Autumn Statement 2013: A mixed picture for property as Osborne tinkers
05 Dec, 2013
The property industry today (Dec 5) welcomed the Chancellor’s announcements on business rates, planning reform and changes to the reit regime, but sounded a note of caution on plans to hike taxes for overseas investors.
Responding to the Autumn Statement, Liz Peace, Chief Executive of the British Property Federation, said: “Operating within his self-imposed constraints, this was on the whole as good as we could have expected from the Chancellor. On the business rates cap, planning reform and changes to the REIT regime we can feel pleased that George Osborne has listened to the property sector.
“We do however remain concerned, and somewhat bemused, by Government’s decision to make overseas investors liable for capital gains tax given that it risks so much to raise such relatively paltry sums. If the Chancellor really does wish to address fairness in the tax system, then committing to a root-and-branch review of business rates would be a much more sensible place to start.”
Responding in detail to policy announcements, Liz Peace said:
Business rates reform– “We are delighted that the Chancellor appears to have heeded our calls – and those other business groups – of to commit to a review of business rates, as well as taking short-term action to mitigate the harm that continues to be caused by this archaic property tax. However, simply tinkering around the edges of the system will not be enough – the business rates regime remains one of the greatest barriers to investment in the built environment, and is fundamentally unfit for the 21st century.
“Action to support the re-use of empty shops is particularly welcome. Empty properties blight our high streets and town centres, and we would urge government to think further about reforms to the business rates regime that would allow property owners to invest further in these properties.”
REITs as institutional investors – “We are very pleased that the government has decided to support our request to include REITs in the definition of institutional investors. We believe that this will increase the attractiveness of UK investment property by making it easier for REITs to raise funds through joint ventures and co-investment arrangements. By allowing overseas REITs to take significant interests in UK REITs, the decision will ultimately increase the availability of capital to the UK market and at the same time promote the transfer of expertise, with widespread benefits for the whole industry.”
Planning reform – “The statutory requirement for local authorities to have a local plan, the potential for withholding the New Homes Bonus where planning applications are decided on appeal, and consulting on a new 10-unit threshold for affordable housing are all welcome, and reinforce the need for a clear, evidence-based local plan and for local authorities to apply the presumption in favour of sustainable development as set out in the NPPF. Withdrawal of the New Homes Bonus when development is allowed on appeal should provide an incentive to ensure that the presumption is applied properly. The proposed new 10-unit threshold for section 106 affordable housing contributions will go a little way to helping small developers build much needed housing stock, but may well mean that, particularly in dense urban areas, there is a reduction in affordable housing provision.”
Action to unlock stalled housing sites – “The £1billion 6 year programme to fund infrastructure to unlock housing sites is very welcome. The up-front cost of infrastructure is one of the biggest deterrents to development. In many cases, a comparatively small amount of Government funding can transform the viability of major housing projects.”
Proposals to compensate individual households for new development – “While it is right that communities can see the benefits of accepting new development in their area, we would urge Government to be cautious. Either this bribe for households will be paid from existing developer contributions, and so divert funds away from badly needed infrastructure or this will represent an extra contribution that developers must pay – on top of their already-onerous Community Infrastructure Levy and section-106 payments.
“Either option would be extremely unwelcome. This policy risks setting an unnecessary precedent that households could expect handouts to accompany every new development, and may lead people to attach less weight to those benefits that will be felt by the community as a whole.”
New energy efficiency grants for homebuyers and private landlords – “In terms of the incentives as they are described, based on the amount of funding and the homes being targeted, each property would receive £2000 of Government funding. We would, however, urge the Government to ensure that the level of finance available is sufficient to provide adequate funding for the measures necessary to bring the least energy efficient rental properties in line to meet the Government’s minimum energy efficiency standards under the Energy Act 2011.”