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Monday, 12 November 2012

Manipulating Property Prices and Rentals in Jersey

I last looked at The Construction Business in Jersey about a year ago and I thought I would re-visit this and see what has occurred one year on.

The first thing to note is that the income support allowance for accommodation has increased by just over 6% (from £661 to £701) which is of course significantly higher than inflation and significantly higher than the increase in average wages.

Landlords have not been slow to pass on this 6% increase to their income support funded tenants, indeed many structure the leases to expire just weeks after the increase is announced, in order to gain full benefit of this government handout. A handout which of course does not benefit those most in need in any way, shape or form whatsoever.

Housing too have not been slack in increasing their rentals which have gone up from 75% of the 'market rent' to 90% of the 'market rent'. Someone seems to have conveniently forgotten that this is caused by the increases in the accommodation component of income support and that the current rentals are far, far from the 'market rent' - if only the market were left to set rentals.

This process will of course assist our government to meet its 'growth' targets because the economy is now so much bigger; more rents are being charged by, and more rents are being paid by, the government, of course this is just an accounting trick which will mean that all those Civil Servants and States members have successfully completed their roles, met their targets and achieved the much needed growth.

I also noticed that the qualification for 1.1 (k) status now requires a property to be valued at over £1.5 million pounds a 50% increase - given that there are only a certain number of properties which will ever be deemed acceptable to those with multi-millions and given that there will likely be no restriction placed upon these people purchasing property when the new Work and Housing (Jersey) Law 201- comes into force next February perhaps this explains why the 'average house price' has not fallen but risen.

If the high end properties have experienced a 50% increase in value despite the recession  and indeed with the raising of taxes around the world it is now more attractive than ever to pay what is effectively no tax, then this will help to mask the plummeting house prices in the lower price band.

Looking through Estate Agents website there is something of a bi-polar effect occurring, those who can afford to hold out are refusing to bring the prices of their properties down to a level at which they will sell (and those that are selling are selling at around 20% below asking price) whilst people more motivated are busy slashing prices as fast as they can.

It still appears to me that there is at least two more years of decline to come, people just aren't desperate enough as yet. But with rising food and energy prices, taxation on near exponential increase and stagnant wages more and more people will be trapped in the 'safety net', become dependent on government and be forced to their knee to tug the forelock before the all mighty (and not the almighty) and they had better be grateful, or else.

Property prices are just about the only thing that the States of Jersey can control, and don't they do such a great, public minded, job of it?