Property professionals offer a lukewarm response to yesterday’s Chancellor’s budget

Yesterday’s budget has received a lukewarm reaction from the UK’s property professionals.  Here’s a selection of the feedback, both positive and negative that we’ve received from property professionals across the UK:

Budget responses – the critics

 
Dylan Williams, speaking for one of Swansea’s oldest professional firms, Rees Richards, said the Chancellor had offered little support for the property market in yesterday’s budget:
 
“Rate relief for small businesses will bring support for many small businesses, but won’t provide the financial support the UK’s retail industry so desperately needs.
 
“The stamp duty measures for shared ownership in yesterday’s budget won’t impact Wales anyway, but even elsewhere will have minimal impact on England’s broken property market, so small in fact that most commentators are ignoring it.
 
“Meanwhile prominent property professionals have sounded warnings that went unheard by the Chancellor.    The Royal Institution of Chartered Surveyors (RICS) predicts that rents will rise by 3% annually for the next five years, which ultimately hurts tenants.    The National Landlords Association recently warned that around 380,000 landlords plan to leave the sector, a move which would flood the market with properties for sale and reduce availability of rental stock in an already oversubscribed market.  
 
“Thankfully, the Welsh property market continues to thrive and shows no signs of slowing, but yet again, the budget has failed in providing any impetuous for residential development and in general I doubt many of my peers will be celebrating today.”
 

Neil Cobbold, chief operating officer of PayProp UK, said the Chancellor had missed an opportunity to introduce tax breaks for landlords offering long-term tenancies

“This would have been a welcome move by the government as it would have allowed landlords and tenants who want to pursue longer tenancy agreements to do so without making it a mandatory requirement for the entire PRS.

“Industry research has shown that mandatory longer tenancies may cause some landlords to exit the sector, and that not all tenants are looking for long-term agreements.

“However, for many landlords a capital gains tax break would be a timely incentive to continue to provide much-needed rental housing stock.  Such a policy could have provided vital feedback to the government’s previously announced plans to introduce mandatory three-year tenancies, indicating whether long-term tenancies are needed or if they should remain an optional decision rewarded with a tax break.

Russell Gould, CEO, Vesta Property expressed disappointment that ‘property has again taken a back seat’:
 
“We are disappointed that once again property has taken a back seat and the much needed tax breaks to support landlords who provide the nation’s tenants with valuable rental homes have been ignored. The move to provide Lettings relief limited to properties where the owner is in shared occupancy with the tenant only goes so far.  It doesn’t provide any support to the wider landlord community. The private rented sector is fulfilling a vital service in the UK by providing essential rental properties for millions of households unable to find or buy their own property and access local authority housing. 
 
“What the Chancellor has failed to recognise is that the existing taxation on rental properties hurts everyone in the long run. We have already seen thousands of private landlords leave the sector since April 2016 when stamp duty was increased.  Recently, the National Landlords Association stated that approximately 380,000 landlords[i] could flood the market with properties putting tenants’ homes at risk, while causing significant disruption to the lives of longer-term tenants (increased distances from schools, places of work and communities).   As a result, prices rise.  The Royal Institution of Chartered Surveyors (RICS) believes that rents are likely to rise by 3% annually for the next five years, outstripping rises in house prices.  It’s not just stamp duty; landlords have faced increasing pressures from mounting regulation and continued reductions in cash flow due to Section 24 of the Finance Act that removes the landlord’s ability to deduct the legitimate expense of mortgage interest, so many landlords with debt have to pay more income tax. “
 

Keith Cooney, Head of Rating at Knight Frank said promised business rate reforms were ‘as elusive as Godot’:

“The promised business rates reforms have proven to be as elusive as Godot with the Chancellor once again leaving this draconian £31 billion tax burden largely unchanged.

Despite the weekly closure of household names in the retail industry, the Chancellor has only offered relief to small retailers who have a Rateable Value of £51,000 or less.

Furthermore, around 60% of retailers in that band will fall below the exemption threshold of £10,000, meaning they do not pay business rates anyway. As such the Chancellor’s gesture will support the few rather than the many.

This is set against an overall increase in business rates of £680 million from April next year. Given the market and economic uncertainty there is a strong argument that The Chancellor should have grasped the nettle and frozen the tax at the current level.”

 

Nick Leavey, Chairman & Partner – Head of Real Estate at law firm Coffin Mew said twin challenges presented by housing and the high street needed a long term strategy:

“Whilst some will welcome a number of the Chancellor’s announcements in this year’s budget, many are still looking for radical solutions to twin crises affecting the property market: housing and the high street.

“The Chancellor announced £500m for the Housing Infrastructure Fund to help deliver 650,000 new homes, new housing association partnerships to help deliver 13,000 more, and up to £1 billion in bank guarantees to help small housebuilders deliver their housing schemes. He also abolished stamp duty for first time buyers of shared ownership properties valued up to £500,000.

“Businesses with a rateable value up to £51,000 will have their business rates cut by one-third for the next two years, saving many around £8,000 each year and local councils will receive support from a Future High Streets Fund.

“However, whilst these measures will be welcome, both crises need long term strategic plans, providing for an even larger increase in housebuilding, alongside a transition to a new leisure experience focussed, rather than retail focussed, high street.

“These strategies will need to address a wide range of major challenges, such as the reduction in labour available to housebuilders since the Brexit referendum and the threat to high street businesses from giant online retailers.”

 

Chris Evans, deputy managing director at Rolton Group, was concerned that the £420-million to tackle Britain’s roads was a ‘drop in the ocean’:

“The Chancellor’s commitment to deliver £420-million to tackle Britain’s decrepit roads is a mere drop in the ocean of what needs to be ring-fenced to deliver a capable sustainable transport infrastructure. Announcing measures to tackle potholes while only hinting at further infrastructure investment may please the public but won’t go very far towards transitioning the nation to a low-carbon vehicle future.

“The Autumn Budget speech is the latest in a longline of piecemeal policy announcements, which are half-hearted and often contradictory. Freezing fuel duty is at odds with curtailing support for EV and hybrid vehicles and will leave many unsure of the government’s direction on low carbon vehicles.

“What we really need is a long-term, costed 20-year transition programme to transform the UK’s infrastructure and create a smart grid capable of supporting battery electric vehicles (BEVs).

“The vision should be to make the UK the world leader in infrastructure development to support our future transport needs. At the moment, the government’s approach is vehicle-led – or in other words, consumer-led – and this means we’re all reacting to market forces rather than collaborating together to achieve a national strategy, leaving a gaping pit in the drive for a sustainable future.”

 

Rory O’Neill, Head of Residential, Carter Jonas expressed disappointment that changes to stamp duty were again omitted from the budget:

“In failing to address Stamp Duty for a fourth consecutive year, the Chancellor has missed another opportunity to inject much needed momentum into the market. As the primary hurdle facing residential property, Stamp Duty fees over the £937,500 threshold coupled with the 3% levy on second or multiple home purchases are grinding the market to a halt.

“It should go without saying that no echelon of the market operates in isolation, and penalties at the top end will always filter down the ladder.

“In the first instance, homeowners in the core market, of between £650,000 and £900,000 can rarely raise the transactional funds required to upsize, creating a logjam in the squeezed middle, while precluding first time buyers from trading up to their second home…  the market is so congested in the middle that it has reached an impasse. While more first time buyers can take their first step onto the ladder, the real challenge is how far they can climb it and how quickly.

“Encouraging older generations to downsize, and freeing up family homes for the younger generations and the squeezed middle-income earners, could have provided a boost to transaction volumes. However, once again, Hammond has done nothing to unlock and redistribute existing housing stock.”

 

James Ryan from Ellis & Co estate agency in Golder Green, London said nothing had been done to boost low transaction levels:

“While the budget has given a boost to first-time and shared-ownership buyers nothing has been done to boost low transaction levels, which is not good for the property market but even worse for the economy as a whole. There is a huge section of society that will only be able to rent, so more support for this sector would have been welcome.” 

 

Maxim Cohen, Chief Executive of The UK Adviser, a mortgage adviser support franchise, said that while landlords were struggling there could be new opportunities for brokers:

“The Prudential Regulation Authority (PRA) rules, introduced in October 2017, continue to restrict landlords in an already difficult market, meaning they are finding it increasingly problematic to obtain lending and favourable rates, as well as experiencing a reduction in product choice. Further restrictions in this area of the industry could cause big problems for landlords – although it also creates greater opportunity for advisers who are quick to understand the changes and evolving market, and can advise on tax changes and the most suitable products for each individual.

 “The increase in annual investment allowance (AIA) to £1 million for the next two years is encouraging – this should stimulate investment and growth during Brexit, with extra incentive for businesses to invest in property as up to £1 million can be deducted from profits, a significant increase from £200,000.”

 

Budget responses – the fans

Brian Berry, Chief Executive of the FMB was far more positive, praising the Chancellor for investing the UK’s High Streets:

“It is important that the Chancellor has recognised the importance of investing in our high streets. He has announced a £675 million Future High Streets Fund to allow councils to rejuvenate town centres. It is estimated that as many as 300,000 to 400,000 new homes alone could be created by making use of empty spaces above shops on our high streets. This is space just waiting to be turned into residential accommodation. There is a pressing need to re-invent many of our town centres in light of changing patterns of retail and leisure. The Government should be applauded for its ambition to safeguard the life of our high streets.”

Berry continued: “We would urge councils to take this opportunity to look again at how they can work with local builders and developers to make better use of existing town centre building, and facilitate the development of wasted space above shops. A recent report titled Homes on our High Streets from the FMB puts councils at the heart of the solution and suggests some practical ways for them to facilitate the development of wasted space above shops. Retail will always be an important element of vibrant high streets, but there is plenty we can do on a small scale to help convert unused and under-used space in to attractive residential units. This will both boost the supply of new homes and help breathe new life back into our high streets. What we must avoid is perfectly good space lying empty and achieving nothing in terms of boosting the local economy or housing individuals.”

Berry concluded: “We are also pleased that the Chancellor has today announced £1bn to guarantee capacity to support lending to the SME housebuilding sector. This will be implemented by the British Business Bank, working with Homes England. Many small scale house builders continue to experience real difficulty in accessing the finance they need to build homes, and it is often the smallest scale builders that experience the greatest problems. This new funding will help to speed up the delivery of homes and lead to a more diverse and resilient housing supply.”

 

Jason North Associate Director and London Property Specialist for Barnes International said if it were not for Brexit, this budget would be more positively received:

 “If, in a parallel universe, the EU referendum had not come about, this chancellor’s budget would have been welcomed as an uplifting and forward thinking affair. Just for a while there, the shadow created by the lengthy frustrating and protracted negotiations of achieving Brexit was lifted and one was able to believe that we as a country can come together. Property did not pay a large part in the budget but there were further efforts to stimulate the first time buyers market and to open up fresh areas of the country for development. Until Brexit is resolved however, whether hard, soft or otherwise, values will continue to stagnate and decline. That fence which people are sitting on is becoming dangerously overcrowded. This time of opportunity for buyers should be grasped with both hands.”

Benedict Hall Director of BARNES Commercial Department also welcomed help for high street businesses:

“From a commercial real estate investment viewpoint nothing dramatic or damaging was announced in this year’s budget, it was certainly targeted at UK families and workers. By comparison last year’s budget introduced the revised taxation on commercial real estate for overseas investors which comes into effect from April 2019, I am sure this was taken into account in this year’s budget and it certainly hasn’t dampened the appetite for commercial investing. The pot of money set aside to help the smaller high street businesses and retailers over the next two years will only help protect them as investment opportunities. What is more important is the £2bn set aside for Brexit which is paramount in ensuring the UK remains a safe haven for transparent and non-volatile commercial real estate investing going forward.” 

 

Neil Tomlinson, residential specialist and Director of London-based Neil Tomlinson Architects welcomed changes aimed at encouraging younger buyers:

‘First-time buyers are being helped a little more and this seems to be more regionally-geared to help more young buyers get onto the property ladder – very much needed to invigorate the stagnant market. Another positive is that Councils are being given a boost and encouraged to make a start to promote building 650,000 new homes with a £500 million Housing Infrastructure Fund. Time will tell whether this is enough to make a real difference, but it’s certainly a positive step in the right direction towards more quality housing for all.’

 

 

 

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