March: This Month in Moving
This is the first of our monthly round-ups of the latest news in overseas property prices, cost of living, tax and red tape changes, and all the other things that affect the life of the expat, or the mover-to-be.
It’s too early to gauge the long-term effects of the severe flooding in the UK in the winter of 2013/14, but as well as the likely impact on property prices, one outcome could even be to persuade people to move abroad.
Not too many people live in the Somerset Levels, but the flooding in the Thames Valley was a different matter, bringing the issue home to many people.
In a survey by online insurance specialists Policy Expert, 12% of respondents said they would even consider moving abroad if they believed flooding would get worse in the UK.
95% of the 3000 respondents said they would not consider purchasing a home on a floodplain. 6% (presumably of those who are in an area liable to flooding) said they had already moved, or were considering moving as a result of floods.
The UK floods have already cost insurers £446 million this winter, and premiums looks certain to rise in their wake.
Who wants to be a millionaire?
The big tax news for the better-paid expat is France’s controversial “millionaire tax”, to be levied on companies that pay salaries of more than €1 million euros (£837,000) a year.
The measure, fulfilling an election pledge by President Hollande, was cleared by France’s Constitutional Council in December 2013. The tax was originally meant to be 75%, to be paid by high earners on the portion of annual income exceeding €1 m, but the council said the legal maximum should be limited to 66% for individuals.
The tax will now be applied as a 50% levy on the portion of wages above €1m in 2013 and 2014. It will rise to about 75%, when social contributions are included.
French newspaper Le Figaro reported this month that the new tax had prompted a growing number of rich Parisians to put their high-end properties up for sale and leave France. They are following the example of actor Gérard Depardieu, who moved to Belgium in 2013. The newspaper reported a big rise in the number of grand properties, residences and apartments on the market, especially in the well-off 16th and 17th arrondissements and elegant districts such as Neuilly.
Budget’s quiet bombshell?
The newspaper headlines after UK Chancellor George Osborne’s March budget concentrated on his apparent generosity, on the increased Lamborghini-buying capacity of the newly enriched British pensioner, for example.
As is often the case, certain key, if seemingly innocuous, points in the Budget were missed by many. One could have a direct impact on the five million Britons living and working overseas.
The Chancellor said personal allowances for nonresidents are to be reviewed. It’s all there in the HM Revenue & Customs overview of the budget https://www.gov.uk/government/publications/budget-2014-hm-revenue-customs-overview/hmrc-overview:
Currently UK taxpayers have a personal allowance (Around £9,500 set to increase to £10,000 in April 2014), the amount of income they can earn before they need to pay tax. Non-residents are also currently eligible for this allowance.
Mr Osborne said: “To ensure the UK personal allowance remains well targeted, the government intends to consult on whether and how the allowance could be restricted to UK residents and those living overseas who have strong economic connections in the UK”.
The feeling among pundits is that some expats who draw an income from UK property and other sources, or a pension, but who don’t live in the UK, could be affected.
But this is a contentious issue up for consultation, so who knows what may transpire?
They speculate that the personal allowance will still apply to Britons living in the EU. However those living in places such as the US and Australia could see their status change.
The Telegraph reported this month on a growing interest among the British in buying abroad. A strengthening pound against other currencies and growing confidence in the UK economy were cited as the principal reasons.
As you might have guessed, Spain and France are the two top preferences for that switch abroad, but the newspaper reports rising interest in Turkey, where a big fall in the Turkish lire has made property prices more attractive.
Other favoured destinations include South Africa (where a weaker property market and the falling rand mean a purchaser today has 33% more spending power than 12 months ago), Thailand and Brazil.
Agents selling overseas property were reported saying business was better in the first two months of 2004 than at any time since the start of the recession. Some were reporting record transaction levels.
In an earlier assessment of 17 countries, A Global Housing and Mortgage Outlook (February 2014), credit ratings agency Fitch said it expected to see house price rises in Germany and the UK, matched by further falls in the Netherlands and Italy. The biggest falls would be in Greece and Spain, with a “bottoming out” in 2015. A spokesman said the mortgage and housing market outlook “has either improved or remained broadly the same compared with twelve months ago”.
March, too, saw the publication of new figures on global house prices. The Knight Frank Global House Price Index indicated an average rise in the countries it looked at of 8.4% in 2013. This was the biggest hike in a single year since the study began in 1995. The biggest rise of all, around 35%, came in Dubai. Not surprisingly Ukraine saw the biggest fall, one of 26%.
The countries of Southern Europe, favoured by UK expat buyers, continue to perform poorly, although the rate of decline has slowed. There were falls of 9.3% in Greece, 4% in Spain and 0.5% in Portugal. Decreases of 7.3% and 5.3% were measured in Cyprus and Italy in the year ending October 2013.
Prices in Croatia, newest member of the EU, and in the grip of a recession, showed the biggest decline, down 14.4%.
High (price) life
The latest, and perhaps the most authoritative, guide to the most expensive cities on earth, the Economist Intelligence Unit’s Worldwide Cost of Living report places Singapore at the top of its list, up five places from 2013. It displaces Tokyo, the table’s perennial leader.
The survey compares more than 400 individual prices across 160 products and services. These include food, drink, clothing, household supplies, personal care items, home rents, transport, utility bills, private schools, domestic help and recreational costs.
Paris came in as second priciest city, indicative that European economies and currencies were improving, according to the EIU, The next three spots were taken by Oslo, Zurich and Sydney. Next came Caracas, Geneva, Melbourne and Tokyo, all on sixth spot. London was the 15th most expensive city.
One reason given for Singapore’s high price position is the high cost of owning and running a car, as the authorities there try to ease congestion. Rents, medical and food costs are also very high, according to expats quoted online.
The world’s cheapest cities, according to the Economist’s list, Include Mumbai. New Delhi, Karachi and Kathmandu.
In another survey, by ECA International, Dubai emerged as one of the most expensive places to move to, with rents going up by 30% in 2013.
Those looking to Europe for a possible move, should be cheered by another optimistic survey this month. Financial information company Markit reported that recovery in the 18 country Eurozone appeared to be “gathering speed”. It was running at a near three-year high, after emerging from its longest-ever recession in the spring of 2013.
As expected Germany, Europe’s largest economy, leads the march, with clear signs of recovery extending to France and even as far as Greece and Spain, burdened by austerity packages for years. However the ongoing crisis in the Ukraine could still slow progress and dampen confidence.
Easier moves to Turkey
Anyone planning to move to and, or, work in Turkey, should prepare for new regulations which will take effect from April 12. They will affect almost all foreign nationals, those on work permits, residence permits, and business visas (as well is tourist visas, which can now be bought online). In theory the changes should make life in Turkey easier for expats.
The new measures, which include people issued with a work permit no longer needing to seek a residence permit, are expected to significantly cut processing times and bureaucracy. Crucially permit applications can be made a consular offices consular post overseas, instead of in Turkey itself, although the fine detail on the joint work and residence permit hasn’t yet been published.
And finally, Channel 4 announced that the colourfully-spoken restauranteur Gordon Ramsay is taking his TV series Kitchen Nightmares into Europe, to help expat British restauranteurs improve their performance.
Series producer Nicola Lloyd said Ramsay would be descending on “Europe’s holiday hot spots to help Brit-owned restaurants, hotels and B&Bs that are struggling to make ends meet.
“We’d love to hear from any owners, managers or head chefs who feel they could benefit from Gordon’s help and advice.”
Filming will take place during May and June. Applicants should check their skin for thickness.