Thinking Unthinkably on House Prices

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JERSEY, C.I. – A middle-aged millionaire down at my local pub made an interesting remark the other night after what was, perhaps, one too many…

“If your family lived in Jersey in the 1970’s and owned their own home and you are not now a millionaire, then someone along the way has mucked up”.

Suffice to say, my family didn’t live in Jersey in the 1970s.
But the remark sprang to mind recently when the States of Jersey Statistics Unit released official house price data for the final three months of 2015 and, by extension, for the whole of that year.
In a nutshell, the average price of a home in Jersey is £456,000, having grown 4% last year.

Want one with three bedrooms? That’ll be £545,000 and rising. Although a one-bedroom flat will, on average, set you back a more modest £227,000, which is not dis-similar to what they’ve been fetching for the past few years.

To anyone other than a Londoner, they’re eye-watering numbers.

They also only tell half the story.
If you take the 2015 mean end-of year price for each of the five housing categories and multiply them by the relevant number of houses sold – and sum them – you get an implied annual property market value of £580 million. That’s more than 10% higher than the 2014 result which is £522 million.

These totals are clearly too high because I used the end-of-year prices, so crudely chopping off of half of those 4 percentage points – to reflect an imaginary 2015 mid-point – you arrive at a market value of £568 million… which is much closer to another simpler calculation I did which suggested the housing market in Jersey was worth £555 million in 2015, up from £500 million in 2015.

Proper boffins would be horrified at my methodology. Yet their far more statistically sound methods also reach the same conclusion (without putting a price on it): that Jersey’s housing market grew by more than 10% last year, not the simple 4% prices that grew by.

Bear that in mind while we have a quick look at the taxes people paid on property transactions last year.

According to the States of Jersey draft budget for 2016, the bean counters at Cyril Le Marquand House took in £27 million in Land Transaction Tax and Stamp Duty (henceforth collectively referred to as property taxes) which works out at just under 5% of the total value of transactions we just worked out.

That basically makes sense, although seems like a high percentage.

The elephant in the room though – or elephants in the island – are the multi-million pound 5-bed plus properties, which attract 7% tax, but aren’t included in the States’ housing market figures. That’s because though small in number, their high cash values skew the data.

So let’s make some more wild assumptions, sticky-tape it all together together, and see what pops out.


Take the overall average non-mansion house price at the end of 2015 of £456,000; multiply it by the 2.5% property tax (0.025) they would typically attract and you get £14 million.

That implies homes with up to four bedrooms – the ones reflected in the official stats – contribute £14 million a year in tax.

So the rarer but far more valuable playboy mansions, which are hidden from the stats, presumably contribute £13 million (£27m – £14m = £13m).

So you can just about extrapolate that if the mansions all attract 7% in property tax, the market for premium homes in Jersey has a turnover of around £185 million a year.  Not insignificant.

Now think about the £140 million public spending “blackhole” Jersey’s Powers-that-be say they have to plug by 2019.

This is obviously all very back-of-the-fag-packet stuff, but imagine the Powers explored the unpopular option of raising property taxes.

A 5% property tax across the board (while still protecting first-time buyers), would be in line with UK and could push the tax take up to £37 million.
Of course that would equate to a tax hike for the middle and a break for the rich. Such measures can appear unpalatable, (if not unheard-of).

Using the same logic but leaving top-end property buyers to pay their current 7% property tax, the overall tax take might be an even juicier £40 million.

Both compare well – from the bean counters’ perspective – with today’s £27 million, which is forecast to grow much more modestly than the 10%-plus the market is actually growing by.
Taxes are a thorny subject, and no-one likes paying them, but property taxes are potentially less thorny in Jersey than in the UK.

Homeowners are an undeniably powerful voting bloc, especially in the UK, where about 70% of householders own their homes.

But only half of Jersey households own the roofs over their heads. The big question is: would the roofless half, as powerful as they could be, bother to vote?