So, we’ve had our first budget from Mr Darling, aka Major Eyeswater, and I thought I’d have a look to see what, if anything, it means to the buyer of or investor in property overseas. Also, it may give some hints as to what you should expect in the future if you are looking now for that apartment in the Balearics or the villa in Portugal.
For the owner or aspiring owner of a property abroad the budget probably hasn’t done much to damage or encourage levels of investment overseas. Unless you need the extra child maintenance to afford the mortgage on your Caribbean apartment (unlikely!) there isn’t a great deal of impact (at first sight) from Mr Darling’s words yesterday.
Overview
The first thing to note is how everyone is calling it a low-key budget (or have I misinterpreted that and it should read Loki budget? Loki, for those who may never have heard of him, was a character in Norse mythology associated with villainy, fraud, cowardice and theft!). This always worries me when used to describe a budget as it generally means the true impacts have been well disguised or completely hidden only to ooze out slowly over the following days. We’ll see….
Similarly this budget seems to have been less ‘green’ than everyone had been led to expect although my neighbour, Ivor Gasguzzler, isn’t too pleased. At least the Exchequer is moving away from levying duties on airline travel on a per-user basis and focusing on the airlines themselves which makes sense and will probably encourage more investment in low-emission aircraft over the medium term.
Whilst I am no tax expert it does occur to me that the large hike in the tax burden on businesses coupled with the reduction in the 22% lower band tax rate may give tax advisors plenty to work through arbitraging the two. Finding new ways to expense things to companies which prove to be investments for their owners or mechanisms for rewarding staff through benefits in kind may be seen as ways of reducing the tax charge in specific circumstances. We are planning soon to release some overseas properties that can be included in a SIPP (Self Invested Personal Pension) and similar such tactics are likely to become much more widespread if the gap between corporation tax and personal tax widens.
Specific thoughts
The question as to whether the additional aircraft duty will have any effect of the overseas property market likely deserves a resounding No as the answer. After all, the airlines themselves and the airport builders and managers don’t seem to be reducing their plans with new routes to Turkey from EasyJet, new airports at Lisbon and Huelva in Spain as well as substantial expansion planned for Stansted. Hardly a sign that they expect us all to be driven to holidaying at home by this or future tax levies.
That said I do feel this comparatively young tax is becoming a bit like the duty on tax and alcohol – low-hanging fruit for any chancellor as his armoury of defensive arguments is pretty large if ever he is attacked for increasing the duties. A shame, really. I would prefer there to be a lot more real debate about how green taxes are determined and then implemented.
As for plastic bags – well, I’ll leave you to work out how this will impact on overseas property prices!
Making builders think green when they are designing and erecting new homes seems a no-brainer to me and I’m not alone – there are already examples out there of eco-friendly developments and I expect a lot more to come on stream in the near future. Alistair Darling is no trend-setter!
Key issues
I don’t think anything in this budget specifically makes the decision to buy an overseas property more or less attractive. What will matter in the coming months is the degree to which Mr Darling has steered our economy towards a gentler landing than some other parts of the world since this, more than anything, will affect the value of the pound in our pocket and hence our purchasing power when looking for that Moroccan home or the beachside apartment in Turkey.