Real estate finds little to cheer in Budget

Real estate leaders have expressed their disappointment at a Spring Budget that stopped short of a meaningful boost for the industry. Chancellor Jeremy Hunt set out measures that included levelling-up funding for Canary Wharf, more devolution and more investment in life sciences, as well as changes to capital gains tax and empty rates relief.  However, there was little in relation to significant business rates reform, planning or tax-free shopping for tourists, which were among the key issues that the industry had hoped would be addressed.  Experts also criticised Hunt’s proposals for failing to focus on stronger measures to elevate housing delivery. Melanie Leech, chief executive at the British Property Federation, said: “There is little in today’s Budget for the property sector to cheer about. Further devolution deals are welcome as are the announcements of support for delivering more homes in a small number of places, but this falls far short of a bold strategy for delivering the homes needed across the country.” BTR braces for a hit In his speech, the chancellor said multiple dwellings relief would be axed. It was previously introduced as a tax break to support investment into the build-to-rent market and private rented sector. Leech said: “Abolishing SDLT multiple dwellings relief will hit the BTR sector at a time when the government should be doing everything in its power to encourage more long-term investment into professionally managed rental homes. “This will hinder rather than stimulate the efficiency of the housing market.” Henry Moss, a partner at law firm Ashurst, called the move “an unexpected blow to institutional investment”. Brendan Geraghty, the chief executive of UKAA, said: “The Spring Budget provided the government with a perfect opportunity to put housing front and centre, to invest in, and simplify, the planning system to deliver the new homes that the country is crying out for – but they did not take it.” He added: “The government itself estimates that 300,000 new homes are needed per year. Yet the planning system remains the biggest obstacle to new home delivery and urgent reform is required.” Chris Gardner, chief executive at development finance provider Atelier, said: “What was delivered in today’s Budget does nothing to help unlock the current housing market inertia. “Nothing was done to address the actual issues facing the sector. A lack of delivery and affordability has plagued the market for years, and without intervention we face a future that deprives the young of home ownership.” He added: “Overregulation and planning bureaucracy has hamstrung housebuilders by making it economically unfeasible to build houses in many parts of the country.” Gardner called for the government to support SME developers, which he said were “the hardest hit by overburdensome regulation” and were “left short-changed.” Jeremy Raj, national head of residential property at Irwin Mitchell, said: “It’s hard not to conclude that the government now feels that issues within the residential property market will not be a favoured battleground for them in the coming general election, other than sloganeering about the green belt and commonhold. “Several kites were flown in the run-up to the Budget, but the reality was a distinct lack of innovation or creative thinking in relation to issues such as downsizing, property taxes or improving the environmental quality of our housing stock.” Still no meaningful business rates reform Industry leaders conveyed their dismay at the ongoing lack of movement on fundamental business rates reform. Richard Curry, partner and head of retail at Rapleys, said: “Another year, another budget without proper business rate reform, how disappointing but not unexpected. I would have liked to have seen business rates scrapped for all businesses that are taking existing high street space, no matter which use, to stop the decline on our high streets and get existing properties repurposed more quickly.” Vivienne King, chair of the Shopkeepers’ Campaign, said: “The chancellor has squandered his last chance to keep his party’s manifesto promise to reduce business rates for retail. His decision to let the standard multiplier rise in line with September’s 6.7% CPI figure – when inflation today is at 4% and falling – will reduce investment by the 220,000 biggest occupiers of commercial space in the UK.” King also said she was “deeply concerned” by the government’s decision to extend the reset period for empty property relief in England from six to 13 weeks. “This measure will discourage short-term letting of empty properties and will bring down the curtain on pop-up shops,” said King. “The measure has been proven to not work in Wales and Scotland, so why repeat it in England? “This Christmas, there will be fewer empty properties let to short-term tenants over the festive period. Far from raising an extra £40m for the Exchequer as the Treasury imagines, with fewer properties occupied, this measure will bring in less revenue from business rates.” King added: “This was the Conservative Party’s last chance to keep its manifesto promise to reduce business rates before the next election. Retailers across the country will feel betrayed as they continue to suffer under one of the most punitive property tax regimes in Europe.” John Webber, head of business rates at Colliers, said: “This is a kick in the teeth for those retail or leisure landlords who are unable to find a tenant for their property, who will end up paying considerably more in business rates for a property from which they are receiving no income. “This is likely to deter property investment and values in an already distressed market.” No U-turn on tax-free tourist shopping Property leaders also said it was “deeply frustrating” that calls from more than 500 sector leaders to bring back tax-free shopping for tourists in the UK have been ignored by the government. Scott Parsons, chief operating officer, UK at Unibail-Rodamco-Westfield, said: “Today’s Budget is an utter disappointment for the retail and property sectors, with no significant announcement on business rates and no U-turn on tax-free shopping for tourists.” Parsons added that the existing business rates system placed UK high streets at a massive disadvantage compared to those in other European cities. He said: “UK retailers shoulder a financial load nearly 10 times more than brands on the continent. Permanently lowering rates is the most meaningful way to support the sustainable, long-term growth of the retail industry and show the world once and for all that the UK is open for investment.” Parsons added by failing to deliver on revoking tourist taxes and business rates, the government had “missed opportunities, especially in this all-important election year”. He said: “While Hunt has failed to deliver for the industry, in contrast, the Labour Party’s newly unveiled strategy to revitalise Britain’s high streets holds great promise. By pledging to overhaul the outdated business rates system, Labour is signalling a more encouraging future for the sector.” Charles Begley, chief executive at the London Property Alliance, urged the government to restore tax-free shopping for tourists, “given the very clear economic benefits for the country”. Boon for life sciences While industry players found the Budget lacking for the retail and residential sectors, they were broadly encouraged by the focus on life sciences in the government’s spending strategy. Begley said: “The chancellor’s support for investment into life sciences is welcome. Our own research has shown that greater public and private sector partnership is needed to fulfil the UK’s potential as a global superpower in this high-growth industry, with the property industry already providing world-class lab and associated workspace across the capital.” Mike Derbyshire, head of planning at Bidwells, said AstraZeneca’s £650m investment was evidence of the potential and strategic importance of Cambridge’s life sciences industry to “propel economic growth in the country at large”. He said the sector could “still deliver so much more in terms of both economic growth and health outcomes”, and outlined his hopes that Cambridge’s new development corporation would “deliver a framework through which this can be fully realised”. “This will depend, however, on the government’s conviction in regard to its investment in transport infrastructure, its willingness to streamline the planning system to boost lab space availability, and sufficient investment in housing and infrastructure more generally. If these issues are addressed, then investment will flow into the sector on its own accord.” Photo by Rex/Shutterstock