Arab Spring May Bring Unseasonal Cheer to London Property Market, But do Fools Rush in?
By Vistra jersey Limited, PRNESunday, July 3, 2011
ST HELIER, Jersey, July 4, 2011 -
The turmoil in the Middle East seems to be having a silver
lining for at least one group of people - London Estate Agents.
Anecdotal stories abound of residents in the leafier boroughs such
as Chelsea being approached by their local estate agent with a
‘once in a lifetime offer’. Apparently, some estate agents are even
offering homeowners a premium of up to 20% to complete on the sale
of their property quickly. The rumour floating around Chelsea
recently was that one particular offer was being conducted on
behalf of a significant Middle Eastern figure who was looking to
export at least some of his assets to the premium end of the London
prime property market.
West London agents Kay and Co would appear to concur, Martin
Bikhit comments, ‘We are seeing prime markets being boosted by
strong overseas demand. As political turbulence intensifies
overseas, it is reinforcing once again that residential property in
central London is a safe haven for international wealth. Over the
last few months the number of Middle Eastern buyers has
significantly increased following the Egyptian crisis and the
subsequent wider unrest in the region. We have seen the proportion
of Middle Eastern applicants double compared with the same time
last year.”
The political and social turmoil has undoubtedly created genuine
discomfort and uncertainty for many respectable Middle Eastern
families with assets in the region. It is an entirely rational
reaction against such a backdrop to want to diversify risk by
moving assets into less volatile areas and the interest in London
property and other high quality assets is not unexpected. However,
such investors must be careful not to rush in to transactions
without the appropriate long term consideration being given both to
the style of the assets and the ownership structure used to hold
it.
Families wishing to restructure assets out of the Middle East
and into western markets, whether London property or other
investments should bear in mind a number of considerations if
transactions are to be successful and achieve a meaningful and long
term reduction of risk and increase in portfolio stability.
Situs of the assets
Where assets are located can often determine the reality of how
they are treated. Immovable assets such as property will be always
vulnerable to external influences, so investors would be well
advised to ensure portfolios are built up in jurisdictions that
offer political and social stability, security, a good legal
framework, and genuine expertise for handling them.
Diversification of assets
Spreading risk across a variety of asset classes is generally
regarded as sensible for most families. This requires careful
consideration of a number of factors, such as appetite for risk,
country specific and political risk, currency risk, assets
concentrations, asset return correlations and liquidity
requirements, both today and in the future.
Tax
Effective tax planning needs to be taken into consideration
regarding the transfer of assets or acquisition of new assets into
a new jurisdiction. Many of the tax advantages that come into play
in the Middle East are simply not available in the UK or Europe,
where the tax regimes are more complex. Thus capital gains tax,
inheritance tax, and income tax are all variables that may need to
be taken account of by the Middle Eastern family moving assets into
Western Europe and the UK, unless care is taken to structure such
assets into tax efficient holding vehicles.
Structuring
Proper structuring of assets is vital. For Middle Eastern
investors considering Europe as a home for assets, different
vehicles may be required, depending upon the local legal and
taxation system. Foundations, Private Trust Companies and Trusts
are widely used in this respect, with an important driver for
selection being whether the local legal environment recognises
trust structures or not. There are many trust and foundation
structures that would be suitable for most Middle Eastern families
which offer protection, whilst retaining an element of control over
the assets.
- Foundations - are familiar in the Middle East and allow
a lot of flexibility to family members, as they can make up the
majority of the council members. The foundation’s council is the
body that administers the foundation’s assets. In Jersey,
foundations have a guardian type role, which is akin to that of a
protector, and that too can be occupied either by a family friend
or family member. The guardian’s role is to ensure that the council
carries out its functions in relation to the charter and the
beneficiaries. However the guardian cannot both be a guardian and a
council member (unless they are founder or a licensed service
provider like Vistra).
- Private Trust Companies (PTCs) - are becoming
increasingly popular amongst Middle Eastern families due to the
control that they give the family over the underlying trusts that
invariably hold the family’s assets. PTCs can be established in
off-shore jurisdictions to provide families with the ultimate level
of control, and, subject to tax considerations, the family can
provide the majority of the board of directors required to run the
trusts underlying the PTC, alongside advisors and fiduciaries. The
family are usually closely involved with the trust company, and can
influence the underlying structures.
- Trusts - many International Business Centres have now
introduced amendments to their trust laws that allow the role of
protector to be implemented. Whilst it is common for corporate
protectors to be used, there is absolutely no reason why a close
family friend or a non beneficial family member cannot be used to
steer the trustees in the best interests of the beneficiaries. This
can be extremely helpful when considering Sharia law and its
application to the beneficiaries.
For the Middle Eastern family who, following the onset of the
Arab Spring, may now be reconsidering the concentration of their
assets locally, there is therefore a wide choice of options.
However, in reality the process of moving or acquiring new holdings
can prove time consuming and require detailed planning, if a viable
long term investment strategy is to be built.
Vistra
(Jersey) Limited has a long track record of working with
clients from the Middle East and providing for their structuring
and asset protection needs. Vistra regularly works closely
with and coordinates the input of other professional services
providers to ensure an optimum single family solution. This
flexibility and attention to detail are essential, if any wealth
planning solution is to stand scrutiny both now and in the long
term future.
Marc Farror TEP, is the Private Client and Family
Office Director of Vistra Jersey Limited, website
telephone +44(0)1534-504753. Vistra (Jersey) Limited and its
affiliatied entities are regulated by the Jersey Financial Services
Commission.
About Vistra Group
Vistra is a leading
independent provider of trust, fiduciary, corporate and fund
services delivering personal and tailored solutions to
international corporations, institutional investors and high net
worth individuals from around the world.
Our clients can benefit from a multi-jurisdictional and personal
approach, delivered by a team of professionals with an in-depth
understanding of the often complex needs of every client. Our
services include company formation and management, fund formation
and administration, trustee services, family office, marine and
aviation and accounting services.
Today Vistra employs around 350 employees in
covering 18 jurisdictions, with each of our offices providing the
full range of trust, corporate and estate planning solutions.
Today, Vistra is a unique player in the trust and fiduciary
industry, boasting the most balanced geographic reach globally
while always guaranteeing the personal and tailored service that
our clients deserve.
Together, we bring to life the Vistra ethos of “Crossing
Borders, Creating Solutions”.
For further information please visit
Media Contacts:
Guy Stephenson/Jennifer Duffy
Nacelle Ltd
+44(0)20-8333-9125
gstephenson@nacelle.co.uk
.
Tags: Jersey, July 4, St. helier, United Kingdom, Vistra (jersey) Limited
