So did David Cameron make the right decision when he vetoed a revision of the Lisbon Treaty?
As always there are two sides to every coin. It would appear in this case the decision by Cameron was based on him protecting the City of London from various financial rulings that he felt were unacceptable to the UK. One of these being the so called ‘Tobin Tax’
So what is ‘Tobin Tax’? This is a tax which covers financial transactions.
And because our economy is so reliant on the Financial Services marketplace, it would appear we would be picking up the lion’s share of the tax for Europe.
Stuart Fraser, Policy Chairman at the City of London Corporation said ‘this would have been a tax on London and the UK. The European Commission’s own impact assessment highlighted that of the £48.6 billion it would have raised across the EU, £34 billion would have come from the UK’
Source: http://www.thisislondon.co.uk/standard-business
The argument against introducing such a tax is that it would need to be introduced globally to simply prevent a flood of business moving from the UK to other non-EU countries. After all the Swedish markets dried up when a similar tax was introduced.
We could not afford to let this happen to the UK, when we like the other countries are still in a perilous financial position!
So would a Tobin Tax have impacted us as Property Investors?
Well it would almost certainly have had an impact on mortgages by increasing their costs. This is simply because the Tobin Tax would place a tax on derivatives which underpin the activities of fixed –rate mortgages.
So it is all good news for property investors that Cameron stood his ground?
Certainly in the short term it may well be so. However, there are those who are now arguing we have isolated ourselves too much and the other countries in EU will basically go ahead and agree fundamental financial changes without the UK round the table. And as we will not be party to the talks, we will be unable to have any influence.
So given that no –one has a crystal ball what does this mean for property investors?
How can we mitigate the risk of any fall out?
I would recommend that now more than ever it is important that you purchase for ‘cash-flow’. Ensure you stress test your purchase so that you know it is still positively cash-flowing even with a rise in costs.
Think twice about purchasing if the margin of safety between current costs and when you have to start supporting the monthly payments are slim. Basically you need to feel comfortable you have some room for movement between when the property shifts from an asset to a financial liability.
These are uncertain financial water we are chartering at the moment, and although you cannot influence Europe at large you can take responsibility for your own portfolio and purchases.
If the cost of lending between banks starts to rise it may well be worth having a conversation with your Mortgage Broker, particularly if you are currently on a product which is tracking the LIBOR rate. Understand what options you have available to you.
Basically look at your own house and take responsibility for that which you control.
As I started this entry – there are two sides to every coin, so if you are able to ride the crest of the wave with regard to cash flow and build your wealth during this turbulent financial period, by making the most of this amazing time to invest in property, you will truly be in a position of strength, going forward.
If you are nervous about evaluating property to ensure you make the correct financial decisions, please feel free to contact me on Tel 07783 506649 or gill@venuspropertymentoring.co.uk
