Mention the Isle of Man and people just think of wind and rain. They shouldn't there's a lot more to the island than this. But that they still do is no bad thing.
In general, if a large number of people have already woken up to an opportunity, the best time to get in has passed. That's clearly not the case here. Roughly 572 square kilometres in size, the Isle of Man is ten times the size of Guernsey and five times the size of Jersey. The official headcount is 76,000, but the actual population is probably around 100,000. The island lies far north when viewed on a map, but sea currents create a surprisingly mild climate. Subtropical plants flourish and winters are mild. A stunning 93% of the island's population say that they're very satisfied with their quality of life.
There are, surprisingly, nine airlines serving the Isle of Man. From London, the island is served from City Airport and Gatwick. Ronaldsway Airport on the southern tip saw a multi-million refurbishment a few years back. Close by lies Castletown, a picturesque village of 3,000 people and the island's original capital. So far, so dull. But not for long. A pioneering local businessman, Roy Tilleard, has gradually bought up every single property in what would be the natural town centre, if there were one. He's filed for planning permission for a £7m redevelopment of the entire area in to a new shopping and living quarter next to the historic town centre. Scheduled for completion in summer 2007, this development will transform Castletown.
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A priceless special status
The reason Tilleard is doing this comes down to the island's peculiar status as a tax haven. It is governed by its own parliament (Tynwald) and has largely managed its own affairs since 979. As a Crown Dependency, it's neither part of the UK, nor the EU. Foreign relations and defence are taken care of by Westminster, and the Queen serves as a largely symbolic head of state, but it sets its own tax laws (there's no capital gains tax or inheritance tax) and as a result has long attracted wealthy entrepreneurs and retirees. Speaking to the Isle of Man Examiner, one of three local newspapers, Tilleard depicted his investment in Castletown as a bit of a hobby. Yet as an island insider, he must be well aware of what is happening a 20-minute drive further north, in the island's modern-day capital, Douglas. There are changes in the making that will transform the island and be of great benefit to his project.
Casino project
Last July, the local government set out what is probably the major project of the last three decades. In a tender invitation, the Manx government offered a casino-operating concession as part of a major redevelopment in Douglas. A site currently used as a bus station has been designated as development land for a four or five-star hotel with a casino and leisure facilities. Located in Lord Street, it's a stone's throw from the ferry terminal and seaside promenade, which was once the centrepiece of a flourishing tourism industry. Construction is scheduled to start in mid-2006. And just this week, a rival £40m hotel/leisure venture, on a site opposite, was announced by Hilton and the local Sefton Grand Hotel.
Douglas's promenade has changed hugely in recent years. Several of the run-down Victorian hotels that littered the promenade have been refurbished or turned into apartments or upmarket shops. The Victorian Gaiety Theatre has been restored to its former glory and an unattractive nightclub venue will shortly be replaced by 164 new apartments. Things are moving fast.
A booming economy
Back in the 1980s, the island's economy had virtually collapsed following the exodus of tourists. Cheap air travel lured British tourists off to Spain, leaving the island's economy devastated. National income collapsed to 55% of the UK's level, unemployment stood at 12% and young people were leaving in droves.
Yet today, national income per head stands at 106% of the UK's, and with the economy last year growing by a big 6.3%, the wealth gap between the Isle of Man and the UK is set to widen further. Throw in a maximum income tax of 18%, nearly zero crime and the absence of terrorist threats, and the attractions become clearer still certainly for the estimated 25,000 illegal immigrants who have flocked to the island. With a 1.3% unemployment rate, the island desperately needs more manpower. Thanks to the influx of new residents, the population is growing younger every year.
Not all is perfect, but there's a wind of change in the air, underlined by a drive to attract more business. The island offers special online-gambling legislation, which is why the world's second-largest online-poker firm has moved its headquarters there from Costa Rica (other big online-casino firms are believed to be considering following suit). The government also allows a favourable regime for registering ships. Shell has bought an entire building in a central square of Castletown to hold its in-house ship registry. Registers for private aircraft and satellites are to follow soon. The government has an AAA-credit rating from Moody's and has net financial reserves of about £500m. This miniature nation is hell-bent on becoming a good place to do business.
Corporation tax slashed
Some 70% of the local government's tax revenue now stems from VAT, and it can afford to slash corporation tax to 0% for everyone bar banks and a few other exceptions from 6 April next year. It is this environment that will, with all likelihood, lead to fast-rising property prices. In Monaco nowadays you easily pay e20,000 per square metre of living space, while on the Isle of Man you'd be hard pressed to spend e3,000. Moreover, only 8% of the island's land mass is open to building, not least because of its 20 protected nature parks. Hence the number of properties suitable for rich tax exiles is limited. So what do you do if you want to make money in the years to come? Invest in the kind of property that wealthy immigrants will snap up. Once the corporate tax rate has been reduced to nil, demand for executive houses will have only one way to go. Consider too prime locations in Douglas. What was once a gorgeous Victorian promenade is likely to be relaunched as a major location for visitors and residents alike.
Investors are starting to take notice
The world's foremost investor in infrastructure plays, Australian-based investment bank Macquarie, is already said to be looking at the local ferry operator, the Isle of Man Steam Packet Company. Macquarie will be well aware that there is potential for reviving unused ferry routes, and the government plans to double visitor numbers to 500,000 per year by 2008 not least because the first casino is likely eventually to be followed by others.
The promenade will profit from all this, and although it is a good three kilometres in length, there will only ever be so much space for erecting first-class apartments with direct promenade-access and unrestricted views of the sea. In five years, these properties will be able to command a real scarcity premium.
Set-jetters spark property boom
What would all this be worth if no one was ever going to notice it? Recently, the FT ran a six-page supplement on the Isle of Man "the greatest economic success story that the world has never heard of".
While that's true now, it's likely to change. It used to be jet-setters that made places popular, but nowadays it's the set-jetting' filmmakers of films such as The Lord of the Rings in New Zealand who send visitor numbers soaring.
In November 2006, Stormbreaker will hit the big screen. The film an adaptation of the first six novels of Anthony Horowitz's popular tales of teenage spy, Alex Rider is now in production, starring Mickey Rourke and Ewan McGregor. The £21.5m production is largely set in the Isle of Man. It will depict the island in the best of ways not least because the island's government used a small portion of its financial reserves to buy an equity stake.
And it may not even take that long for the broader public to take notice. In the weeks leading up to Christmas, the local government will decide on the bids for the casino licence, and it becomes more apparent by the day why the Isle of Man is in for a new lease of life. The winter of 2005 will quite possibly be the last and final season for making property purchases without having to compete against other overseas buyers.
What to do now
There is a huge array of properties to be had on the Isle of Man, ranging from harbour-side cottages to stately countryside homes. British and EU citizens can buy without restrictions. For a list of all local property agents, visit: Gov.im/Isleofman/housing.xml. For information on how to set up a business, or move to the Isle of Man, see: Gov.im/ebusiness/advantages/ welcome.xml.
Sven Lorenz is founder of Profit Hunter Files, the free investment briefing on little-known opportunities around the world. To receive these free weekly emails, visit: www.electricmessage.co.uk/phf
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