10 January 2019
A perfect storm in a Brexit teacup?
Whilst the trigger for the improvement in the Local Market in Guernsey has undoubtedly been the consequence of domestic conditions and the downward correction of the market having naturally run its course, the recent increase in Open Market interest and transactions is unquestionably due to external factors and, most notably, the direct and indirect effects of Brexit.
Such a contention, given how difficult even the most well-informed among us appear to find predicting the likely effects of Brexit on Guernsey, warrants further explanation. In particular, why should the high-level negotiations between the UK and EU around their future trade agreements and wider relationship, have a direct influence on people making the decision to up sticks in the UK (although there is interest and movement from elsewhere too) and relocate to Guernsey?
The answer to that question and the reason for the noticeable increase in interest being shown by people in moving to Guernsey would appear to have more to do with the ongoing uncertainty surrounding Brexit and the potential for a snap general election in the UK that could result in a win for the Labour Party. Such a prospect, given Labour's vastly different approach to economic policy and objectives that includes the introduction of swingeing property and wealth taxes on the better off, appears to be leading many people to consider voting with their feet (rather than risk doing so at the ballot box) and to make a move to the island.
Allied to and running in tandem with the concerns regarding Brexit, is the threat of a significant decline in the growth of the UK economy (predicted to be as high as 15% in some quarters, regardless of what Brexit deal is concluded). If that should be the case, then a move to Guernsey is an increasingly attractive proposition.
To add to that proposition, new tax rules were introduced in Guernsey at the start of 2018, designed to encourage relocation to the island by high net worth individuals (HNWIs) and their families. The changes have seen an income tax break for new residents who spend at least £1.5 million on an Open Market property (giving rise to a Document Duty take of £50,000 or more). A new lower tax cap of £50,000 will be available to such HNWIs for the year of charge in which the individual takes up permanent residence and will then apply for the following three years. The States proposed the initiative as part of its 'Future Guernsey' manifesto with a core objective to make the island 'one of the healthiest and happiest places in the world'.
On top of this, the island's pragmatic, proactive and efficient approach to assisting new businesses and individuals, coupled with the unique culture and lifestyle people find once they arrive here, make Guernsey a very strong contender for those looking to relocate from the UK.
It is to be hoped that the noticeable increase in interest and improvement in the good fortunes of the Open Market that has been seen in 2018 - with 49 Open Market sales in the first nine months of the year compared to 27 at the same point in 2017 - will continue into 2019 and well beyond that. Certainly, if the analysis of the likely cause and effect of the renewed interest in the Open Market provided by this article is correct, it could be said that Guernsey will not only benefit from the storm created by Brexit, but it will also provide a safe haven from it.
If you are considering relocating to Guernsey, you are advised to talk to a member of our team at the start of the process in relation to your personal, business and tax affairs.
An original version of this article was published in En Voyage (Issue 14), January 2019.
© Carey Olsen 2019.