Much missing in steady statement

The content of the Autumn Statement was to a large extent “steady as she goes”. Which is exactly what we need at a time of such economic and political uncertainty. The highlight was the large commitment to infrastructure investment. Over the next five years, the government’s new national productivity investment fund will deploy more than £23bn to support housing, transport, telecoms and R&D. Infrastructure spending is a crucial catalyst to real estate development, providing jobs in the short term and creating places where people and businesses can thrive in the long term. We were pleased to see that business rate rises affecting London and the South East are being phased in at a slightly slower pace. Taxes should not be the ruination of businesses and this will help. It’s also great to see a further £1.8bn allocated to LEPs across the country, as many are working hard to deliver growth and employment in their areas and this will help unlock land for housing, boost skills and improve transport connections. This funding, coupled with the promise of further devolution deals, shows a commitment from government to inclusive regional growth. Sticking with the good news, the government confirmed it will be extending a capital gains tax relief so that certain real estate investors will now benefit. The substantial shareholdings exemption will be more generous from April 2017 and should make the UK a more attractive country in which to domicile real estate funds – possibly at the expense of Luxembourg. However, the statement disappointed on a number of fronts. Taking no account of extensive representations arguing for a delay in the introduction of OECD rules to restrict tax relief on interest expenses, the government is pressing ahead in less than six months’ time. The rules will be horrendously complicated and fundamentally change the tax treatment of an important source of capital for property – debt. It is crucial that we get them right if they are not to discourage investment. There was also no mention of changes to SDLT, despite recent media pressure and BPF representations. So we are left with a 3% surcharge that sends all the wrong messages to institutional pools of capital that could invest billions into building new homes, and a set of rates and thresholds that stymies transactional activity in important markets. And there was no acknowledgement that recent increases to commercial SDLT have hurt the value of pensioners’ portfolios. Finally, a couple of things to look out for over the coming months. Firstly, a white paper to address the country’s housing challenge once and for all. It will be interesting to see what options the government is willing to contemplate. Secondly, a consultation on changing the tax treatment of non-resident investors in UK property. As overseas investors now own more than 25% of the UK’s commercial property market, this could have far-reaching implications. In summary, a shorter set of policy measures than we have become used to, which we hope is a sign that the chancellor understands the importance of keeping tax and regulation stable and predictable – particularly for long-term investment in real estate. Melanie Leech is chief executive of the British Property Federation