Dear chancellor: Five property demands for the Budget

The Tory conference was peppered with new proposals aimed at “generation rent”, cash-strapped councils and buy-to-let landlords. But will chancellor Philip Hammond firm up details of these when he unveils his final proposals on 29 October? And what else does the property sector have on its wish list for this year’s Budget? Here are the industry’s five biggest asks of the speech. 1. Housebuilding incentives In the 2017 Autumn Budget, the government set out ambitious plans to build 300,000 homes a year, having already pledged to deliver 1m new homes by 2020. This year, many are hoping Hammond will provide more detail on measures to accelerate the government’s housebuilding plans, such as lifting the cap on council borrowing for new developments. Ruth Cadbury, former Labour shadow housing minister and MP for Brentford and Isleworth, says: “The overall top-line issue has to be anything that delivers the 1m new homes, including at least 100,000 genuinely affordable homes.  This has to be a combination of lifting borrowing caps and direct treasury funding.” Others would like specific interventions in London to bring large-scale schemes to market faster. As housebuilding gathers momentum on a national level, some processes in London are being held back by lengthy planning processes, says EY’s UK head of real estate Russell Gardner. “This may also be a time for interventions on housing supply. There needs to be greater focus on supply-side measures rather than taxing demand. “The national picture indicates strong momentum for housebuilding when you look at the gap between what’s being built and annual targets,” he adds. “However, this isn’t the case in London, where the planning process for big residential schemes needs to speed up. Government plans to remove the cap on local authority borrowing will also be beneficial.” Evans Randall chair John Slade, adds: “I want to see something done to encourage inner-city urban schemes and housing. I would like to see more funding and more central government support of local government on kick-starting those schemes.” What are the chances? 3/5 2. Digital tax Hammond has recently stepped up the call for online retailers to face a tax on their revenues. Efforts to address the imbalance between physical stores and their online rivals, who do not need to pay the same overheads, has largely gained backing from the industry.  Many are expecting details of an internet sales tax – sometimes called the Amazon tax – to appear in this year’s Budget. Walter Boettcher, chief economist at Colliers International, says: “I think the Amazon tax is in the works. There is an unfair tax advantage for digital companies compared to high street retailers. There is more to come.” Ion Fletcher, director of policy (finance) at the British Property Federation, also welcomes the notion of the tax, but warns that more needs to be done to revive the UK’s high streets. “This is not an alternative to much-needed support for our high streets, which still require urgent support in the form of fundamental business rates reform,” he says. What are the chances? 4/5 3. But no other property tax hike The industry has faced multiple hikes in stamp duty over the years, affecting the top end of the residential market as well as investors in large commercial property market. Buyers of second homes and buy-to-let properties were also dealt an additional 3% stamp duty surcharge two years ago. Now the industry is wary about further domestic stamp duty hikes, as well as new proposals to target foreign investors. Miles Gibson, head of UK research at CBRE, says: “I am concerned about the impact of the proposed stamp duty increase for overseas purchasers of residential property. “I am also hoping the chancellor will avoid a further increase in stamp duty on UK commercial property – this would be badly timed given the current jitters around Brexit. Also, it would be a further hit to retail property, where values have fallen recently on the back of high-profile retailer restructuring.” Evans Randall’s Slade adds: “The government and political uncertainty have slowed down the residential market sufficiently with the big increase in stamp duty [in 2014] and now this overseas owners tax. They have achieved a slowdown and more; they have almost stagnated the high end of the market. Overseas investment helps with stability – please leave it alone.” There has been a flurry of tax changes in the property industry and most in the market will just be pleased without too much more disruption. “The real estate industry will be hoping for minimal changes on the tax side as the number of measures introduced in a short space of time has meant it hasn’t had a chance to digest them,” says EY’s Gardner. What are the chances? 3/5 4. Stamp duty drop As well as no further tax hikes, many are also hoping for some tax reductions. At the top of the market, buyers of homes costing more than £2.1m have paid a stamp duty rate of 7.9% since 2014 (which saw the rate go up by just under £20,000). Helical chief executive Gerald Kaye says these kind of rates are “freezing” the high-end UK residential market. “The current levels of stamp duty are reducing mobility in the high-end market and is inefficient in that older people are not trading down to smaller properties enabling growing families to move up.” At the bottom, others would like further reductions for first-time buyers. In the 2017 Autumn Budget, Hammond abolished stamp duty for first-time buyers purchasing a home of up to £300,000. This time round, Labour’s Cadbury is calling for a new deal for first-time buyers with no stamp duty on their first home. And Colliers’ Boettcher is hoping the government will repeal the stamp duty on buy-to-let properties to prevent the loss of private rental stock. On the latter point, Savills’ residential research head, Lucian Cook, suggests this is unlikely to happen. “I would be amazed if the 3%  stamp duty surcharge was removed. The number of people paying that is significantly higher than the government had originally forecast. However, they could ease the pressure on BTL landlords by delaying the restrictions on mortgage tax relief.” What are the chances? 2/5 5. Business rates reform No property sector wish list would be complete without a mention of business rates reform. New Consumer Prices Index (CPI) figures this week show the current rate of inflation at 2.4%, which Colliers International says will add around £600m to the overall gross business rates burden from April 2019. Britain’s retailers alone would see a £200m increase next year. Boettcher says: “Town centres are being decimated by an unfortunate cocktail of dysfunctional tax policies – there needs to be a balancing act. But when you look closely at business rates closely, it is complex. As it is linked to government revenue, changing that formula is not the easiest thing to come up with.” Fletcher adds: “The government should be brave. It should decouple business rates from inflation and it should fix the rate of tax. This would mean businesses pay more in the good times, when they can better afford it and paying less when times are tough.” What are the chances? 1/5 To send feedback, e-mail anna.ward@egi.co.uk or tweet @annaroxelana or @estatesgazette