Hide And Seek

Number One Hyde Park has been well publicised in the media as the ultimate London property development. The prices are said to be from £3 million plus for a shoebox one bedroom flat to £36 million for a posh penthouse.

In its way it is a microcosm of the insanities of the UK property market as well as an extreme example of how wrong our money system is going. The latest information is that a large number of the flats are not paying in council tax to the local authority.

This is Westminster Council, the home of our seat of government where you might expect a greater attention and drive to get in the revenues. But it seems there are obstacles. The first is that the developers and sellers of the flats claim that they do not “know” who owns them.

That the Candy brothers are less able to identify their customers than the chap who sells garden sheds down the road from us is a source of wonder to me given the extent and nature of administrative and legal services available to them, but there you go. Even the biggest beasts can be totally incompetent.

Or perhaps it might raise some interesting questions about the sales tactics. One matter is how the prices were originally “benchmarked”. There is the smell of the “huckster’s plant” about this. Have someone put up a big bid early and all else will follow.

Candy brothers are well connected with other London property players so they would not have too much trouble finding a helpful friend. Especially, as amongst their closer contacts there were some who really needed to protect whatever wealth they could rescue from the demands of anxious creditors and others.

Legally, of course it is all shipshape and trim and not a speck to be seen. The owners of the flats are all business people with complex financial structures. These are the kind that disappear wealth from beyond these shores through a chain of secrecy jurisdictions to a place that nobody can find.

Least of all the tax gatherers of Westminster City Council. What is really odd about the whole business is the annual Council Tax payable is reported to be £1375 a flat. This figure may surprise most readers and it is likely that very many people would be delighted to have any flat or home, Knightsbridge or wherever where the total Council tax payable was as low as this.

How did they manage it? If it is correct it must be legal. Yet there are the most elaborate arrangements in place to avoid it on behalf of some of the richest people on the planet. Or would they rather not be identified for reasons we can only speculate about?

The problems relating to this kind of thing in the property world are well known. Apparently, the covering up of ownership information enables avoidance of stamp duty and a range of other taxable charges and expenses.

Quite how much in total a wealthy property investor can avoid or evade is astonishing. The national estimates for this are staggering in the context of our present fiscal situation.

From what is known about some of the flats from the back of my personal random memory between the ears came a little voice saying “’Ullo, ‘ullo, ‘ullo.” Names emerged from the mist of Scotch there. These are well known to many people in and around the London elite and their connections.

That the owners are truly anonymous is highly unlikely. If I am right not only do many know who they are but they are also major donors to the Conservative Party with a direct line to the Prime Minister and the Chancellor of the Exchequer.

And nobody dare breathe a word.

Evicting The Aged

Hot on the heels of the attempt to deal with Dale Farm residents, property speculators in a small way, comes the suggestion that older retired people living either alone or as couples in family sized properties might be encouraged to shove off somewhere else.

It is alleged that this would release a lot of homes for people with greater needs. These are not specified but we can imagine. Some are supposed to be families who cannot at present afford the costs of buying houses.

The delicate issue that a sudden flush of selling might drive the property prices down when the financial authorities are frantically try to prop them up for the sake of their investment returns and all the dodgy mortgages given out in the last decade has not been mentioned.

Additionally, there are all those older people who have been enticed into equity release schemes which effectively can trap them where they are.

The other issue is where all these aged might go to. “Down sizing” is the theme but this is a lot more complicated than it seems. We have already had one major shift in recent years, those who have already cashed in on London area homes to go somewhere else, leading to rocketing prices in rural and seaside locations and putting the locals out of the market.

Some of the older people in turn have been able to borrow money to go in for the “second home” or the “holiday home” capers. There are a lot of these. In how many places at present there are once working class cottages, which are now used for these purposes and often left empty for half the year or more. Many have benefited from tax breaks for one reason or another.

Can you see any of our politicians leading the charge against not just the aged but the connected ownership of second and holiday homes? Just how many homes vacated by the ancients in desirable areas might become only second (or third) or holiday homes for those with access to credit?

You will see where this is leading to. If the market is going to be directed into ensuring the “right” people are buying the homes then this means control over sales, credit and financing. Inevitably, price control might be in the offing with the other matter of the nature of property taxes becoming a major factor.

There could be unforeseen consequences. “Down sizing” means going from larger detached and bigger “semi’s” into smaller homes. The very size of home needed by first time buyers and all those “singles” who are now around struggling to get into the market.

In order to sell those larger places then people with smaller places must have to want them and the higher running costs and mortgages involved. Given the way the economy is going just how many families with middling and lower incomes want to take all that on?

Then there is the element of speculation. If you are trading up you increase the element of risk. In the last three decades increasing the risk has been funded and encouraged on the basis that investment in property is better than saving for income or pensions. We know where all that has led to.

In looking at the aged there are increasing numbers of those of greater age and in need of continuing care and support. These are often people especially reluctant to have to move despite all the difficulties. In any case where do they go to?

At one time the retirement flat sector was an option but this is in serious disarray at present thanks to their property management falling into the hands of big finance intent on maximising income streams, securitising them and engaged in major leverage of all the assets. This has gone badly wrong.

Instead of reducing their worries, work and liabilities people in their 80’s and more are having to watch, calculate and administer in ways far beyond those had they stayed back in their own homes. For some it has become a nightmare.

With both pension incomes and savings income of the old being squeezed giving very many problems at the margins the outgoings now arising from this kind of “down sizing” now make it a much less attractive option in the later years of life.

The same financial and speculative drives have had major impacts on the care home provision and other residential facilities for the old. There has been a surge of scandals and disasters in this sector.

Add to this the major reduction in the number places at a as a consequence of increased regulation and the nature of the property market at the same time of increasing numbers of the old there are further strains. Care in the community means a lot of little trained ladies rushing about in cars to do their best, if they can.

On feature of both care homes and hospitals is the changed culture of “care”. One community nurse of the old school told me that she was tearing her hair trying to tell many care home providers that hydration and nutrition mattered not just feeding the residents on anti-depressants prescribed by “flying doctors”. It is a lesson now being relearned the hard way.

What will our politicians come up with to deal with all this? Holidays in Switzerland with one way tickets?

Swanning Around

Cyprus is also needing assistance and bail out, although not to the same extent as its larger fellow members of the EU. Nassim Nicholas Taleb’s theory of “Black Swan” events has had a great deal of attention in recent years.

Automatic Earth has an intriguing item on this which suggests that the problems in Cyprus arise from just such an event. It is worth reading for the full explanation of what can happen when you least want or expect it.

http://theautomaticearth.blogspot.com/2011/07/july-28-2011-real-black-real-swan.html

In the meantime closer to home, this blog has suggested already that there are a set of pre-conditions in the leasehold property sector that have the potential to go bad if some unlucky circumstances arises. Naked Capitalism has sounded a warning.

Few seem to be aware that serious issues with one of the major UK operators in this sector have led to the Bank of America owning a number of companies. This has happened because they were security for debts owed to the Bank which could not be met.

Amongst the companies are not only major property management services but a number who own the Freeholds of very many properties. It is interesting to see how the Bank of America deals with property financial issues on its home territory.

http://www.nakedcapitalism.com/2011/07/orwell-watch-banks-put-a-happy-face-on-demolishing-foreclosed-homes.html

So should you see new blocks of flats suddenly being razed to the ground there is a rational explanation. At least, that is, according to the Bank of America and its associated financial agencies. Those stuck with the mortgages, other debts and liabilities that have lost their investment in their home may not see it that way.

Buy shares in demolition firms?

Who Owns London?

Those who do not have a few tens of millions to splash out on second or tenth homes will have missed the shindig to celebrate the completion of Number One Hyde Park (look at onehydepark.com and endless stories) in Knightsbridge and opposite Harrods, a subsidiary of Fulham FC just for contrast.

Apparently it was a gathering of our new good and great in the land. Essentially chaps with their hands on oil and gas supplies and others who are at the forefront of the Non-Taxed part of our economy. The sort that Mayor Bossy Boris The Blonde Blunderbuss prostrates himself before at the tinkle of a phone call.

Within these people there are connections with a UK background. There are a handful of remnants of the old landed aristocracy who were lucky enough to marry heiresses owning lands on the fringes of the London of the 18th and 19th Centuries.

They are the ones who were clever enough to move their valuable property holdings into company ownership before Inheritance Tax and the consequences of the long Agricultural Depression could cull them along with their peers.

There are the Crown Estates, the only one that excites the London media and a useful distraction that avoids too much attention on other property owners, especially those media moguls and their friends who have substantial interests in London property.

It is not a simple business. In the middle years of the 20th Century those with mortgages almost always borrowed from UK financial organisations who relied in turn on UK savers or investors based in the UK. Public Sector organisations normally owned their own buildings or rented them from UK property companies.

Much of private industry and commerce were the same, those who owed money on their buildings again were large engaged with UK financial companies. Some of the arrangements had more complex arrangements but it was simple to know who was who and in money terms what was what and the implications.

In other sectors, rentals and leaseholds much the same applied. UK ownership, borrowing, management services and the rest were identifiable firms. You knew where they were, who owned them, for the most part could see their accounts and they were more or less all within the taxable economy.

What is the position now? One of the better known examples is HMRC who are said to have unburdened themselves of property ownership and management. They have sold off and then leased/rented or what back, given over the management of the properties and the rest to attract “investment” into UK government operations.

The general idea was to promote “efficiency” more or less like Santa Claus is said to be an efficient way of distributing goods to the lower age market segment of the leisure products industry. He promotes sales and the reindeer and elves get to eat while he is the public image of a bountiful financial operator.

However, as all parents know the reality is sharp increases in spending out of disposable incomes often now driven by increased debt loading with added interest and servicing costs arising from children’s insatiable demands urged on by a foreign ruthless and relentless marketing and financial servicing operation.

Were I to go through all the ownership, property management, financial systems and the hugely complicated, layered, intricate ways of moving money, credit, debt, added consultancy and accounting costs of all the types of property in London it would be a very long post indeed and that is not mentioning tax havens.

Also, it would be almost impossible to understand and certainly the financing of much is beyond any comprehension. Because not only do ordinary people have little idea of what is going on, nor do our politicians who serve the system, nor does the average financial adviser or pension fund trustee and least of all the people who are actually running the show.

As for the Bank of England, this lot are the equivalent of a pack of drunken incompetent elves under the guidance of a Santa who is in serious denial of his mounting money problems and reindeer out of their skulls on schnapps laced moss and lichen.

Bossy Boris believes in unlimited support for housing benefit for non-working, non tax-paying people lodged in premises owned by non-taxpaying people engaged with financial agencies who pay little or no UK tax all of whom owe little or no allegiance to the UK. One does wonder where his family money is invested in.

But if you go round all sectors of property in London now and ask the simple question of who owns what, where the money is coming from, where the eventual ownership lies, how it is managed and to whom money is owed and what have been the trends over the last twenty years you will come to realise that the UK no longer owns most of London.

London may be the capital, financial and media centre of the UK. but the taxpayers outside the M25 are paying huge subsidies one way or another to sustain a city whose main activity is to extract as much money from the UK and to pay as little UK tax as possible.

If my visit yesterday was any guide, it is not just the ownership that stinks; the air quality there now is the worst I have experienced.

And I remember December 1952.

Property Shock Horror - Cable Weighs Anchor

At last it has happened. A senior politician, respected, regarded as an honest and decent man, well known on TV for his stance on moral issues in politics, has “come out” and admitted to a truth whose name has barely been whispered or hinted at in polite society. It is something that has shocked his class, and all his colleagues to the core, it has horrified everyone, not just those of his peers and background, but in almost every home in the country.

Vince Cable has admitted to a belief in some sort of real property tax. Inevitably, the whole of the London Mediocracy, notorious for the viciousness and violence of its bigotries and prejudices has turned on him almost to a man, woman, or persons of transgender. Will he ever be invited to a dinner party again? Or any other form of party? Will he be jostled and jeered at when he passes by the drunks spilling out of the bars in Parliament as they stagger off to the Divisions? Will the boys of the Bullingdon Club try to throw him into the fountains of Trafalgar Square? Will people in dark suits bawl insults at him in the street? Will gangs of private equity property investors and estate agents gather outside his home to lower its value? Will all those bloggers with second or third homes run endless Youtube Hitler in the bunker spoofs as well as obscene diatribes?

Well, if he has the courage, who am I to stand aside? Yes, people, I too believe that some form of property tax has become inevitable in present conditions, and that the nettle should be grasped. For those who have allergy problems with nettles, read dock leaves. At one time we had “Rates”, a curious way of local authorities raising their funds from the distant past, that had developed so many weaknesses and problems that it had to go. Then, for a brief moment in time around 1990, there was the “Poll Tax”, more properly called “Community Charge”, the inception and structure of which was botched, a capitation tax to avoid the need for taxes on property. The Conservative Government that had bet the house (OK a dreadful pun) on the notion of a Property Owning Democracy, made it impossible for themselves to risk any significant added levies, and this in turn led them into unleashing The City predators on to property to generate revenue by other means. Well, we all know where that led to, and in the USA where the same notions led to the same problems.

Indeed, there are levies at the moment, the Council Tax which is a sort of property tax at local level, but does not provide near enough revenue for local spending. This has serious weaknesses and is heavily loaded in favour of the better off and those at the top end of the property market. There are some transaction charges, but this is dependent on the number and nature of transactions. Pity all those expensive officials in the Treasury did not manage to work out that one, perhaps they were all too busy with their own and helping politicians with their property portfolios.

As for the “difficulty” and “unfairness” (the rich pay more, indeed pay something) this should not be too difficult, around the world are many and various forms of property taxes. If I were to lay off the Fantasy Football and USGS Earthquake listings for a couple of hours, and do some heavy Googling with luck I could knock out a structure by the end of the week, and then mailing round a few reliable people would tidy up most of the details. I am tempted to try. The real problem would be to try to explain it in simple terms to the Treasury, the Bank of England and the London Mediocracy, who will listen only to the foam flecked mouthings of the dogmatic extremists and arm waving threats from all the vested interests involved.

Never mind that most of them might be obliged to pay at least one tax that bore some connection to the extent and nature of their wealth and income.

Property - Foreign Edition

In today’s Telegraph there was a tearful article from Emma Soames on the subject of her travelling problems to her second home in the Vaucluse.

Ryanair is reported to have moved many flights from Manchester Airport elsewhere because of the landing fees, and cancelled others on “economic” grounds, which means that their tight operating margins have become eroded with a range of added costs.

Here is an extract:

“Whatever you have thrown at us, we have sucked it up, because as long as we stuck to the rules – as dreamt up, and frequently changed, by yourself – our houses in France were still accessible.

I bought my mousehole, an 18th-century village house in the Vaucluse, northern Provence, two years ago. Much as I adore the region, its lavender, markets, heavenly walks in flower-surrounded vineyards, and the endlessly amusing but gravely disappointing searches for furniture in a country that has been stripped of its heritage by American decorators.

I know that bucolic rural life is not for me full time. My initial plan for my maison secondaire was to spend a week there for each of the summer months. So far, I have only managed once or twice a month for three or four days at a stretch – but it’s Ryanair flights that make it a possibility. I can fly with other airlines from other airports. But Ryanair’s presence helps bring the price of all flights down.

The harsh fact is that without Mr O’Leary, I would be mostly stuck in England. The value of the house, and the possibility of renting it out to others, would be equally poleaxed.

Which is why all second home owners should be very watchful and worried about Mr O’Leary’s latest decision. He blames airport charges for his Manchester pull-out. But if declining profitability of such routes proves to be a factor, those of us with holiday homes will need a backup.”

The tears rolled down my cheeks. The cheap landing fees enjoyed by Ryanair at many of the destinations are in fact a subsidy from the local councils at the urging of local business interests. So what happened was that as well as a few extra tourists British property price inflation was imported by second and holiday home buyers, usually at the expense of low paid local people, and often sterilising and damaging rural communities.

Ryanair in turn has benefited from the UK government approach to alleviating the costs of air travel, again at the expense of the ordinary taxpayer.

There is little doubt that if the cost of aviation fuel were to remain high or increase and other financial pressures were to force other added costs onto the aviation industry, many more low margin routes would be affected.

So how long will it be before the Telegraph starts calling for Government assistance and extra help for all the owners of second and holiday homes elsewhere?

Property - Investing And Retaining

Listed below are the people that the Labour government have helped to buy their own homes, and second, and third, and other peoples, freeholds of just about all the leaseholds, the property management services of leaseholds, and lots and lots of repossessions. Despite recent difficulties they have been able to rely on the unqualified backing of nationalised and state supported banks

To these should be added their ocean going accommodation, and interests in commercial property, such as hotels, pubs, and indirect holdings in social housing.

Added information on their overall tax commitments is also given.

Drug Barons – zero tax.

Housing benefit fraudsters – zero tax.

Money launderers – near zero tax.

Identity and passport fraudsters – zero tax.

Human traffickers in prostitution – zero tax.

Human traffickers in other forms of slave labour – zero tax.

Financiers in the UK but based in tax havens – near zero tax.

Terrorist support groups – zero tax.

Private Equity operators – near zero tax, with those buying government property paying zero tax.

Private Finance Initiative providers for government– near zero tax.

Prestige project consultants, advisers, and providers – near zero tax.

Agents and others dealing in one legged, broken winded footballers – zero tax.

Various persons dealing in three legged, broken winded horses – zero tax.

Public sector top executives and chairpersons- near zero tax.

Global company, banking, and Quango bosses – near zero tax.

Global arms dealers – zero tax.

Ministers Parliamentarians and associates – tax paid on declared incomes and expenses, of some other sources of income many will pay zero, and others near zero, apart from a small minority with unaccountable moral attitudes.