UK Tax Change Projected to Alter Dynamic of European Property Market

The dynamic of the European property market is set to change considerably in the New Year, with the UK potentially the biggest loser, experts predict. From 1 January 2010, companies and trustees managing investment funds in the Channel Islands, Isle of Man and British Virgin Islands will be able to invest in French properties free of the French annual 3% tax on their open market value. This will radically alter the flow of funds within Europe and represents a genuine threat to any recovery in the UK property market.

In anticipation of the scrapping of the tax, 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 and vineyards, 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.

“This seemingly small tax change is already big news in the investment community, with many private and corporate investors approaching us in advance of January 1”, says Nick Leach, Head of Pierre & Vacances Property Investments, UK & Ireland. “Suddenly, a big reason for not investing in France will be removed and the effect could be dramatic as more and more investors catch on.”

David Anderson, a chartered tax adviser at London-based Sykes Anderson Solicitors, adds: “The removal of this tax on 1 January will have a very positive effect on the French property market, specifically investment property, but could have a very negative effect on parts of the UK property market. From the New Year, a pool of capital in the Crown Dependencies will, for the first time, be able to flow, uninhibited, into France, with quality French property in good locations likely 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 investor mindsets. We have already exchanged contracts for several channel island investors on high value French properties, who are aware exclusive French properties will soon be harder to acquire as more wealthy buyers enter the market.”

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).

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.

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