The world is a much more uncertain place since Tunis erupted. Even the more secure of absolute rulers are checking their bolt holes and reestablishing links with their most favoured alternative places of residence.
For most of them, London fits that bill and they are joined by the growing number of super rich who have reason to distrust the continued tolerance of their homelands. The Khodorkovsky affair has had reverberations way beyond Russia. We should, therefore, not be surprised at this month’s figures that show a stunning start to 2011 in top-level residential sales in London. Fitch’s reaffirmation of the UK’s triple-A rating will only serve to continue the trend that sees London as a safe haven in an increasingly uncertain world.
Despite HSBC’s reported rethink on its London base, the government’s bank tax policy has been generally accepted as a careful balance between political and economic necessity and the desire to make the UK a welcoming home for financial institutions. The knee-jerk reaction on non-doms has done harm but it is recoverable if George Osborne’s enterprise Budget is followed by continuing efforts to make the UK tax-competitive. He will also have to show serious intent to get back to a sensible top rate of personal tax. Given that caveat, we ought to expect continued good times for operators at the top of the housing market, where supply will not keep pace with demand.
But that is the only good news. Rising unemployment and uncertainty together with limited mortgage availability and little new-build will conspire to hold back the rest of the market. My real concern, however, is the commercial scene. Investors with money are finding it hard to find suitable deals. What is available is fetching prices which won’t be easy to justify in the near-term.
Despite the chancellor’s promise to press the Irish government, its arrangements to deal with “toxic” loans are exceedingly slow and leave large areas blighted with no hope of early resolution. UK banks have also found it politic to be slow in their recognition of the real state of much of their property exposure. That is improving but certainly not fast enough, and the market is still far too sluggish as a result.
There is a good deal more fallout from the banking crisis to come and the gung-ho attitude of the Serious Fraud Office bodes ill for its handling even after the coming reorganisation. The Tchenguiz affair was inexcusable, whatever the underlying rights and wrongs. Law enforcement should never involve playing to the gallery, but that has become the hallmark of the SFO, whose press and PR department seems to run the show. Justice should be done through the courts rather than the tabloids.
However, while this attitude pervades, we can expect further casualties. All this adds to the lack of confidence that so seriously afflicts the property world and simply undermines our reputation for fair play.
Yet, despite all this I remain optimistic. The success of Eurozone ministers in getting their full reform package through, the remarkable stability of the Far East even in the face of the horrific news from Japan, and the tenacious conduct of the coalition on financial matters give real ground for optimism. The message is hang in there, the wait will be worth it.
The message is hang in there, the wait will be worth it
