A Question of Property – Ep 7 – Paul Mahoney, Stefano Lucatello & John Howard - Nova

A Question of Property – Ep 7 – Paul Mahoney, Stefano Lucatello & John Howard

Lucia France:

Hello everybody, and welcome to A Question of Property. My name is Lucia France, and I’m here to host your panel of property experts here on Zoom, who are here every week, answering your questions. So we have John Howard property mogul, expert developer, and Ipswich advocate. He’s been in the industry more than 40 years and he has written three books on the topic, including his most recent one Buying and Selling at Auction. So morning to you, John.

John Howard:

Morning, Lucia. I don’t know where mogul comes from. I’m sure, I think that’s a slight exaggeration, but good morning.

Lucia France:

Good morning. We also have Stefano Lucatello, our legal brain of the panel, and he is a senior partner at Kobalt Law International Property Lawyers, and an expert on buying and selling property in Europe. So morning to you, Stefano.

Stefano Lucatello:

Morning. Don’t forget the book.

Lucia France:

And a book, of course, yes.

John Howard:

[Listen 00:00:55], I showed you the book… I even showed the book last week. I haven’t got paid for that or anything yet.

Lucia France:

We did go over the books last week, but there’s no reason why we can’t do that as well today.

Stefano Lucatello:

Checks in the post, John, don’t worry.

John Howard:

Thank you.

Lucia France:

And last but not least, of [course 00:01:09], Paul Mahoney, bestselling author, award-winning property speaker, and head of Nova Financial Group. And if I may say something as well, the much needed and appreciated buffer between the heated debates of John and Stefano.

Stefano Lucatello:

He’s the only [crosstalk 00:01:23] author in the group. He’s the really [crosstalk 00:01:24].

John Howard:

The voice of reason, I call him. The voice of reason.

Lucia France:

Voice of reason.

Stefano Lucatello:

No, that’s me.

Paul Mahoney:

We were talking potential recessions yesterday and and somebody mentioned that John’s first one was in 1908. So that was quite a bit longer than 40 years ago.

John Howard:

Very cruel.

Lucia France:

I think that might be a slight exaggeration there.

John Howard:

Exactly.

Stefano Lucatello:

The hair transplant’s doing well, John.

John Howard:

Thank you. In fact, can I just say, Mrs. Howard is getting a bit too confident with my hair because it’s like a property deal. It’s the third deal. The third deal people do they get into trouble with because they get over confident and my wife’s done my hair twice now so I’m very concerned [inaudible 00:02:04].

Stefano Lucatello:

There we go.

Lucia France:

Well, it’s looking fine as it is.

John Howard:

Thank you.

Lucia France:

I think we’ve got a lot of home haircuts going on at the moment.

John Howard:

We have.

Lucia France:

So guys, speaking of going to the barbers, et cetera, I wanted to ask you, just as a question to kick things off, we’re still in lockdown here, I can’t remember what week were on, but what’s the first thing you’re going to do that you can’t do now after lockdown?

Paul Mahoney:

Go to the pub for a pint.

Lucia France:

Good answer.

Stefano Lucatello:

Go [crosstalk 00:02:32].

Paul Mahoney:

I saw an article yesterday. There was people, they raided a pub and they found people hiding in the cupboards. And I think I’m just about at that stage where-

Lucia France:

No way.

Paul Mahoney:

… I’m willing to hide in a cupboard for fresh pint of Guinness.

John Howard:

Typical Australian. That should be lager. My big thing, there’s a lovely, lovely cafe in Ipswich, lovely café. It does the most wonderful coffee. Double roasted. And I want to sit there and have my breakfast.

Lucia France:

Sounds good. Stefano?

Stefano Lucatello:

I’m missing a good Italian restaurant.

John Howard:

There you go. As always.

Lucia France:

I’m with you on that. It’d be nice to just be around other people again, part from the people…

John Howard:

I don’t know about that.

Lucia France:

In my house. Moving on. We will go to Paul for our first question here today. So Paul, I wish to purchase a property for investment purposes very shortly in the South of England. Where abouts would you recommend for me to buy?

Paul Mahoney:

Well usually when we get asked questions like that with a set criteria in mind, to be fair, it’s a fairly broad criteria, it is the South of England, but my first question would always be why, why the South of England and what are you actually trying to achieve from this investment? So try to change the focus away from… Well, find out why they’re saying the South of England, but change the focus away from the location and more so toward the goal that they’re aiming for. And I think generally we find that probably this person’s saying the South of England because they live in the South of England, but that doesn’t mean that you need to invest in the South of England. And if there’s better investments elsewhere, I would say it is extremely strong logic to invest elsewhere.

Paul Mahoney:

But to answer the question, London’s a very difficult place to justify from a buyer’s [inaudible 00:04:23] perspective because property prices are high and yields and low. There’s some half decent areas on the fringes of London that you can make stack up. But I think probably my favorite city in the South of England is Bristol. It’s better price, yields are better. It’s a substantial city in its own right. If I was to say I had to invest in the South of England, I’d probably invest there, but I’m not investing in the South of England. I’m investing in the Midlands and the Northwest because I feel as though there are stronger fundamentals and stronger driving factors in those locations for them to perform well, but also be more sustainable through bad economic times.

Lucia France:

Also Bristol, I know there’s quite a lot of film industry there as well, isn’t there? And people can commute to-

John Howard:

Bristol’s a great.

Lucia France:

… [just 00:05:13] great.

John Howard:

I’ve got some flats in Bristol. Clifton’s great. And actually, I’m in the process of negotiating to buy, or was or am, I’m not sure now, a block of 12 flats in Clifton, which is a great, great area. And I don’t totally disagree with Paul, and I’ve bought all over the UK, especially up North. Not so much more recently, but certainly in the past, [I have 00:05:35] a lot up North. But what I would say, if you can stick an hour, hour and a quarter by train from London, there’s some great places that actually aren’t that expensive. I could mention Ipswich, which is only an hour away, but there’s other places. [crosstalk 00:05:48] and there’s all these other places which you can get a decent yield on. And some of them, considering you’re only an hour by train, they’re relatively cheap. You could live in London and I bet Paul, he lives in a lovely part of London, Paul does, but I bet getting into his lovely office in the center of London, it takes him probably 40 minutes. Well, it’s only an hour to some of these other places.

Paul Mahoney:

It doesn’t, John.

John Howard:

How long does it take, Paul?

Paul Mahoney:

It takes me 15 to 20 minutes, it takes me.

John Howard:

Well, that’s because you live incredibly close to where you work, but a lot of people don’t. A lot of people-

Paul Mahoney:

But I suppose then that would be my slight [cancer 00:06:21] argument, John, to what you’re saying there. And I think this, absolutely no offense whatsoever, but this might be showing the difference in our age and the preferences of different age groups.

John Howard:

Oh, that’s nice.

Lucia France:

Controversial. Controversial.

Paul Mahoney:

No, honestly, I’m not being derogatory in any way. But in the past, people have been more than willing to travel an hour to and from work. And I’m very confident in saying the younger generations don’t want to do that anymore. And there is much more of a focus on central living and traveling as little as possible.

John Howard:

But the trains are still absolutely packed or where before COVID.

Paul Mahoney:

That’s true, they are.

John Howard:

I agree it might change. I agree it might change.

Lucia France:

Could I just ask John John there as well, except for Ipswich, are there other places in the South that you would recommend, or Stefano, for that matter?

John Howard:

Well, I think there’s so many places in the South and I accept that where Paul’s talking about, the Midlands and the North, Paul’s done incredibly well. They’ve had an awful lot of growth in the last five or six years, but you have to question whether that will continue. Who knows? Some people think they know, I accept that. I don’t think anyone quite knows what’s going to happen going forward. I mean even where Stefano, [inaudible 00:07:33]. [inaudible 00:07:34] has been in the doldrums for many years, but actually it’s picked up in the last few years and actually hasn’t done too badly. And I had a block of 16 flights in [Hull 00:07:45] I sold a bit early. I bought them very cheap in a very nice area of Hull. And there is a very nice area of Hull, by the way. You’re looking [crosstalk 00:07:51].

Stefano Lucatello:

There are many nice areas in Hull, John.

John Howard:

There is.

Paul Mahoney:

Really?

Stefano Lucatello:

Really.

John Howard:

And I probably sold a little bit too soon, but there’s lots and lots of areas. Do your research. You’ve got lots of time at the moment. Get on the internet. Do your research. Employment’s going to be so important going forward, so finding a town that won’t lose employment. Where perhaps it’s got a big Amazon or something like that to support the town’s economy is very important.

Stefano Lucatello:

Let me just say that you’re talking… I was going to say Clifton and St. Paul’s. Two [crosstalk 00:08:23] opposed areas of Bristol. Clifton has gone through a regeneration over the last few years.

John Howard:

It has.

Stefano Lucatello:

And St. Paul’s, which was one of the roughest, most drugged up areas of St. Paul’s, minority ethnic area of Bristol.

John Howard:

Years and years ago it had all the riots, didn’t it, St. Paul’s?

Stefano Lucatello:

Yeah. So it’s going through a change. Lloyds Bank moved into Bristol in each port area many, many years ago and started the transformation of Bristol. And Bristol, just like Hull, is a port. So it’s one of these cities that relies very much on its port activity. And it’s a very strong city. And one place that I’d recommend, and I have three friends who live in this area, is the area between London and the Midlands, which is Northamptonshire. Milton Keynes and Bicester, Towcester, Northampton itself, nice posh areas. And of course, it’s the center for engineering, for motor racing engineering. So you’ve got four or five of the motor racing teams based out there on the A43. And it’s a rich area. It’s a developing area. One of my colleagues has a, my partner, David, he was from Northampton, has a house there. And the rent and the yields, he’d say, [or like 00:09:48] he says over the last five or six years have gone up substantially in Northampton, Towcester, that sort of area.

Stefano Lucatello:

It’s sort of a town, but it’s not a town, it’s in the countryside. It’s well connected by rail, by road. And it has the industry which supports it. And that corridor of the M40 where some of the motor racing teams are going across to Bicester, going across to Northamptonshire, Milton Keynes, especially Milton Keynes. Milton Keynes is like Marmite, isn’t it? You either like it or you don’t like it. It’s one of those towns that was constructed on a rigid grid like the American cities, and it was a trial city and some people like it, some people don’t.

Lucia France:

It’s got a great Milton Keynes bowl. Great venue there for a music venue, hasn’t it?

Stefano Lucatello:

Yeah.

John Howard:

It’s got a very good equestrian. Addington Equestrian Center is very good just outside there as well. That’s a very wealthy area.

Lucia France:

And there’s this-

John Howard:

Outside Milton Keynes is very good. Buy anyway. Good to get some property advice in the UK from Stefano. I shall make a note.

Lucia France:

… absolutely.

Stefano Lucatello:

You see, I’m not just only international. I do listen to what goes on in other parts of the world.

John Howard:

More than a one trick pony.

Lucia France:

Absolutely. Let’s move on then to our second question, which is for Stefano. I’m currently getting divorced. This is not me just yet.

Stefano Lucatello:

Lucky you.

Lucia France:

And I own a property in Italy in my personal name. Has my wife any rights to the property and could she force me to sell it?

Stefano Lucatello:

Well, the answer to the question is yes. The property, fortunately, is not in joint names, but just because it’s not in joint names doesn’t mean to say that your wife, soon to be ex-wife, won’t have a corridor to attack all or part of it. Let’s presuppose this gentlemen is a United Kingdom citizen, United Kingdom resident, and he’s going through an English divorce. Then the court, family court, the high court, or the county court may make a property separation order, which means that all the asset… Well, let’s go back. When you get divorced, one of the things you have to do is you have to fill in one of the forms, which is a property asset and liabilities form. I think it’s called an E5 or something, not that I’ve done matrimonial law for many, many years. And anyway, you have to set out what you’ve got and what you haven’t got, and the debts and the liabilities and all the rest of it.

Stefano Lucatello:

He will have to show in his assets, or if his solicitor is a proper person, he’ll tell him, because many solicitors along the way don’t, and I’ve I’ve come across two or three of them were English solicitors have said, no, you don’t need to mention your property abroad. You do need to mention every asset you have in every part of the world when you’re doing a divorce. So let’s say he mentions it, she could then say, well, I want to have that sold as part of the matrimonial settlement, either because she wants a lump sum or because she wants a monthly [order 00:12:33] for the kids or for her, whatever. So yes, the answer to the question is that not withstanding the fact that it’s in Italy, not withstanding the fact that it’s in his own name, an English court could say, put everything into the pot and sell it because either she is to get a lump sum or she’s got to get a financial order for herself or for a child or children, and that may have to be taken into consideration. But he’ll certainly have to declare it. That’s the first point.

Stefano Lucatello:

And I have to say that over the years, having been an international lawyer for many, many years, English solicitors, not through deliberate actions, but because of almost negligent advice, have said, no, you don’t need to mention the property abroad because we are only dealing with an English estate here, an English grouping of property or whatever. It’s not the case. English solicitors have got to mention everything you have, whether it’s pensions, whether it’s [inaudible 00:13:26].

Lucia France:

Stefano, we lost your audio there for a second.

Stefano Lucatello:

Oh, sorry.

Lucia France:

You said whether it was pensions or…

Stefano Lucatello:

Yes, whether it’s pensions or whether it’s property, whether it’s bank accounts, whatever it is, you must bring those into account. And then the starting point on a divorce in England is 50-50. Then the judge goes backwards and says, well, how long have you been married? Is it a short manager of one, two, three years? Is it a longer term marriage, five, six, seven. Or is it like John, he;s been married forever? He’s been married 40 years [crosstalk 00:14:04].

John Howard:

Doesn’t feel like that, of course.

Stefano Lucatello:

Eh?

John Howard:

It doesn’t feel like that, of course. It’s only 20 years. I got married when I was nearly 40. I was single till then. So I [didn’t do 00:14:11] too bad.

Lucia France:

Well, congratulations.

Stefano Lucatello:

So [there 00:14:15], that’s the answer. The answer in short is, yes, it could be taken into consideration, but the first thing is that your solicitor must declare it in the assets that he says to the other side that you have.

Lucia France:

And what would happen if it wasn’t declared then?

Stefano Lucatello:

Well, it’s contempt of court, contempt of court because she will know. What happens, it’s daft really, isn’t it, because she will no doubt know. They’ve no doubt being on holiday to this place, let’s say. So she will say to her solicitor, well, hold on a minute. Our property in wherever it is in Italy is not mentioned here. He’ll go back to the other solicitor, the solicitor will then give his client a hard time and say, look, you’re putting me in a difficult position. The position is, of course, that if the solicitor doesn’t get what he wants out of his own client, he has the right to step back and say, well, I’m sorry, you’re putting me in a breach of law position. I can’t continue to act for you and I’m going to withdraw. But if he does, if the lawyer is complicit with this non-mentioning, it will be daft anyway, because the court would say, bring it into account and otherwise there’ll be a financial penalty order against you.

Lucia France:

Thank you. Anything else to add there, guys?

John Howard:

Don’t think so. I think Stefano’s the expert on that one.

Lucia France:

Fantastic.

Paul Mahoney:

Don’t get divorced.

Lucia France:

Don’t get divorced.

John Howard:

Don’t get divorced.

Stefano Lucatello:

Don’t get married.

Lucia France:

Moving onto John’s question. Now, John, what would you consider to be the best strategy for purchasing property coming out of the COVID locked down?

John Howard:

This is a question I’m getting asked an awful lot and it really still depends. As I always say, it depends really on what you’re passionate about, what you’re interested in, because if you’re not interested in that topic, it might be a refurbishment, it might not, whatever, then you’re not doing a great job. However, I do think in this market, you have to be a little bit more flexible than you have been in the past. And for me, I can only speak for myself really in this. And for me, I want to be fleet of foot. So I don’t want to get into any big developments, which are going to take two or three years to do. I want it in and out within six months because we don’t know where this is going. And if I’m in and out within six months, even if it drops a little bit [and I’ve 00:16:22] bought right, and it’s all about buying right, Lucia. If you buy right, if the market drops a little bit, you’re still going to be okay.

John Howard:

So if you can really buy right in this market, I want to be in and out quickly. Alternatively, if you’re looking a long term buy-to-lets and you can buy in a yield, instead of the buying yield of five or six percent, you can buy at a yield of eight, nine percent because of the market, then I think that’s fine too. And because I think over 20, 25 years, you’re going to be sit down, it might go down and a little bit in the next year or two, but over 20, 25 years, you’ll say what a great buy that was, what a great time to buy.

Lucia France:

So again, going back to what the purpose of the property is and what the reason for the investment.

John Howard:

Yeah, I think so. And also most people have a niche and you may need to widen that niche in this market because it may not be suitable strategy in this market. You do need to be flexible and a bit more open minded perhaps than you have been.

Stefano Lucatello:

Is that called a mixed portfolio, John?

John Howard:

Yes. Well, a mixed portfolio, of course, would be a mixture of probably commercial, residential and [a bit of 00:17:29] land maybe. So that’s what a mixed portfolio would consist of. And again, people do ask what is a mixed portfolio? It gives you a bit of flexibility and also you’re spreading your risk if you’ve got rental stuff, you’ve got property you’re going to buy and sell, and you’ve got commercial. Although, of course, commercial at the moment, like I said in the other programs we’ve done, only 30% of my commercial tenants have paid, and interesting is the big national tenants I’ve got who haven’t paid. They’re the ones, of course, Lucia, you expect to pay because they’re big and you think, well, you’re proud with some of your big tenants. And of course they’re the ones who have let you down. So there you go.

Stefano Lucatello:

John, what’s the up to date on nonpayment of rent by tenants, commercial and residential? Hasn’t it been extended to November now?

John Howard:

Well, I think the residential you can’t boot anyone out for three months, and on the commercial, normally, as you know, we can go in… with commercial we can go in with within 21 days and take possession if they haven’t paid the rent upfront, which is fantastic. However, I think the government, I’m not quite sure if government said the same or not, three months, but even if they haven’t, you’ll be pretty great to go in and take possession after 21 days because you’ve got empty rates to pay straight away. And if it’s just a blip and you can support them or do something to help them, you would never want to [bait 00:18:54] commercial property at the moment. It’s the last thing you want to [do 00:18:57].

Paul Mahoney:

I think the only important point to clarify there, Stefano, it’s not a situation where tenants can just stop paying. They don’t have a nonpayment window. They generally will have to pay it at some point, make up for what they haven’t paid at some point in the future. It’s just the landlords can’t evict tenants. They’re not being forced into accepting nonpayment.

Stefano Lucatello:

I’d heard yesterday that this had been extended to November. That’s why I asked the point. I didn’t know whether it was correct or not.

John Howard:

I haven’t heard that, but it wouldn’t surprise me.

Paul Mahoney:

I haven’t heard that either.

John Howard:

Wouldn’t surprise me. Wouldn’t surprise me.

Lucia France:

Does that-

John Howard:

It’s not official, I don’t think.

Lucia France:

… are you saying there, Stefano, that maybe when we’re going to be in lockdown longer than we perhaps [are 00:19:38] expecting?

Stefano Lucatello:

I think that the social distancing and the lockdown will continue even though certain areas, there’s a big debate today on which areas will be released before others, and to what extent. You’ve got the schools which seem to be going back in September time. As Michael-

John Howard:

I should hope so. Goodness me.

Stefano Lucatello:

… Michael O’Leary of Ryanair was on today saying that you can’t put people two meters away in an aluminum can, whether it’s a railway carriage, an underground carriage or a plane. I think we’re going to find the air travel and train travel, in the future, will be completely different, especially air travel. Virgin’s up for sale, British Airways are cutting 12,000 staff, and we’ve got a mega change over. I don’t think Ryanair and EasyJet will exist at the end of this year if it continues the way it’s going.

Lucia France:

Thanks very much, Stefano. Little bit off topic there but still interesting.

John Howard:

Well, not entirely off topic, because actually if you want to fly, Lucia, to Italy or to Spain and suddenly the airport you were going to fly too you can’t go anymore and you’ve got a house out there or you’re buying a house out there it makes a lot of difference.

Stefano Lucatello:

That’s very true. We were saying previously… Sorry, Lucia. I interrupted you, but we were saying in a previous edition that on many occasions, people buy property abroad following where Ryanair and EasyJet and small airplane carriers like these go to, because it means that they will then have a regular carrier route to their home. Michael O’Leary was saying this morning that many of the regional, he didn’t say anything about the foreign ports that they go to, but the regional ports in England, the airports in England, he said that they would be pulling out. He said that they can restructure Manchester, Birmingham, Stansted, but they can’t do anything on the smaller airports. And it will be a problem. And the problem is also that the British government, United Kingdom government is not giving these air carriers any support. He was saying, and interestingly enough, Alitalia, which has gone into and out of nationalization, has just been renationalized and brought back into government control by the Italian government. It’s been a loss leader for many, many decades, Alitalia. Good aircraft carrier, but it’s been nationalized. But the British government’s not giving the same support to British Airways [crosstalk 00:21:58].

John Howard:

No, good. Don’t think we need to.

Lucia France:

Well, were any of you meant to be going away during this period, because I had quite-

John Howard:

[inaudible 00:22:08] we’re working.

Lucia France:

… well, I had…

John Howard:

We’re working.

Lucia France:

I did have some flights booked to go to Spain for a week and I can’t remember now if it was EasyJet or Ryanair, but they allowed us to change the date of the flight to a time in the future, but then pay the difference. And obviously we kind of thought, well, when’s the next sort of holiday time? August. But I don’t even know if we’re going to be able to use those now.

John Howard:

No.

Stefano Lucatello:

Remember, there’s a big difference legal, and there’s a big debate on refunds and vouchers. Many aircraft carriers are giving people vouchers for use in the future. They are not the same as a refund. And there’s a big legal hoo-ha going on about what people are given. Some aircraft carriers are giving people vouchers, which have no legal validity. They may pull that from one day to another, and then refunds. And if you can, I would suggest you get a refund, which is money back into your card. And the ultimate thing is, of course, pay everything by credit card because then you’ve got recourse to go to your credit card company and then get the money back from the credit card company under the consumer credit rules.

John Howard:

Good advice.

Lucia France:

[crosstalk 00:23:11]. Thank you very much, Stefano. We’ll go back to Paul then for your second question today. We are running out of time slightly so try and make these answers a bit concise. So Paul, I’ve got four buy-to-let properties. I’m very concerned that not all of my tenants will pay going forward. Could you please advise me whether I should sell one of the properties in order to reduce my loans and cover my interests on the other properties?

Paul Mahoney:

Look, I think selling a property is a bit rash. That would be your last resort, I would have thought, depending on how serious the situation is for this person. I’d say first off communication with your tenants is key. Don’t just assume they’re not going to pay because most tenants are still paying. So communicate with them, find out their situation, encourage them to pay, work with them if they need to arrange some sort of payment plan, of course. Keep in mind that lenders are also giving what’s being referred to as mortgage holidays. It’s not actually a holiday. You still have to repay it the same way as tenants have to repay any unpaid rent. You will need to repay any unpaid interest on your mortgage, but lenders are being flexible in that regard. So if this person… it seems this person is concerned about being able to service their mortgages and if their rent wasn’t paid they wouldn’t be able to service it. Well, they should be able to get some flexibility from their lender on that specific to COVID-19.

Paul Mahoney:

And had a conversation with a client about this yesterday, that they were concerned about asking for a mortgage holiday because they thought it would affect their credit history or their ability for mortgages in the future. And that’s not my understanding at all. It’s not the normal financial hardship application, it’s specific to COVID-19. And there is an understanding that because a lot of tenants aren’t paying, therefore a lot of landlords need flexibility on their mortgages. So don’t be afraid to have that conversation with your lender. Depending on the properties, the last thing you want to end up having to do is sell one to cover costs. That’s generally the reason you bought the assets in the first place is to provide passive income and to have them grow in value so you can build a portfolio and by selling one, you’re doing the opposite. So I would only do that as a last resort. Try to get your tenants to pay and the best way to do that is to communicate with them, make sure they feel as though you’re looking after them and you’re doing the right thing by them. Make them very aware that this isn’t a time that you can just not pay rent. The rent will need to be repaid in the future. And if they realize that actually I might have to pay double rent in September, October, November they’re probably less likely to not pay rent now.

Lucia France:

I think that’s a lot of the problem with the word holiday, isn’t it? It’s not a… it’s more like a delay, I guess, isn’t it?

John Howard:

[crosstalk 00:26:03].

Stefano Lucatello:

It’s a deferment.

John Howard:

Deferment.

Stefano Lucatello:

Deferment. The best-

Lucia France:

Better word.

Stefano Lucatello:

… we’ve had a lot of discussions on this in law. It’s called a deferment because people will have to pay it. It’s like not paying your credit card, at some point you will have to pay.

Lucia France:

Exactly.

Paul Mahoney:

And although there is a ban at the moment so far as evicting tenants, that ban will be lifted at some point. So obviously as a tenant, you don’t want to put yourself in a position where you’re likely to be evicted once this is all over.

Lucia France:

Of course. That’s great. Thank you very much, Paul. Stefano, let’s move to your second question then. This person currently owns a flat in Gibraltar. Will any of their rights change after we leave Europe officially on the 31st of December?

Stefano Lucatello:

Well, I have to say, Lucia, that Gibraltar is very close to my heart. I spent six years in Gib, seven years nearly there. I’m a Gibraltar qualified lawyer. And I was there from ’91 to ’97, nearly ’98. It’s a very strange area. It’s like Marmite, said before. You either like Gib or you don’t like Gib. I loved it for all sorts of reasons. And the position of Gibraltar’s very strange because it has its own self-government, it has its own parliament. It is not part of the United Kingdom, but it is a UK dependent territory. So it governs itself for everything except for defense and that sort of thing. It’s not part of the common agricultural policy, it’s not part of the Schengen Area. So it was the only UK territory, obviously it’s territory that became part of the European Union. And it’s been a bane of United Kingdom and Spain’s governments over the years because Spain wants it back, United Kingdom won’t let it go. The Treaty of Utrecht of 1666 said that 98% of Gibraltar citizens had to vote in favor of succession to leave the United Kingdom’s grip. Nobody wants that. But strange enough, when we had the 2016 referendum, 99% of the 19,000 people that are there at the moment voted in favor of having closer ties and remaining in European Union.

John Howard:

Can’t believe that many people would be wrong, can you really?

Stefano Lucatello:

Well, I mean 632 people voted in favor of staying… sorry of exiting the European Union and the rest of them, 19,000 odd voted in favor of a closer tie with the European Union. It’s like Brighton but having it 3,000 miles away. It’s very much English. They speak a dialect of Llanito, which is a word of English, a word of Spanish and a word of dialect. It was first colonized by the [inaudible 00:28:52] in La Caleta in the South part of Gibraltar, which faces Morocco. And it’s a very different mentality. It’s an English mentality, but they’re very foreign as it were. And each status will be argued over for many, many centuries, I think, to come. Decades, centuries. We don’t know. The answer to the question is we don’t know because what happened was that, what’s her name? May, said when she was negotiating, that Gibraltar’s rights would be protected. And it transpired that they did so much, but we don’t know where we are now because it’s been left in abeyance and nobody has discussed this any further. So we don’t really know what the rights of Gibraltarians are going to be. And-

John Howard:

I’m pretty confident, Stefano, that we’re going to come out on the 31st and that’ll be it. No deal, no nothing.

Lucia France:

So basically it’s all a bit up in the air at the moment.

John Howard:

Yeah.

Stefano Lucatello:

It’s very much up in the air.

John Howard:

Would you buy there at the moment on that basis, Stefano?

Stefano Lucatello:

It’s very interesting, because over the years, having done a place in the Sun Exhibition, the exhibition we do every year, all of a sudden five years ago, Gibraltar came up on the radar where it’s never been on the radar. I mean, it’s been considered as one of those poor areas. You wouldn’t buy in Gibraltar unless you’ve got a particular reason to do so. And all of a sudden they’ve adopted a strategy, many builders have adopted a strategy of reclaiming land from the sea, like in Monaco. And they’ve done the same thing.

Stefano Lucatello:

What they’ve done is they’ve… I think when I was there there were three marinas. There are now, I think, five marinas and some of the area that was sea, a marina, has now been reclaimed and they’re selling flats. Fantastic flats, if you look at them. 500, 600, 750,000 pounds. And they’re now marketing these flats that have come out of nowhere, these beautiful building blocks, and they’re built on the same way, as I say, in Monaco they’ve done. And they’re marketing them for these astronomical sums and people are going there. Why? Because of course it’s the heart of the offshore gambling. When I was there, I used to do… I was just working for some of the big gambling institutions that were coming into Gib. Because they’ve got all their offshore gambling headquarters there in Gib because they can get tax favored concessions. They don’t pay any VAT. Gibraltar is out to the VAT area. It’s out of the customs union so it doesn’t pay VATs, has it’s own regulations for tax.

Stefano Lucatello:

Very interesting area. And it’s very useful. I still use it as an offshore lawyer. I still use it as part of my triangulation exercises, whether you use Guernsey, Gibraltar, and maybe Malta because using that triangulation, you can give clients who are ultra high net worth individuals, protection, legal protection from paying [taxation 00:31:33] or deferment of taxation. So it’s a very interesting area. It will always retain it’s attraction for people who want to leave the United Kingdom, have part of the United Kingdom still there, but still be in the heat. And the access into Spain as well. You can just do across into the border from La Linea and you’re into Spain and you’ve got the rest of Europe.

Lucia France:

Thank you very much, Stefano. We have only got just under three minutes left. So John, I’ll go to your question.

Stefano Lucatello:

That’ll be difficult for him to keep it short, won’t it?

Lucia France:

I know. What do you consider to be the most volatile part of the property market currently?

John Howard:

The most volatile part of the market. It’s a great question. I think if you’re halfway through a development it’s difficult because you don’t know what you’re going to be selling for at the end. And you’ve already started so you’ve committed, so you’ve really got to finish because if you finish you’ve got a few options. You can either rent it, hopefully, if you have to, or you can still sell them. If not, if it’s half finished, guess what, you’ll be selling it to people like me and you never want to be doing that if you can help it.

Lucia France:

Anything to add there, guys?

Paul Mahoney:

Yeah, just a point. Well, we pretty much are in a recession. It seems we’re certainly going in that direction. If people are assuming the property market is going to be hit badly by this, and I don’t think anyone knows-

Lucia France:

Got less than a minute, Paul, just so you know.

Paul Mahoney:

… I don’t think anyone knows the answer to that, but it will be the smaller towns and cities that are driven by one company or one industry where those jobs dry up that will struggle the most. And it will be the major cities that are more robust and sustainable.

Lucia France:

Thank you so much guys.

Stefano Lucatello:

Just one point. Before we go, Lucia. I had a client yesterday who rang me-

Lucia France:

We’re going to get [cut 00:33:14].

Stefano Lucatello:

… and said that he’s decided that he’s going to change his buy-to-let, which has one tenant in it and it’s expiring in the next few weeks. He’s going to get him out and he’s going to turn it into an HMO.

Lucia France:

Thank you so much for the advice there, guys. Stefano Lucatello, John Howard, Paul Mahoney, I’ve been Lucia France. If you’ve got any questions, email us, ask@aquestionofproperty.co.uk, and we’ll see you again next time. Thank you.

 

A Question of Property

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