Partner Article

Budget impact on the property sector

Richard Turner, director of investment agency at DTZ in Newcastle, shares his views on how the Budget will affect the property sector.

The Chancellor’s 2012 Budget contained some reassuring messages which overall can be viewed as mildly positive for business growth. Short term impacts look unlikely but the medium term outlook for occupier demand - thereby providing the foundation for rental/capital improvements in the relevant sectors - is encouraging. Further reductions in corporation tax, cuts to the top level of income tax as well as discussions around the long-term use of the bond markets are positive signs which will underpin confidence in the UK, as a stable place to do business.

It would appear that the proposed changes to the rate of Stamp Duty Land Tax (SDLT) are limited to residential property which will be a relief to the commercial sector, particularly for those owners struggling to maintain values given low debt availability and generally weak occupier fundamentals. Our estimate is that the increase in SDLT to 7% for homes worth more than £2 million could raise around an additional £200-300 million in revenue for the treasury with the potential for more given the clear focus on anti-avoidance measures. This will not be a concern for the regional market given general levels of house prices, so long as it does not carry over into quasi-commercial uses such as Nursing Homes.

The property industry will welcome the simplification in other areas such as the Carbon Reduction Commitment Scheme, whilst certain new concessions will encourage business sectors which already have a strong presence in the North East, such as video gaming software development, who will get a tax deal similar to the film industry in the UK. Companies who want to become Real Estate Investment Trusts (REITS) are now able to list on alternative markets rather than just on the London Stock Exchange.

The Government clearly hopes that the New Planning Policy Framework (NPPF) will prove a major engine of economic growth. Developers will be encouraged by its streamlining of the planning process. Questions still remain as to its impact given recent cuts in local authority planning resources, the NPPF’s ability to provide sufficient direction at either a national or local level, and the potentially obstructive impact of ‘Localism’. We also welcome extra finance being made available up-front to support construction companies building new homes but more still needs to be done to encourage the output required to meet future demand.“

It is not a perfect Budget for the property sector, with no reform of the contentious empty rates liability, but on balance the support to business is likely to encourage occupiers, which is much welcome as our region begins to see some improvement in property outlook.

This was posted in Bdaily's Members' News section by Tom Keighley .