FOCUS: Who lives in a house like this?

Monday 23 April 2018

‘Uncertainty’ isn’t a word enjoyed by many, but is one that has dominated the lips of financiers, business moguls and political pundits alike in recent years.

First came the trade threat of Brexit – a tale whose conclusion still remains unclear with just a year left to go – then came a snap election, leaving the UK government standing on a platform less strong, less stable and the reddest it had been in many years.

But for Jersey’s luxury property market, uncertainty yielded opportunity. With fears of a Corbyn government and an EU fall-out abounding, rising numbers of ‘elites’ are considering a move to the island as a secure haven – and not just for tax reasons. Express investigated why properties for high fliers are flying high.

“It’s for days like this they come here,” Broadlands Director and luxury property specialist Nigel Hurst says of Jersey’s appeal to high-value residents. He could have stopped there – the panoramic view of sunlit St. Aubin from the balcony of this new £2.85million residence speaks for itself. From here, political turmoil and the London business rush are unimaginably far away, and the bay’s still waters contrast against the flurry of panicked phone calls the firm apparently received from wealthy individuals coming to terms with the realisation that Labour leader Jeremy Corbyn could one day be Prime Minister following the snap election result.

“In the early 70s, there was a Labour Government in and the top rate of tax was 98p in the pound… Anybody of a certain age who has been through all that will think, ‘is that what we really want again?’” Managing Director Roger Trower chips in. 

Pictured: Nigel Hurst, Broadlands Director and luxury property specialist. (Holly Smith)

The luxury market was already growing, but the 2016 election was a “huge” catalyst for interest from wealthy individuals. Locate Jersey – a body tasked with bringing such people to the island – saw high value residency enquiries spike at 155 last year, while 20 people made the move. But these aren’t just moneyed pensioners keen to grab their cash and dash to an inheritance tax-free land, nor are they all oil-rich or Putin-backed oligarchs (billionaire football mogul Roman Abramovich aside, whose residency application was recently approved). The majority are tech-savvy families in their 30s and 40s who bring their business interests with them.

Two factors are clear draws: corporate tax is favourable here, and high-value newcomers are taxed at just 1% after paying a minimum contribution of £145,000. Trower maintains, however, that it’s really the safety they’re willing to up sticks, and fork out for. “You can’t put a price on that. If you’ve got little kids in London, you’re very wealthy and known to be wealthy, you could be targeted by kidnappers… Here, the alarm is stuck on the wall but it’s not switched on!”

“People are always surprised when we show them properties and the door is already open,” Hurst adds. The ‘Northern Brittany weather,’ Michelin-starred dining and sea views don’t hurt either – especially as they’re united in a place where UK arrivals won’t have to learn a new language.

This youthful demographic has shaken up the whole market. Far from the once revered sea-facing manor houses of Bergerac, bedecked with intricate wooden panelling, luxury buyers are now looking for ‘turn-key’ properties. They’re shunning palatial ‘doer-uppers’ for swanky eco-pads that boast green credentials and swish technology. “They want to dial in from an iPad on a beach to see who’s at the gate, and let them drop a package off,” Hurst says. But “annoyingly” for agents, development isn’t quite keeping up. Gaudin & Co Partner Bradley Vowden says that demand for properties over £2million is increasingly high, and that it’s getting harder to find homes that can excite the youthful new demographic.

Pictured: Buyers are shunning palatial ‘doer-uppers’ for swanky eco-pads that boast green credentials and swish technology.

The market is just about buoyed by properties leaving familial ownership after centuries thanks to “lifestyle changes” – islanders are having fewer children, and are less likely to live in multi-generational homes. “The people these properties are being left to could probably do with the money. They have probably never lived in the house and don’t have the emotional attachments. Their great, great grandparents might have lived there, but they’re people they never met,” Vowden says. Many of these properties are exceedingly traditional, and inheritors don’t want to spend their time and money on a property that needs to be “gutted” before it is sold.

The resulting lack of modern supply is not only causing prices “to start to run away”, but also causing more and more high-value buyers to turn to luxury rentals – and they’re not afraid to dish out top dollar. “We’ve done one to a well-known figure who rented here for a couple of years paying £250,000 a year. These kind of people are coming from having sold a terraced house in Notting Hill £6-7million because of the location, so coming to Jersey they think, ‘actually it’s quite cheap. I don’t mind paying the rent, I’m benefiting from the tax advantages anyway,’” says Vowden.

With deep pockets, shelling out the price of a new apartment each year is the price many are happy to pay until they finally find ‘the one’. Others are happy to rescue older properties dwindling on the market over long periods of time, taking advantage of potential price slashes and either developing them to their own specifications, or seizing the investment opportunity to rent them to a fellow newcomer. “These wealthy people are seeing an opportunity that they can generate more income than they would get if the money was sat static in the bank.”

But bringing a period property up to a modern ‘luxury’ standard via a maze of planning permission regulations can be a maddening task - one that can be a shock to some newcomers when they see their development ambitions dramatically scaled back by Island Plan rules and listings on their heritage properties. 

Pictured: Bringing a period property up to a modern ‘luxury’ standard via a maze of planning permission regulations can be a maddening task. (Fenby Miskin)

It’s a question worth considering for the ‘helipad’ elite like Mr Abramovich. “Where’s he going to buy?” Vowden questions. “When you see what he owns and what he would want, naturally people would say St. John’s Manor [£23million], but it has so much listing, he’d probably want to knock it down, but he won’t be allowed. So where does he go? Does he just buy an apartment to have a postal address to benefit from Jersey instead?”

Getting to the planning permission stage means finding the right property in the first place – and the “dream” combination tends to follow a similar pattern for most high-value residents. “Sea views are the big thing – you’re coming to an island surrounded by water, and what do people want to see? A sea view. So it’s most requested. The other is privacy, and quite often you can’t get both,” Hurst says. Proximity to the airport is especially valued by frequent business travellers, as well as those who “don’t want to party on their doorstep”, instead opting for weekend revelry in global capitals before touching down at their on-island family base again. That combination makes St. Brelade a particular sweet spot, although education prioritisers may compromise their beachy ideals for what agents call “the golden triangle” – the leafy eastern zones surrounding the island’s private schools.

It’s a difficult juggling act for agents, but one with a big pay-off both for the firm and the island if they get it right. 2017 saw £95million of property purchases from high value residents alone, resulting in £4.6million stamp duty paid. That’s why Vowden says he is willing to quite literally go the extra mile for his high value resident clients by flying over to meet them in their homes. “You see the style of life and property they’re looking for.” Broadlands, meanwhile, treat their clients to a local road-trip on arrival to give them enough of a flavour of island life to tempt them away from other jurisdictions – even if they offer lower tax rates. “They come on a shopping trip – they come here, they might go to Guernsey (God forbid!), Isle of Man, Cayman, Bermuda, so of course we’ve got to sell them the lifestyle as well,” Hurst says. Clients are mostly a mix of UK residents with existing connections to the island, but advertising is helping secure interest from as far afield as France, Germany, Australia and the US.

Pictured: Sea views and proximity to the airport make St. Brelade a sweet spot for high-value residents. (SBBA)

Locate Jersey are stepping up their efforts to make sure the island remains competitive, with TV commercials punctuating the recent Super League Triathlon, which was held in Jersey and broadcast around the world to millions of viewers. They reached 14.3million people in 2017. But should Jersey be glancing over its shoulder at its neighbour? Guernsey secured 24 relocations last year and 126 enquiries, after all. 

Trower says Jersey shouldn’t fear competition. According to him, Jersey’s financial services are a massive benefit – “Guernsey always used to be good at insurance, but that’s about it” – as well as its airport. “The private jet part of it is very, very busy now. We’ve got a bigger runway, better communications – it’s helped enormously and put us way above Guernsey.” He added that a recently- approved £10million project to build new hangars should also help. But the luxury market isn’t solely stimulated by outsiders. 33 homes worth over £2million were purchased last year – many of which were by locals looking to “upscale.”

Could newcomers be squeezing stocks for these local luxury shoppers? In Vowden’s opinion, they are if they only pay the ‘entry point’ property price of £1.75million to be allowed to come to Jersey. “High value residents should be forced to pay more, otherwise I genuinely think that is taking a property away from a successful local family… If they really want to come to Jersey for all the benefits, I think they should be competing at another level.” He suggests a figure of around £2.5million instead.Doing so would allow for more movement within the local property market, and potentially benefit all levels of the community by leaving more properties at the cheaper end of housing stock, whose prices are rocketing in line with increased demand from an ever-growing population.

“The market has got better and better and better, not necessarily prices, but in traffic… and it goes hand-in- hand with the local market. If somebody buys a big house, the people with the big house then move out to a smaller house – it makes the world go round. So if you’ve got 20 people each year buying big houses, that’s 20 more below. It has a knock-on effect – they might buy a £5million house, another downsizes to a £2million, another to a £1million,” Hurst explains. 

Pictured: 33 homes worth over £2million were purchased in 2017.

Although Jersey is an welcome ‘haven’ in more ways than one for new residents, it isn’t completely unaffected by outside events. The recent poisoning of former Russian spy Sergei Skripal has placed the international spotlight firmly on Russia – a country with a growing affection for Jersey. As political pressure mounts of the UK to scrutinise resident oligarchs’ riches, Jersey’s External Relations Minister has claimed that it would be “foolish” not assess whether high value residency application processes are vigorous enough, with a particular emphasis on our Siberian fans.

The Chief Minister’s Department maintains, however, that the applications procedure – involving a police check and an order to ‘prove’ their source of wealth – is robust enough. Indeed, Hurst recalls how previous prospective clients of his have mysteriously “fallen away” when asked “too many questions” about their riches. Agents also have to be on alert for false identities – after all, as Vowden observes, “a lot of these houses have some extremely expensive pieces of furniture, art...”

Potential problems aside, agents are confident that the market will continue its steady upward rise, soaring past pre-2008 disaster levels of interest and sales.  Data from Statistics Jersey showed that prices were 13% above the pre-crash peak in September last year. Of course, the market doesn’t move by itself: it relies on a steady diet of client interest between peak periods (the end of the tax year and shortly before the academic year) drummed up by agents always on the hunt for prospective movers at high-end functions or even by tickling the fancy of friends and colleagues from school years

Victoria College and UK public school-educated Hurst candidly admits: “A lot of the law firms, they went to school with me. There is a bit of an ‘old boys’ network because the first person in the property market they think of is me… And a lot of our business is referrals.”

Despite their flashy backgrounds, not all luxury purchasers think bigger is better. Demand is growing for apartments – the Metropol and Waterfront-based Horizon developments are notable additions to the market. More could be on their way, with islanders reportedly forking out millions for land in beauty spots for future development. In the near future, they’ll inject activity into the local construction industry. Tourism, finance and agriculture: shuffle up. The luxury property trade is making its mark as the island’s next big money-spinner.

This article first appeared in Conncet Magazine, which you can read in full HERE.