Millionaires’ impact on the housing market ‘unknown’

Friday 23rd January 2009, 2:54PM GMT.

THE authorities do not know the impact that millionaires are having on the Island’s housing market.

In the States this week St Helier Deputy Trevor Pitman asked the Housing Minister if he would bring in legislation to prevent 1(1)k residents from making multiple investments in the A-H housing market after they have got their housing qualifications.

Housing Assistant Minister Sean Power replied: ‘The Housing department is unable to establish the impact any 1(1)k investing in multiple investments would have. However, the policy is consistently applied. All 1(1)ks are approved on the same basis.’

He said that after 12 years 1(1)ks were treated in the same as any other locally qualified person, getting taxed at 20 per cent with the same deductions and reliefs. ‘Investment by residentially qualified people is to be encouraged,’ he said. ‘At the current time there is little evidence to change the Income Tax Law.’

1
Mike R

January 23, 2009 at 3:13 pm

From an economics standpoint there should be no issue with 1(1)K’s buying as much property as they like – they presumably can’t occupy it all so they would have to rent it out to residentially qualified people – interestingly the UK government has been actively encouraging businesses to buy up properties for onward rental to broaden the rental market, so arguably we should be considering the same – not everyone wants to be a property owner.

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2
Sara

January 23, 2009 at 4:10 pm

This is probably one of the most important flaws in the housing/tax system that the JDA have brought up to date. 1.1.(K)’s have been investing in A-H Qualified and Business Properties to offset their income tax through tax free capital gains. It is a flaw in the system that benefits nobody in Jersey apart from property speculators, and it is therefore fair comment to follow on and ask what benefits the 1.1.(K)’s do for Jersey when they actually do things like this?

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3
Matt

January 23, 2009 at 5:21 pm

We have been asking on the Internet forums for a review of this for over a year!

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4
Steve

January 23, 2009 at 10:33 pm

It doesn’t take a rocket scientist to work out that rich people push up the prices of all housing on Jersey by paying these inflated prices.

It does not matter that they are buying at the top level, because houses in the next tier nature try to move up in relationship to those above.

If 1.1.K and J cats were limited house prices would have to fall to find buyers that could aford them.

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5
Rothwem

January 24, 2009 at 9:22 am

Sara you say “1.1.(K)’s have been investing in A-H Qualified and Business Properties to offset their income tax through tax free capital gains” which is nonsensical – you can’t “offset” income tax in this way.

Capital gains are not taxed for anyone in Jersey so we can all invest our money in assets that generate no income but as investors have discovered in the last year the value can be eroded very easily – no income means no cash coming in which is self defeating really.

As for people choosing to invest in Jersey surely that keeps the money in Jersey, being spent in Jersey, making jobs in Jersey? Would you be happier if they invested in property outside Jersey? What evidence do you have that these people aren’t renting out this property and receiving a taxed income – even 11Ks pay tax on all Jersey derived income, another reason I want them buying Jersey property rather than investing off Jersey when they can avoid tax. Oh – and every time hey buy Jersey property they pay stamp tax to the States (i.e. us)

You seem to have an issue with wealthy people. Is this the JDA’s real agenda?

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6
Sara

January 24, 2009 at 11:23 am

Just to clarify. What I mean is that the tax free gains they make from buying and selling property they use to offset against their agreed income tax. I know this because I know 1.1.(K)’s. It is their books if you follow. One couple I know where making so much money from buying and selling property at one time it was a lot more than their agreed income tax liability which was capped.

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7
Matt

January 24, 2009 at 12:39 pm

I know one family of 1.1.(K)’s that were buying flats and commercial business in town through nominee companies. All Capital Gain was tax free and rental income was a good earner. They were only oblidged to pay £100K tax a year and couple the income from rent and the explosion in house prices they were laughing even further to the bank. When you compare this to the people paying 20 means 20 something is dreadfully wrong in Jersey.

Well done Deputy Pitman for sticking you neck out and asking these questions in the States.

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8
Sam L

January 27, 2009 at 1:21 pm

I think Rothwem makes a good point in that the island’s economy benefits from outside investment and to deny this would leave the island in a less desirable state, which is clearly not what it needs.

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9
Al

January 28, 2009 at 9:50 am

It is not desirable to have the price of housing pushed completely out of reach of most people living and working in Jersey Sam by buy-to-let investors which is the point here (be they 11ks or local millionaires). Average house is now twelve times the average salary as a result !

Yes investment is to be welcomed where it is channelled in to business ventures and creates more employment, provides better services etc. Not where it condemns a whole generation to sub-standard, extortionate, rented accommodation

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