UK property market to suffer further as abolition of 3% annual tax will see offshore funds redirected to France

The UK property market, already reeling after 18 months of price declines, is to face new competition for offshore investment money as funds in the Channel Islands and Man will soon be able to invest in French property without any prohibitive French tax charges.

The imminent removal by France of the annual 3% tax on the gross value of French property that currently applies to investors based in Jersey, Guernsey and the Isle of Man will considerably widen the property market for direct investment and may threaten any nascent stabilisation in the UK property market, reducing demand for UK investment properties and applying additional downward pressure on capital values.

For the first time, and bringing them in line with the tax treatment of UK entities, companies and trustees managing investment funds in these three offshore territories will be able to invest directly in French properties without having to pay the prohibitive annual French tax of 3% of their open market value.

In anticipation of the scrapping of the tax, the purpose of which is to prevent tax evasion, funds that would otherwise make their way into the UK residential and commercial property market are already being earmarked for investment in France.

French property will not only provide added portfolio diversification for offshore investors but, with the investments being Euro-denominated, a currency hedge. France also offers a wider range of properties to investors than the UK, such as alpine ski resorts which are bound to appeal to offshore investors.

The Pierre & Vacances Group, a listed French tourism property developer and manager, has seen a sharp rise in enquiries from the three offshore territories since the beginning of the year, as investors brace themselves to move once the tax is scrapped.

David Anderson, solicitor and chartered tax adviser, Sykes Anderson Solicitors, comments:

“The removal of the French annual 3% tax for investors based out of Jersey, Guernsey and the Isle of Man will be a huge boost for the French property market, specifically investment property. However, it could have a negative effect on some parts of the UK property market. Soon, a pool of capital in the Channel Islands and Man will, for the first time, be able to flow, uninhibited, into France, with quality French property in good locations set to do particularly well. So far, this looming tax change has passed largely under the radar, but even before its implementation it is already beginning to change the dynamics of the European property market.”

Nick Leach, Head of Pierre & Vacances Property Investments, UK & Ireland, comments:

“We are receiving more and more enquiries from these offshore territories, as private and corporate investors ready themselves in anticipation of the 3% tax being formally removed. We are bracing ourselves for a sharp flurry of activity, as tax changes can always be reversed and investors will not want to
miss out.”

For more information, please contact:
Dominic Hiatt, Rhizome PR
T + 44 (0) 20 8670 4920 | M + 44 (0) 7595 221604

About Sykes Anderson Solicitors
Sykes Anderson is a niche tax and commercial tax and property law firm in the City of London with Commercial, Litigation, Property and International Tax departments. Founded in 1989, our clients are mainly wealthy individuals and entrepreneurs.

About Pierre & Vacances
The Pierre & Vacances Group has been designing, developing and managing holiday homes and apartments for 40 years, anticipating European property and tourism trends.

The Group’s development strategy has led to the acquisition of Center Parcs Continental Europe, Europe’s number one provider of short breaks. Pierre & Vacances takes a visionary approach to the world of holiday accommodation, and, since the birth of the Avoriaz development in 1967, has continued to grow in France and throughout Western Europe. The undeniable market leader in residential tourism, the Pierre & Vacances Group has developed a complete range of short and long stay holidays, with a choice of hotel and leisure services designed to meet every requirement of today’s European consumers. With a presence in France, Northern Europe, Italy and Spain through its three main brands – Pierre & Vacances, Center Parcs Europe and Maeva – the Pierre & Vacances Group occupies, with a turnover of 1.5 billion euros, an unparalleled position in the European tourism industry.

Pierre & Vacances in numbers: A tourist network of 50,000 apartments and houses 230,000 beds – by the sea, in the mountains, in the countryside, and city centre 8 main brands: Pierre & Vacances, Center Parcs Europe, Maeva, Latitudes, MGM, Adagio, Senioriales, Citea 6.9 million customers per year 8,500 employees Annual turnover €1.5 billion Since launching the “Nouvelle Propriété” in 1979, Pierre & Vacances has offered private investors the opportunity to enter the lucrative real estate rental market by becoming a freehold owner of a holiday property with a leaseback.

The Pierre & Vacances Group is quoted on the Paris Stock Exchange and is a member of the SBF 120 (French equivalent of the FTSE100).

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