One man's disaster is another man's opportunity 

Advocate Carl Parslow of Bedell Cristin in Jersey comments on the opportunities which poor market conditions create.

With stock and property markets in turmoil worldwide, it is arguably hard to find good news for buyers and investors. Falls in interest rates, allied with exchange rate fluctuations have, in the view of many market commentators, made both Jersey and the United Kingdom an attractive proposition for buying and investing in commercial and residential real estate, particularly for those wealthy in currencies other than sterling. 

Certainly United Kingdom property stock looks to be more affordable than it has for many years. While values of Jersey property stock appear to be remaining buoyant, there are also potential opportunities to be obtained here. By way of example is the negotiation concerning an office block in Jersey owned by a UK fund. The property had previously gone on the market at circa £13 million but with pressures on the fund managers caused by investors looking to redeem their investment, the fund was forced to drop the asking price by several million for a quick sale. For those investors who have funds readily available and can move quickly there are still opportunities to acquire commercial properties with good covenants at an attractive discount. 

Proffesional advice for buyers

So how can you, as buyer, seek out potential property investments? First and foremost,
you can conduct your own review of the various properties offered for sale by agents
specialising in residential and or commercial property. The other alternative is to engage
a reputable property search agent. These agents act solely for a buyer, and help clients
to find suitable properties and negotiate the purchase price unlike the estate agent who
generally acts for the vendor. There are a number of search agents operating both in the
Jersey and United Kingdom markets.

Some claim that any costs that such agents charge can be far outweighed by the price saving they can achieve! In a difficult market a well-advised buyer should be confident that the property they are buying is likely to be a good medium to long term investment and that the price they are paying is not out of step with market conditions. Where the property is let, due diligence on the occupier is more important than ever. 

Buying agents usually charge a take on fee to cover expenses plus a commission based on price once a property has been found and purchased. You, as buyer, will be responsible for this fee but will be buying your own professional advice on which you can rely. 

Bargains at auction?

Another means for one to consider is acquiring real property through auction. While this method of disposing of property is not generally used in Jersey, it is a favoured method in the United Kingdom for disposing of residential property. Many investors view this as an opportunity to acquire such property at affordable prices. An advantage of buying at auction in the United Kingdom is that the process should provide certainty. At the fall of the hammer, preliminary contracts are exchanged and the buyer is obliged to complete the purchase, on the agreed completion date. 

Buying by auction in the United Kingdom will entail certain upfront costs, even if the buyer is not successful in the auction room. First and foremost a prudent buyer should carry out a title check and site visit before the auction date and, if a survey is carried out, to have arranged this as well. Depending on the auction conditions, a buyer may also need to arrange property insurance which can be put in place if a bid is successful and, as with all purchases, a buyer should have made arrangements for appropriate finance to be available to fund the purchase price and associated costs before entering into a contractual commitment to buy. 

If you are considering buying property there are numerous issues to consider.A brief summary of some of the salient points to which you should take advice on are as follows. This is of course not exhaustive, and comprehensive legal, tax and investment advice should always be sought: 

How best to structure a purchase of Jersey or United Kingdom real estate as there may be tax implications. This will depend on your circumstances, principally where you are resident and domiciled. The tax consequences of selecting the wrong structure or selecting the right structure but administering it in the wrong way can be very serious and costly. 

If your property is to be let, advice on the liability to tax on any income produced. If your property is held through a company advice on any corporation tax liability should be sought. 

While Jersey does not have capital gains tax the United Kingdom does. As such, when a United Kingdom property is sold, capital gains tax is payable with few exceptions. 

Advice on inheritance duty and tax issues

All in all we have our own criteria when it comes to buying property and investing in property. There are of course risks associated with all investments, not least in the property market. However with prudent advice from appropriate professionals opportunities will always arise. With the current low interest rates for monies on deposit, an attractive rental yield together with the prospect of capital appreciation over the medium term means that interest in the property investment market is likely to return in the near future. Timing, however, will be everything. To paraphrase the London mayor Boris Johnson - One man’s disaster is another man’s opportunity and indeed opportunity for more disasters.