Even intelligent observers of the Residential Property Market, particularly in London, are being fooled into believing that Brexit and its uncertainty, is responsible for the slump in activity to date, when the cognoscenti know full well, that it is all down to the ‘fall out’ from Stamp Duty.
When Mr. ‘cack-handed’ Osborne imposed these draconian hikes in this tax in 2014, he thought, somewhat stupidly, that it was the Tory’s version of a Mansion Tax. Like all myopic politicians, he had no idea of the devastating effect it would have on other parts of the economy, such as retail spending and the UK growth rate.
Grabbing the Election victory in 2015, from the clutches of Mr. Ed Miliband, was all that mattered at the time and he naturally thought that his strategy of ‘Project Fear’ would win the Referendum vote that would take care of any downfall. How wrong could he be?
With, effectively, 15% SDLT rates at the middle to top end of the market, mainly in London, six out of ten potential buyers have been dissuaded from purchasing altogether, leaving just three to four ‘needs driven’ buyers who are prepared to ‘weather the storm’ and commit themselves.
Treasury Receipts Up
Although for the Treasury, Stamp Duty Receipts are up, I am quite sure that when you look holistically at the Budget Deficit, the receipts from VAT and Corporation Tax etc., will be down and therefore, represent a net loss.
Far from Brexit hindering this process with uncertainty until a deal is done with the EU, paradoxically, it’s depressing effect on the Sterling Exchange Rate has been de facto, an unexpected bonus to help lure international investors wanting to buy a piece of ‘English heritage’ in London at a good price.
In fact, the more problems associated with the EU negotiations, the lower the Pound and the more incentive there is to buy. However, this only affects the market in excess of £5million, but one hopes that it will have a cascading effect on the lower sectors of the market as well.
Estate Agents in Parlous State
Estate agents and associated businesses, generally are in a parlous state, as can be seen from the appalling results from quoted companies such as Foxtons. They need all the help they can get at the moment to survive.
It is perfectly true that anyone connected with the Banking Sector, either for purchasing or renting, will be affected by the uncertainty of Brexit, but it appears that most banks are going to set up satellite offices in Europe, to get around any possible detrimental changes to legislation, as it concerns Financial Services, i.e. passporting, which seems to be a cure for the problem.
The Head of Goldman Sachs, Mr. Lloyd Blankfein, says he is ‘looking forward to spending more time in Frankfurt’, the eleventh most important financial centre of the world, which he claims will be the new colossus of Europe. Bless him, I wonder if he has been there recently, since the crescendo of excitement for the ‘Frankfurters’, is to come out of their dull homes at 7.30 at night, to ‘watch the traffic lights change.’
I’m not sure even Goldman Sachs will have enough money to pay their employees to stay there since, to most of them, it will be the equivalent of being on the Russian Front for German soldiers in the War.
Brexit Deal Prediction
I predict that by October 2018, we will know the outline of the Brexit Deal with those obdurate Europeans and it is likely to be the usual ‘fudged’ compromise, ‘struck at the eleventh hour’, where everyone gets a little bit of what they want and some, of what they don’t.
Instead of this ridiculous ‘three ring circus’, with barbed rhetoric being freely exchanged between Number 10 and Brussels, why don’t these overpaid civil servants lock themselves away in a Norwegian retreat, for three months and come out with an agreed deal? It would starve the Media of the constant Brexit hysteria, which is no bad thing and normal business will resume immediately afterwards. However, I’m not sure whether the likes of Barnier, Juncker or Tusk, would appreciate their being denied a political platform, to justify their low worth.
Fire And Brimstone
As the EU threatens the UK with ‘fire and brimstone’, where are the ‘howls of protest’ from the German car manufacturers and the French wine producers, when one of their largest global markets (i.e. the UK) will be affected by the bile being ‘spewed out’ from these three ‘goons’?
By way of illustration, when West Germany absorbed East Germany, in an un-seeming hurry, and paid the price that their great, great, great grandchildren will still be paying in the distant future, did they ask how the process of absorption and assimilation was going, after a year or two? No, they did not, since it is a ‘generational process’ and whilst it may have been a mess for 10 to 15 years, today they have never looked back from this audacious and highly beneficial plan, which renders Germany as one of the most powerful nations and the third largest exporter in the World.
If you believe in the greatness of Britain, you should be comforted that with our innovation and resources we will thrive in the post Brexit environment and we will look back at an imploding Europe, wondering why we ever got involved with them in the first place.
If you are still ambivalent about all this, watch the film, The Darkest Hour, and you may be better convinced!