel for you G. What the people of the IOM really need are more affordable homes for rent, since that would allow proper mobility onto and off the island when needs require it. Corpy homes for families that need corpy homes, not for families where every adult is in a well paid job, has a nice car, goes on lovely holidays each year, buys all the current gadgets, has a sky subscription, and even owns a couple of other properties for let. But those people have votes and are grateful to the politicians who make things so!
  7. ..A little update.. I was listening to some Estate Agents trying to explain why they were making such half hearted attempts to steer the sellers towards more realistic asking prices. It boils down to every now and again, a property that has sat unsold for four years or more goes at full asking price because some rich bugger from Africa has turned up and bought it in a hurry. So the "exceptions" are keeping them from adapting their marketing strategy to the current reality of stagnation, looming interest rates and tax hikes, or anticipated job losses. Pity the sellers who are accepting this idiotic strategy when the tipping point is past and the iom property market hurtles headfirst into reality. Plenty enough owners have told me that their homes have been sat on the market for years and its them who suggest reducing the asking price to get some interest, not their Estate Agent (and then is it enough of an adjustment in asking price?) or have sold their houses subject to contract several times but then had the buyer think again, revise the offers down and then walk away because the seller was too optimistic. There also still appears to be a problem with some sellers still viewing the IOM property market as if it were still as it was five years ago, with properties coming on the market at outrageous asking prices despite significant problems of damp, roof problems and other significant defects. In those days there was a significant under supply of properties and even properties requiring many hundreds if not tens of thousands of pounds of work would sell at asking price.. BUT THERE IS NOW A GLUT OF UNSOLD PROPERTIES STAGNATING ON THE MARKET! The estate agents like to claim that even if the prices were adjusted downwards that the sales would still not materialise but economics 101.. just as during periods of under supply the achieved prices rise to suit current market conditions, in a period of sustained over supply, prices fall to suit market conditions. There are buyers and sales to be achieved in a Buyer's market but not at the prices that suited a Seller's market! The IOM Government has in its schizophrenic way begun to acknowledge its spending unsustainably with statements made opposing suggestions that fuel duty be cut by 5p a litre when before the recent UK budget it was being considered for the benefit of rural areas. Still, the minor redundancies they solemnly announce seem to be ones where job positions are lost without reductions in actual total headcount.. employees are moved from one department into empty posts in another department, and then the vacated post in the first department gets declared redundant and the press release declares redundancies arisen as a response to cost saving reorganisation of the civil service. Incidentally after the recent manx budget, a few people spotted that while apparently dodging the EU's objection to the 0/10 corporation tax rules (they believe) by ending the requirement that at least 55% of company profits be distributed each year (so apparently removing the disadvantage any iom shareholder had relative to a non iom shareholder in taxation on dividends received), that since there is now no need to distribute dividends you may be able to use a company as a tax free savings vehicle -- expect the accountants working for the rich to notice that!). The top tax man says he will ensure adequate tax avoidance measures are in place to prevent this.. and if so, won't that just mean the EU will continue to have legitimate objection to the 0/10 corporation tax rules?? - the IOM government is in my opinion carrying on spending about £50m more than its income, using the reserves to fund the difference (at least until the election later this year). Unless the structural problems in the IOM Government taxing and spending strategy is addressed, eventually this reserve will be depleted. When the tax man comes looking for the money, and home owners cannot quickly liquidate their homes to move to a lower tax environment, or a more economically sustainable environment, the tax man will metaphorically be shooting fish in a barrel. Well they'll be able to send bailiffs in to seize properties for auction if tax bills are not paid voluntarily... Even forming a company to route all your income through may not work for long, as the IOM Government might introduce a land tax or equivalent (no, I've not heard any rumours but is it ruled out??). Why not once the politicians have been safely voted in for another term?
  8. DeadLegs

    Iom Property

    Barrie is great entertainment, if only for annoying the forum tools so much when he posts something they don't agree with. Such people ought to attempt to take themselves less seriously and try going outside their bedrooms and interacting with something other than the internet.
  9. It reminds me a bit of one of those pronouncements from the former Minister Muhammed Saeed al-Sahaf[/url]! I suppose it is conceivable that HH sales are up one % on last year. If they sold one enormously expensive house for instance, it could make up for all the stagnancy in the books. The volume of sales is so low these unusually large sales can have quite a big effect on statistics of this quality and allow the likes of Muhammed Saeed to gleefully make press releases of that sort! As to who would buy an enormously expensive house on the Isle of Man when it looks like its approaching such a change in fortunes?.. maybe not an individual, but a business/corporation that can claim tax benefits by apportioning a significant proportion of the asset value to business purposes? A limited company that takes out the mortgage then defaults on it if the secret beneficial owner decides the market has dropped so much that its not worth as "tenant" to continuing to pay the rent that was covering the mortgage payments?
  10. Sorry, just in case there are any pedants reading.. I believe it was a working group that reports to some important body of the EU called ECOFIN that made that determination according to their published criteria of what is and what isn't acceptable. And I'm an outsider speculating, I have no inside or privileged knowledge. All Errors and Omissions, IMHO.. etc. I will add that I've personally noted properties given aspirational values of £350k being sold subject to contract for close to £100k less... but still not completing for months and months and months!!
  11. Its really coming to something when an Isle of Man estate agent doesn't put out the usual marketing b******s intended to make everyone believe its a sellers market!! Lets summarise a future for the Isle of Man.. 1. The EU has determined that a central plank of the IOM's economic strategy of tax competition does not comply with their rules of what is and what isn't acceptable, and the UK Government is agreeing and effectively saying "sort it out, don't expect us to defend you on this!". This is because most businesses pay corporation tax at 0% so long as at least 55% of profits are distributed as dividends. IOM residents then pay personal income tax on that dividend but anyone not resident on the Isle of Man (i.e. parent companies, rich folk in the EU, don't, thus maing such companies attractive tax saving vehicles for The Monied. The IOM Government will be forced to act so expect the tax advantage removed if they can't produce another bit of clever smoke and mirrors. 2. The UK Government is continuing its scheduled reduction in the amount of money that the Isle of Man Government gets under the VAT sharing agreement, and the IOM Government hasn't exactly reduced its spending plans and is reluctant to reduce its spending at least until the current politicians have been voted back into office for another cushy 5 years. 3. The UK Government is under incredible pressure to reduce its own deficit and revising the VAT sharing agreement again has not been ruled out, especially as the reductions so far seem to have affected the IOM Government not a jot, while mass redundancies and programme cuts are going on in the UK. 4. The amount of money shared to the Isle of Man Government historically has allowed it to pursue its low personal and business tax agenda while spending like cost was no matter. 5. Base Interest rates are being predicted to rise to 5% (compared to 0.5% presently) With the income from VAT share reducing, there is therefore good reason to expect rates of personal taxes and the level of the tax cap to increase, to keep the IOM Government in the black. There is expectation that if the corporation tax rates (or dividend distribution rules) are revised to comply with EU rules about what is and isn't acceptable, the gains to the IOM Treasury may be wiped out by the effect of corporations leaving (employment especially). There is also good reason to expect at some point the IOM Government will despite its attempts to protect the positions of incumbent politicians at the ballot box, be forced to face the fact that when the voters are expected to pay for a greater proportion of the IOM Government spending rather than the UK Government (via the VAT sharing agreement) that many will demand a reduction in government spending. With the way the IOM Government has structured its capital projects (a bit like a PFI) they may not be able to find savings there, as they continue to be contractually obligated to pay long after the project is supposedly completed... so they may look at mass redundancies, or benefits cuts (population 80k, benefits approx £200m), which again will be a big problem for the IOM economy as the IOM Government is a significant employer and eroding benefits like Mortgage Interest Relief At Source (or equivalent still available on the Isle of Man, I believe) will erode the disposable income available to people working on the Isle of Man to keep their mortgage lenders satisfied. I therefore fully expect that many of the properties which had sat unsold for over a year on estate agent websites will continue to sit unsold, unless the sellers get real about their aspirational values. In the case of sellers who bought quite recently, they will likely have to accept a loss compared to the price they paid, but a smaller loss soon may well be better result than a bigger loss later). I expect the numbers of properties coming to the market to continue to increase, and eventually the bubble will burst. I expect rich tax migrants who thought they could buy an expensive flat to attempt to convince their own tax inspectors that they had moved to the Isle of Man, will regret that decision when they cannot liquidate their purchase easily or without a loss, and be annoyed when on one of their brief visits to keep up the charade, they meet their neighbours who had been installed by the Social Security because the property developer got fed up with waiting for buyer who could afford the asking price and went for a Social Security funded letting to keep the cash flow in the black.
  12. DeadLegs

    Iom Property

    He he.. I've seen a property on the Isle of Man sitting unsold for over a year, but its asking price has GONE UP TWICE!!!! There seems to be some hope that rich tax migrants fleeing the UK will keep the property market inflating. But if you are fleeing the UK for tax reasons, how easy will the UK tax man give up on you???? The IOM Government is carrying on spending as if its not got a worry about treasury coffers.. thats despite the UK deciding to subsidise it less by about £100 million I think. Thats got to be about 20% of total IOM Treasury spending! Who's going to make up the shortfall? (Offshore Finance) Businesses? They'll depart for other tax havens resulting in mass unemployment in the only significant private sector on the Isle of Man. The Ultra Rich? They'll bugger off to somewhere warmer too! The Poor? They've got no money to pay more tax (even though they accept over £200 million in benefits a year!). That leaves the middle class/middle earners. Nice to be on the Isle of man when the penny drops in a few years!!! NOT. Read about it in www.manxforums.com and www.iomonline.co.im. Be warned.. the value of your investments can go up and down, and it looks like the IOM is past its peak already. There is a LONG way to fall.
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