32 | BUSINESS Legal column WORDS | John Howell
BUSINESS Idiot prophecies
Our regular legal columnist John Howell has been pondering the year ahead. What does he think that the overseas property industry is going to face in 2011? Which markets are going to be hot … and which not? And is it foolish to predict anyway?
year (as I write, early January), it is overwhelmingly tempting to do so. Whilst dangerous to the person making the predictions, these predictions are a very useful way for the public to later judge the calibre of the person making them – though they have to judge a year in arrear! They are also a bit of fun at a dreary time of the year. So here goes. My predictions for
T 2011...
A bad year in the UK This prediction can’t be a surprise. Cuts in public expenditure leading to hundreds of thousands of job cuts in both the public and private sectors is not a good start. Add poorer services. Add in rising oil and commodity prices (exacerbated from the UK point of view by a weak pound) and a round or two of
here is a wise old saying that only idiots predict the future but, at this time of
bird flu, flooding etc. Then add in low interest rates and low investment yields leading to poor pensions. By Christmas, people will be very fed up – and they will know that there is a lot more grief to come in the following couple of years. Will they be sufficiently fed up to say ‘enough is enough’ and move overseas? At the moment the main thing putting my older clients off a move to a sunnier climate is the low value of the pound. If things here get depressing enough they may well decide to take the hit and go – especially if there are still bargains to be had abroad. Are you geared up to serve this (largely resale) market?
Euro Crises
I think this story is only just beginning. The speculators – sensing both weakness and lack of political support – will attack again and again, picking off the softest targets. Those will grow to cover most of the Eurozone countries outside Germany.
The end result can
only be one of four things. (1) A truly federal Eurozone economy and tax system; (2) a massive series of cross guarantees – way higher
than what is now proposed – from not just Eurozone
countries but also outsiders such as China, the IMF, the UK etc; (3) the disintegration of the Eurozone; (4) some more inviting target coming over the horizon and drawing the fire of the speculators. (4) would be a sheer fluke. Of
the others, I think that (2), by a narrow margin, is the most likely short term outcome. Whatever happens, these crises cannot be good for the value of the
“I expect the Euro to fall ... I think we will then see much more UK emigration in 2011 / 2012”
Euro. I expect it to fall. £1 - €1.30? That then reopens the prospects of disgruntled British people going to live in France & Spain. I think we will then see much more UK emigration in 2011/2.
Protectionism in the US For some time I have been saying that things are even worse than they look in the US. The haemorrhaging of high tech jobs to the developing countries and the US’ determination to live beyond its means doesn’t bode well. If lenders lose confidence – like they did with Greece – there is big trouble ahead. The traditional US response in
these circumstances is to put up barriers.
This is now starting. The
HIDE Act – proposed to come into force in 2013 – is designed to deter outwards investment by creating or reinforcing tax barriers. Watch for
other similar measures, in the Spin | the wheel, and hope for the best ... who knows what will happen next
US and elsewhere. Curiously, this presents short term
John Howell 020 7836 2841
john@jhco.org Property law expert
opportunities to the property industry – providing that you have channels to sell into the US market. Lots of Americans will want to move a lot of money out of the US before the end of 2012. Many will be tempted to invest outside the dollar area.
More Acquisitions from China China’s willingness to hold foreign cash and bonds seems to be turning into a desire to control overseas assets. At the top level we can expect to see more takeovers of US & UK companies by the Chinese. At a lower level, this increased confidence in dealing with the outside world should lead to many more wealthy Chinese (and there are many millions of them) thinking about putting some of their wealth into overseas assets, predominantly bricks and mortar. In the main, they will be looking at the traditional destinations of the wealthy. How do you tackle this market?
More UK bank lending By the end of 2011 government pressure will lead to banks lowering their lending criteria a little and being more receptive to innovative (but sensible) funding proposals. I am already discussing a number of proposals with banks. Now is the time to start putting together the financing packages that will enable those who wish to buy overseas to do so. Just don’t expect it to be simple! I wish you all a good and prosperous 2011.
www.opp.org.uk | FEBRUARY 2011
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