Special status for the Isle the world has never heard of
The Isle of Man may be the forgotten corner of British property investment but for the many who have discovered its unique combination of independent government, growing economy and astonishing tax rates that's no bad thing. But a few high profile projects in recent months and years has spilled the beans on what some think is an undiscovered gem in the property investment market.
The quaintness and remoteness of the Isle of Man — better known for its quirky laws and well-heeled residents — is on course to attract international property investors after a number of large building projects and advantageous tax rates were recently announced.
Castletown, the island's original capital and a picturesque village of 3,000 people, is due to undergo a huge transformation after local businessman Roy Tilleard bought up every property in the town centre. He filed for planning permission for a £7m redevelopment for a new shopping and living quarter next to the historic town centre, which is scheduled for completion in summer 2007.
Tax laws to make most of us weep
Tilleard's project was prompted by the island's peculiar status as a tax haven. It is governed by its own parliament, the Tynwald, and has largely managed its own affairs since the year 979. As a Crown Dependency, it is neither part of the UK, nor the EU. Although foreign relations and defence are Westminster's responsibility, it sets its own tax laws and as a result has long attracted wealthy entrepreneurs and retirees. And it's no wonder, considering there is no capital gains tax nor inheritance tax.
Douglas bets on Casino project
Castletown is not the only hotspot on the Isle of Man. In modern-day capital Douglas there are changes afoot that will transform the island — and be of great benefit to the Castletown project.
In July 2005, the local government set out what was probably the biggest project for 30 years. The Manx government offered a casino-operating concession as part of a major redevelopment in Douglas. A prime site only a stone's throw from the ferry terminal and seaside promenade, which is currently used as a bus station, has been designated as development land for a four or five-star hotel with a casino and leisure facilities. Construction was scheduled to start in mid-2006. A rival £40m hotel and leisure venture, on a site opposite, was announced by Hilton and the local Sefton Grand Hotel in December last year.
There are other signs that show Douglas is in the midst of a transformation — for instance several of the run-down Victorian hotels on the promenade have been refurbished or turned into apartments or upmarket shops. The Gaiety Theatre has been restored to its Victorian glory and 164 new apartments are due to get the go-ahead.
From bust to boom
Tourists stopped visiting the island in the 1980s after being tempted to Spain and other warmer climes by cheap airfares. As a result the economy collapsed and national income fell to just 55% of the UK's level, unemployment was an unhealthy 12% and young people, understandably, were leaving at their first opportunity.
Today's statistics tell a very different story. National income is 106% of the UK's, and with the island's economy in 2004 growing by a robust 6.3%, the wealth gap between the Isle of Man and the UK is set to widen. Other attractive factors, including a maximum income tax rate of 18% and a negligible crime rate, account for the estimated 25,000 illegal immigrants who have flocked to the island. Despite the influx of new residents and the population growing younger every year, with a 1.3% unemployment rate the island desperately needs more manpower.
A good place to do business
The island offers special online-gambling legislation, which is why the world's second-largest online-poker firm has moved its headquarters there from Costa Rica (other online-casino firms are believed to be considering following suit). Other attractive elements such as a favourable regime for registering ships (registers for private aircraft and satellites are to follow), the government's AAA-credit rating from Moody's, and net financial reserves of about £500m all point to a destination that's a good place to do business.
What this means for property prices
Some 70% of the local government's tax revenue now stems from VAT, and it can afford to cut corporation tax to 0%. Coupled with income tax rates of just 10% and 18%, this environment will lead to rising property prices. And, crucially, only 8% of the island is open to building, often restricted because of its 20 protected nature parks. Consequently the number of properties suitable for rich tax exiles is limited, so investors with foresight will invest in the kind of property that wealthy immigrants are likely to snap up.
Investors are starting to take notice
In another sign of inward-investment fuelling property rises, the government plans to double visitor numbers to 500,000 per year by 2008 — not least because the first casino is likely to be followed by others — and this means expanding existing ferry routes.
Expect the promenade to profit from an expansion in visitor numbers; and although it is three kilometres in length, there will only be so much space to build apartments with direct promenade-access and unrestricted sea views. In five years, these properties should be able to command a scarcity premium.
Island hope for the 'Rings' factor
The Isle of Man is also set to benefit from the 'Lord of the Rings factor', in which New Zealand enjoyed a huge increase in tourism and property investment on the back of the blockbuster trilogy. In November 2006, Stormbreaker, starring Mickey Rourke and Ewan McGregor, will hit the big screen. The £21.5m production is largely set in the Isle of Man, and the local government is banking on it so much so that they bought an equity stake in the film.
The winter of 2006 will quite possibly be the last and final season for making property purchases without having to compete against other overseas buyers.
Life on the Island
- Area: 572 square kilometres - ten times the size of Guernsey and five times the size of Jersey.
- Population: Officially 76,000, but the actual population is probably around 100,000.
- Climate: Despite its northerly location, sea currents create a surprisingly mild climate. Subtropical plants flourish and winters are mild.
- Happy to be here: A huge 93% of the population say they're very satisfied with their quality of life on the Isle of Man.
- Getting there: Nine airlines serve the Isle of Man from airports around the British Isles including London's City Airport and Gatwick. Ronaldsway Airport on the southern tip of the island benefited from a multi-million pound upgrade a few years ago.
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