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Caverns, Crisps and Capital Gains

By Richard Pickering, Head of Futures Strategy

The Irish question  ‘If Ireland is to become a new Ireland, she must first become European’ said James Joyce. However, it is now the relationship between Northern Ireland and the EU that poses Theresa May with one of her biggest challenges in the Brexit negotiations. Resolving the ‘Irish question’ is one of the three prerequisites to starting trade talks with the EU. Creating a hard border between the North and South (310 miles) would undermine decades of progress. However, the alternatives of having a border in the Irish Sea (opposed by the DUP), or having an open border with the EU (opposed by Eurosceptics) are similarly unappealing. Staying in the customs union (or a looser alignment) is another option. However, as Liam Fox states, ‘We can’t come to a final answer to the Irish question until we get an idea of the end state’. With the resolution far from certain, and with £65bn pa of bilateral trade, it’s perhaps no surprise that Northern Irish voters were among the strongest Remain supporters (78% in Foyle).

Bubblecoin?  Hindsight is a wonderful weapon in the arsenal of an investor. Since the beginning of the year, bitcoin has risen in value by a factor of 10, drawing out a cohort of those proudly proclaiming their foresight. Those with longer perspectives might draw parallels with the ‘Tulip mania’ of the seventeenth century (at the height of which a single bulb traded for 12 acres of land), and stay quiet for the time being. Nevertheless, if you had bought £1 of bitcoin in 2010, the same stake would now be worth the best part of a million pounds. In a world of low returns, that’s pretty good going. Bitcoin is no longer a niche market. Reaching $10,000 per coin yesterday [Edit: as at 17.00 today now $11,000], the total investment in the digital currency has reached $185bn which to put that into context is about the same size as the market cap of either HSBC, or the biggest 100 companies in Taiwan combined. However, if it succeeds in its ambition to become the world’s reserve currency, it may yet have some way to go.

A capital idea? The wall of international money driving up the UK investment markets may have had a brick or two knocked out of it by the Chancellor last week. With effect from April 2019, tax will be levied on capital gains made by foreign investors on UK commercial property. Described as a harmonization exercise (aligning to existing rules on resi and those applied to domestic investors), the Government has opened up a consultation process ending in February 2018. The proposed tax will only apply to gains made from pricing rebased at April 2019, so we are not likely to see a sudden run of sales ahead of the deadline. Nevertheless, with a large component of demand coming from overseas, particularly in London (2/3 of transactions by value this year), the application of tax when fed through appraisals will surely lead to a near term pricing impact. In the longer run, this may play well to domestic buyers (or at least those not currently operating offshore structures) who, until now, have been disadvantaged by the unequal treatment.

Bludger  Smart sensors and mobile technology provide exciting new ways to map human activity. In a location sensitive industry like real estate, this can be a powerful tool to better understand how people interact with space. One day it might drive a new monetization model, replacing the rather blunt pounds per area metric used in most existing pricing models. With location tracking comes privacy concerns. Not everyone wants to have their location monitored, especially those who are on the golf course when they are supposed to be in the office; such as Tom Colella, an Aussie electrician who subsequently found himself at an employment tribunal. In a sophisticated avoidance attempt Mr Colella had hidden his mobile phone in a pack of Cheese Twisties for two years, thereby creating a Faraday Cage that blocked both the GPS signal and also his employer’s snooping. He still got sacked. The Telegraph reports that he now works as an Uber driver, where presumably the pack of crisps strategy is less effective.

 

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