Pound plummets: the view from Cyprus
As many readers will be painfully aware, the pound plummeted at the end of September, the markets having been thoroughly spooked by incoming PM Liz Truss and her new Chancellor’s mini-budget, with its proposed tax cuts. At least one U-turn later, the markets have stabilised somewhat, but many expats will have felt a cold shudder at the news that UK pension pots could have been wiped out. In addition, the mortgage markets have not yet followed suit and settled down, with many products being withdrawn by jittery lenders in an already denuded mortgage market. If you have investment properties in the UK while you’re abroad, or are renting out your family home, this is obviously unsettling. If you’re on a variable rate, you can expect a rise in your monthly mortgage payments.
Speaking to the Financial Mirror.com, Blevins Franks in Cyprus warned that the spending power of expats would be eroded – pensions will be affected by the drop in sterling and increasing inflation. Expats on the island, they say, prefer to keep their funds in sterling where possible. Earlier this month, spokeswoman for Michael Kyprianou and Co LLC Paphos said that they were already seeing British expats withdrawing from property enquiries:
“They are concerned, as many of these people rely on the sale of property they own back in the UK and their pension. They are worried over the volatile economic situation with the cost of living, while also the increase of interest rates makes potential clients rethink their decision. Indications are that this situation will not continue for much longer, and the pound will regain lost ground, rebooting client confidence.”
Andalucia’s U-turn on wealth tax
In September, Andalucian authorities scrapped wealth tax on residents and second home owners. The new ruling applies to both Spanish nationals and expat residents with worldwide assets of more than €700K. From September 21st, you will no longer have to pay wealth tax on your worldwide assets. The actual structure of the U-turn, according to Blevins Franks, has been that the government has reduced the tax liability to zero by applying a 100% relief rate. The Andalucian authorities, under the regional president Juan Manuel Moreno Bonilla, have been working to reduce income tax, wealth taxes and inheritance tax for some time, in an effort to attract wealthy people to the region.
Although Spain sets national tax laws, the autonomous regions are allowed to set their own tax allowances, a policy already in place in Madrid. Andalucia has now followed suit. Income tax rates have also been adjusted and backdated to the beginning of this year. You may still need to file a tax return for information, however, so do take advice from your personal tax adviser if you’re worried about failing to follow the new regulations properly.
Blevins Franks further note that the “mínimo personal y familiar” – a form of tax relief similar to the UK’s Personal Allowance – has also been increased in order to reduce the tax burden for those residents without substantial economic resources.
Scandal among Thai financial advisers
The Thai press reports this month that the Thai police may finally be catching up with financial advisers who have been defrauding expats for ‘decades,’ with the recent arrest of Andrew Kirkham, who is accused of defrauding clients to the tune of USD$1 million. Kirkham was originally due to be prosecuted in 2016 for running an unregistered securities business, but the prosecution did not go ahead. Now, Thai investors as well as expats have complained, and this seems to have spurred the authorities into action. Given that Kirkham has been arrested before, for biting a police officer, one might be forgiven for being wary of taking any financial advice from him, but experts recommend that expats avoid independent financial advice, unless it is regulated by existing financial service authorities, whether at home or abroad.
London has been a ‘rude awakening’ to Hong Kong returnees
Bankers who predicted that the financial industry’s exodus from Hong Kong would prove temporary feel vindicated this month, as new figures suggest that disillusioned expats have been returning to HKSAR from Singapore and London. The UK’s capital has proved a ‘rude awakening,’ says one, as expats have found that they just can’t get the kind of staff and privileges that they’ve been used to in Asia. Meanwhile returnees from Singapore say that it’s expensive and ‘boring.’ Expats complained about eating in the same restaurant night after night.
Thus, HR departments at Western banks say that they are dealing with an increasing number of relocation requests back to HKSAR from people who have left: “It’s turned on a sixpence. From dealing with people wanting to move out, we’re now helping people to return.”
Australians compare costs across the world
The Sydney Morning Herald reported in early October that Australians might be reeling from six back-to-back interest rate hikes, which have seen their mortgage costs shooting through the roof, but counsels that day-to-day costs actually still compare well with other nations hit by the cost of living crisis across the globe. Energy costs are significantly lower in Australia than in London or Berlin – 29 cents per kilowatt hour in comparison to 89 and 68 cents respectively in the UK and Germany.
So, if you’re thinking of relocating to Australia, or are an Aussie expat contemplating a return home, don’t despair just yet – and the financial experts to whom the Herald spoke also noted their belief that inflation is about to peak. Freight prices for global goods are finally starting to decrease, for example, and these have been a major contribution to rising costs across the world since the pandemic.
It might be a little soon to breathe out, though. There is a risk that the inflation-averse financial sector might tip us all too far in the other direction, and some experts are warning about deflation in the near future. But in Australia, at least, there seems to be some room for hope.