UK house prices have been rising at their fastest rate for more than a decade. But, unlike previous property booms, most of this growth has been outside of London and South East England. The combined uncertainties of Brexit and the pandemic, along with more employees being able to work for significant periods from home, have led many people to re-evaluate their priorities and search for larger homes and more outdoor space. The Channel Islands, in particular, appear to have benefited from this shift.
With their sea-bound locations enabling them to avoid many of the lockdowns linked to the COVID-19 pandemic, the increasing demand for homes on the islands, coupled with limited housing stock and minimal space for building, has led to soaring prices. Reports published in the summer highlight the average house price in Guernsey had gone up to £510,000, just nosing above London at £500,000, and placing it among the most expensive property markets in the British Isles. Only Jersey, with an average price of £574,000, was more expensive.
The reason for the price hike in Guernsey is not just due to its pandemic response. Many locals cite the outdoors life, personal safety, the option for state-run selective education and gourmet hospitality as key reasons for the island’s popularity. In addition, there is the added sweetener of lower tax rates. Guernsey residents pay a flat 20% tax rate on income – an amount which is capped – and does not levy wealth taxes, such as capital gains and inheritance taxes, as well as VAT or goods and services tax.
Those moving to the island, however, need to be aware that the Guernsey property market is more complex than many countries as it has two tiers: a ‘local market’ and an ‘open market’. Local market properties, as the name suggests, are reserved for those who were born or grew up on the island, or have strong family ties. Although they are also open to people whose employer has obtained an employment permit for them, when there is a shortage of suitable ‘local’ candidates for the position.
The open market properties are available to anyone who holds a British or EEA passport, or has the right to remain in the UK. They are also available to other nationalities, who wish to invest in the Guernsey economy and have been granted an entrepreneur or an investor visa. If you are looking to relocate, these will probably be the properties available to you. They are limited in number and, consequently, much more expensive to buy, with only around 7% of the island’s homes listed on the open market register.
Another aspect of property purchases on Guernsey is the legal framework, and specialist advice is important. The island has its own property laws, several of which are influenced by Norman French law, with some of the legal phrases and documents still in French. Another key difference is that the purchase price of a property is split into two elements: the realty cost, which reflects the physical structure and the land surrounding the building, and the personalty cost, which relates to the fixtures and fittings included in the sale. Normally, this split would be 97.5% realty and 2.5% personalty, although it is possible to apply through your advocate for a higher personalty allowance.
This is relevant as Guernsey has a tax on house purchases called document duty, which is payable by the buyer to the States of Guernsey (local government and legislature) and is based on the property’s realty value. The rate is on a sliding scale, starting at 2.25% of the value up to £250,000, before rising to a maximum of 4.50% on the portion between £1,000,000 and £2,000,000. The duty must be paid before registration of the property and the transfer of ownership.
On top of the document duty, there will also be legal fees, which vary depending on the type and age of the property, as well as bond and court fees. This bond is a security taken over the property, which matches the amount borrowed from the bank, and must be registered with the Greffe – the Guernsey Royal Courts – which then assesses the document duty payable on the transaction and acts as the agent for the payment and collection of the duty.
The court fees arise at the final stage of the purchase process as you need to go to the Royal Court to have your property contract passed. A ‘completion date’ is agreed and you are expected to attend in person, along with your advocate. The conveyancing court sits each Tuesday and Thursday at 9.30am, and the dress code should be smart, with no shorts or beachwear permitted.
Those with bigger budgets can also consider Jersey, which topped the list of average house prices in the British Isles and has also experienced a surge of enquiries from people looking to move to the island. In June 2021, it was reported that Brexit had fuelled an increase in interest from the super-rich, with the biggest Channel Island set to record one of its highest numbers of new ‘high-value’ residents in the year. As a result, the property market is booming, with a property in St Brelade recently selling for a record £31 million after two prospective buyers entered a bidding war.
The right to buy residential property in Jersey is also controlled by local laws and restrictions apply. To qualify as a high-value resident, individuals must demonstrate assets in excess of £10 million and an income that is “comfortably and sustainably” over £725,000 a year. In addition to these thresholds, there are also minimum prices for the properties that new high-value residents are permitted to buy. From 1 September 2021, these were increased significantly, up to a minimum of £1.25 million for an apartment and £2.5 million for a house.
Whether you choose the Channel Islands or not, you should always take legal and financial advice before you proceed with any property transaction. And, if you are interested in relocating to the Channel Islands, we have property and trust specialists based in our Guernsey and Jersey offices. Our experienced teams can provide the best possible guidance in navigating the intricacies of the local property markets, and ensure the process runs smoothly for you.
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Investments can go down, as well as up, to the extent that you might get back less than the total you originally invested. Exchange rates also impact the value of your investments. Past performance is no guide to future returns. Any individual investment or structure is referred to for information only and are not intended as a recommendation, not least as it may not be suitable. Your home is at risk if you do not keep up payments on a mortgage or any other loan secured against it. You should always seek professional advice before making any financial decisions.