Tax dodgers are boosting property prices

World's tax havens are tops as global residential real estate improves.

Tax dodgers are boosting property prices. Some of the world's tax havens are benefitting first, or have bucked the downward trend, as global residential property prices finally pick up.

This is the message contained in a number of surveys and reports released recently on the state of residential property markets around the world.

Most offshore tax jurisdictions within easy reach of Britain have bucked the European property market slump as high net worth individuals get set to leave ahead of harsh UK tax rises, a survey by international offshore tax firm The Sovereign Group has found.

Property values in Monte Carlo and Gibraltar, two attractive destinations for European "ex-pat" money are "holding firm or increasing while prices around them on the Cote d'Azur and the Costa del Sol have plunged by up to 50%", it said, on Other jurisdictions showing positive property price trends include Jersey, Guernsey, the Isle of Man and Geneva.

Meanwhile, seven of more than 30 housing markets monitored by the Global Property Guide are showing signs of recovery. The general situation remains negative, however, with most countries suffering sharp house price falls during the year to the end of the second quarter of this year. The Global Property Guide uses price-changes after inflation, as it believes this "gives a more realistic picture than the (more upbeat) nominal figures usually preferred by real estate agents".

"A key indicator of improvement is the market's momentum: i.e., the number of countries that did better this year, than during the previous year. Nine countries improved their year-on-year performance to end Q2-2009, compared with the previous year. In contrast during the year to end-Q1 2009, only six countries did better than the previous year," said Global Property Guide.

"After experiencing declines in 2008, house prices in China, Portugal, Australia, New Zealand, France, Sweden and Hong Kong rebounded during the latest reported quarter, Q2 2009," it said.

Switzerland, known as a favourite banking destination for tax refugees, was singled out as missing out on the global crunch. Global Property Guide said this little country saw an increase of 4.90% over the year to end-Q2 2009. However, house prices barely increased during Q2 2009.

South Africa, which as we know taxes its higher income earners heavily, is identified as being amongst the worst performers in terms of property prices in recent times. Our prices have been ticking down by more than an inflation-adjusted 11%, said Global Property Guide.

However, even South Africa's poor property performance pales in comparison to markets like Dubai and Latvia, which have seen residential house prices crashing to the tune of about 50% and more over a year.

In any event, South Africa's repeat sales data shows that the worst may be over for the nation's house prices. Thanks to interest rates coming down since December, it seems that property prices are turning a corner (read Residential property prices are perking up).

The Sovereign Group's chairman Howard Bilton said that in this broadband age "voting with your feet where tax is concerned is a very viable option for many". "Everyone has to compete these days and tax authorities should not be any different."

Bilton said Monaco, which "significantly boasts 100% broadband coverage", has seen prices rising by as much as 30% - the rough figure at which they have been falling in Provence, France. He quotes a leading Monte Carlo estate agent as saying Monaco's "tax haven status ensures the market remains buoyant and prices stable so investment in Monaco property continues to be attractive".

Bilton reckons well-heeled owners in London are looking to move offshore. That is a development that might have adverse consequences for London's upper end - a popular property investment location for rich South Africans.

"For many months now, 20% of all new business at our London office has been from wealthy individuals looking to move offshore to escape what they expect to be increasingly harsh taxes," said Bilton.

Global Property Guide's figures:

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