The Chancellor has missed a golden opportunity
The Chancellor’s key 2012 budget ’fails to go far enough’ says Richard Wackett, national head of ratings of property specialists, Lambert Smith Hampton (LSH) and this is storing up problems for the economy and future growth. Property owners, developers and potential occupiers will continue to be reluctant to build and occupy new space given the level of business rates which remain linked to a historical valuation date.
The government’s announcement of reduced corporation taxes, potential enterprise loans and enterprise zone rate allowances ’are incremental in the face of an anticipated business rate yield of £26 billion in 2012/13. The Enterprise Zone allowances are limited by European competition rules and will not extend beyond £50,000 per annum at the behest of the local authority.
The shortage of good new supply to the market, in the absence of any incentive for developers to borrow and build, is storing up shortages of grade A stock which will hinder economic recovery over the next 18 months.
With the bombshell of the UK’s industrial wasteland, post recession, there is an urgent need to reignite the development and regeneration of urban areas with real incentives to build grade A accommodation fit for the 21st Century. Developers need to be encouraged to build high quality space without fear of a lengthy 100% rate charges if they fail to secure a letting.
All Rateable Value assessments are currently tied to economic conditions at April 2008 and are subject to annual inflationary increases. The fact that the valuation date was four years ago and that the rate of inflation adopted this year is 5.6% runs counter to general trends in the property world. This makes life particularly uncomfortable for owners with voids and no prospective tenants.
By 2013 there will be a gross undersupply of good space which will lead to higher rents as the economy eventually recovers. This will be entirely at odds with the previous government’s stated aim to achieve ‘realistic’ rents by encouraging landlords to let buildings through the discredited empty rates regime.
In order to address these issues facing the commercial property industry a number of measures are required:
- A suspension of empty rate charges on new projects to encourage new speculative development.
- 100% rate exemption within Enterprise Zones for a limited initial period.
- The abolition of downwards phasing in England.
- Centrally funded hardship relief for business for a maximum of 1 year.
- Centrally funded discretionary reliefs for business holding partially occupied premises.
The problem of high occupational overheads including rates will be compounded by the lack of certainty inherent in the government’s localism policy now enacted which will enable local authorities to raise their own additional supplementary rates.
At a time when business is risk averse the government would be well advised to provide some ceilings and reliefs on annual rate increases through a policy of equalisation.
This was posted in Bdaily's Members' News section by Richard Wackett .
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