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Expat Investor : July August 2008
EXP A T Serving expats for more than 16 years firstname.lastname@example.org June 2005 £4.95/ €7.50/US$7.50 In this issue Property sales may fall by 40% this year because of the credit crunch, warns the Royal Institution of Chartered Surveyors (Rics). Such a property sales decline would represent the largest shrinkage in the housing market since modern records began and could cut consumer spending by eight per cent. What’s more, in its updated forecast for the housing market in 2008, Rics has predicated that overall prices will fall by as much as five per cent. Rics’ Chief Economist is Simon Rubinsohn, who admits the outlook is worrying. “Money looks set to remain tight and many will continue to find that access to the market is restricted by cautious lenders.” He believes such an outcome will have important ramifications for the wider economy. Were Rics’ predictions to come about, there will be around 700,000 fewer residential and commercial property sales in this year than there were in 2007. Recent market indicators support Rics’ forecasts. UK property rises fell by 1.1% in April, the sixth monthly decline in a row, and were down 1% from the levels seen in April 2007, reports Nationwide. The building society says such price falls reflect a weakening market which had been hit by “poor affordability and tighter financial market conditions”. The latest fall means that the average UK home now costs £178,555, which is £1,759 lower than April 2007. This gloomy prospect has been UK house prices first fall for 12 years I nvestor EXP A T Serving expats for more than 17 years £4.95/ €7.50/US$7.50 July/Aug 2008 Bringing advisers and investors together I nvestor EXP A T Serving expats for more than 17 years £4.95/ €7.50/US$7.50 Offshore savings Who’s offering the best rates for expat savers. Money management How to regain control through careful debt management procedures. Credit crunch manoevres Skipton Guernsey guides expats through the causes of the credit crunch and its impact on their savings. Healthcare Check out new developments in the international healthcare insurance market. Retirement HSBC explains why 2 million women are losing out on a potential pension income. Regulars 10 Offshore funds 11 Offshore savings accounts 21 Property investments 22 Offshore mortgage market 6 16 www.expatinvestor.com As figures confirm that UK property prices are now falling, it’s more necessary than ever that property investors keep watch on this market and their investment in it. For more information from our advertisers or about products featured in Expat Investor enter the Fast Facts number onto the Reader Reply Service coupon on page 20 or go to: expatinvestor.com www.expatinvestor.com “There are those that you know you should read, and then there’s the magazine you will read.” To register for Expat Inv estor digital edition, visit the w ebsite at www .expatinv estor .com Serving expats for more than 19 years 9 20 confirmed by Halifax’s price survey, prompting the forecast of a “modest (low single digit) decline in UK house prices this year”. The Halifax adds that any declines must be viewed in the context of the significant price rises over recent years. “UK prices have increased by 171% over the past 10 years and by 51% over the last five years.” According to the Halifax, the average UK property price has risen by £120,860 during the past decade, from £70,696 to £191,556. More detailed scrutiny of Halifax’s survey shows that there were house price falls in six regions with the biggest falls in West Midlands (–5.0%) and Wales (–4.7%). Homebuyers in a stronger position Buyers have been putting down bigger deposits than in previous cycles. The Halifax found that 82% of all new borrowers put down a deposit of more than 10% of the house price during the final quarter of 2007. By contrast, 56% of new borrowers put down a deposit of more than 10% in 1989 and 1990. The average deposit put down by a first-time buyer (FTB) in 2007 (£34,381) represented 20% of the purchaser price, compared with 12% in 1989. Only 5% of FTBs took out a loan of 100% or more of the purchase price in 2007, compared with 35% in 1990. More than a third (35%) of owner-occupiers in Britain own their home outright. (There are 11.8 million households with a mortgage and 6.3 million households owning outright.) In addition, nearly one in four (25%) of properties bought each year are bought with cash. Total house sales have been much lower in the last few years compared with the height of the 1980s boom. There were, on average, 1.15 million transactions in England and Wales in the last three years (2005–2007). This was a third – 560,000 – lower than in 1988, when there were an estimated 1.71 million transactions. First-time buyers also account for a significantly smaller proportion of new mortgage borrowers: 30% against nearly 50% in the late 1980s. The interest rate quoted is variable, gross and effective from 3 July 2008. Monthly interest available at 6.30% gross p.a. (AER 6.49%). This account is only available online to individuals aged 18 or over and is not available to UK residents. Bradford & Bingley International Limited, International eSavings Unit, PO Box 263, Douglas, Isle of Man IM99 2JJ British Isles. Registered in the Isle of Man No. 052221C. Registered Office: 30 Ridgeway Street, Douglas, Isle of Man, IM1 1TA. Copies of our most recently audited accounts are available on request. Bradford & Bingley plc undertakes to discharge the liabilities of Bradford & Bingley International Limited in so far as the latter is unable to discharge them and remains a subsidiary of Bradford & Bingley plc. Under Isle of Man legislation, eligible deposits made with an Isle of Man office of Bradford & Bingley International Limited are covered by the Depositors Compensation Scheme contained in the Banking Business (Compensation of Depositors) Regulations 1991 (as amended). AER stands for Annual Equivalent Rate and illustrates what the interest rate would be if interest was paid to the account once a year.This advertisement does not constitute an invitation to make deposits in any jurisdiction to any person to whom it is unlawful to make such an invitation or offer in such jurisdiction. Interest rates are variable. Your tax position will depend on your personal circumstances and you may wish to seek guidance from your tax adviser. It is the responsibility of the depositor to declare any interest received to their relevant tax authority. EU residents who are subject to retention tax by way of the EU Savings Tax Directive will need to consider the effect of the retention tax that will be applied to their accounts. Licensed by the Isle of Man Financial Supervision Commission to conduct Banking Business. Apply online now at www.bbi.co.im me& my easy option Enjoy a great rate and easy access. 6.50 % Gross/p.a. eAccess2 Offshore internet banking for expatriates . Internet Savings Account . Interest available Annually, Monthly or Deferred . Minimum balance only £1,000 . Great for regular savings . Deferred interest for tax planning Fast Facts 66000 14 Figures from the Council of Mortgage Lenders have shown an increase in the number of loans taken out by buy-to-let landlords in 2007. With first-time buyers finding it increasingly difficult to get onto the property ladder, it might be expected that private landlords are having it easy. Alan Harper, Senior Analyst at Moneyfacts.co.uk, has researched the availability of buy-to- let mortgages and reports, “Moneyfacts.co.uk research shows that landlords have not escaped the fallout from the credit crunch. As in the residential market maximum loan to value limits have fallen during the second half of 2007. “Moneyfacts.co.uk calculates that, this time last year, the average buy- to-let LTV (loan to value) across all prime products was 82.8%: today it is 80.1%. Based on taking an average LTV on an ‘average’ house price in February 2007 of £189,197, a borrower would have required a contribution of £32,542. On today’s figures, they would need to find £38,063. “Despite the recent tail off in house prices, the average new buy- to-let landlord needs to find around £5,500 more now than a year ago to buy their first rented property. Go back five years and the same calculation (based on an average LTV, researched by Moneyfacts.co.uk, of 79.2%) and the Halifax average house price average of £123,686, equates to a contribution of £25,727, nearly £12,500 less than today. “In May 2007, when property prices were rising and the market was booming, 13 buy-to-let lenders were prepared to offer 90% LTV, the highest LTV ever offered on a buy-to-let mortgage. Now this number has dropped to five.” First time landlords feeling the pinch
May June 2008