Member Article

Autumn Statement reactions: housing hot on the agenda for South East and London businesses

Yesterday the Chancellor of the Exchequer, George Osborne delivered the government’s first spending review since winning a majority parliament in May’s General Election. We spoke to business owners across the South East and London and, unsurprisingly, property was the Autumn Statement’s most hotly discussed topic.

The Chancellor pledged £7bn to build around 400,000 ‘affordable’ houses across the UK. However, Osborne landed buy-to-let landlords another shock by announcing a 3 per cent stamp duty surcharge on property purchases from 1 April 2016.

Housing and Stamp Duty

Robin Paterson, chairman of United Kingdom Sotheby’s International Realty, commented: “George Osborne has pledged £7bn to tackle home ownership issues in this country, but it is a shame he did not do more for all aspects of the UK market in today’s Autumn Statement.

“By not altering excessive Stamp Duty levies that must be paid on top-tier UK homes, he has missed an opportunity to provide a major boost to the property market and encourage top-end activity.

“I feel that this is short-sighted by the Government as they have failed to address the slowdown at the top-end of the market and an increase in activity would have inevitably boosted Treasury receipts.

“The Chancellor could have put new, fairer Stamp Duty levels in place as so many London family homes, even in secondary areas, breach the £1.5m+ barrier. The six or seven-figure tax bills being paid for the highest value homes seems out of proportion with the Government’s other housing policies, which encourage activity.”

Stuart Law, CEO at Assetz for Investors, comments: “It is foolish to see the announcement of the London Help to Buy scheme with 40% interest free loans as this creates further upward price pressure on the capital when in fact subsidies should be being removed not added to this location.

“When the price reversal comes in London this will leave many in negative equity as a direct result of this policy and having to take on even more debt as a result of the further upward impetus on prices this policy will have in London. It is time for investors to leave the capital and invest in safer locations around the UK.

“Secondly with the announcement of the new 3% stamp duty premium for Buy-to-Let purchases from April next year, Buy-to-Let investors have been robbed a second time (following the new ‘tenant tax’ or tax on Buy-to-Let mortgage interest payments for higher rate tax payers) yet are providing something invaluable; homes for rent when saving for a deposit and home ownership is increasingly out of reach of many.

“The Buy-to-Let investor should not be blamed for house price rises, rather, this is down to the chronic shortage of housebuilding in this country which is compounded by population growth. We would therefore advise caution against penalising this group of investors when actually other policy areas hold the key to unlock the solution.”

Mike Chapman, senior manager, Corporate Tax at Knill James Chartered Accountants in Sussex, commented: “As if George Osborne’s announcement in the summer budget of the phasing out of higher-rate tax relief on landlords’ interest payments wasn’t enough, today’s Autumn Statement introduces a further fiscal double whammy for landlords which could have major consequences for the residential property market in the South East.

“Firstly, higher rates of Stamp Duty Land Tax (SDLT) will be charged on purchases of additional rental property (above £40,000) from 1 April 2016 aimed specifically at buy-to-let properties and second homes. The higher rates will be three percentage points above current SDLT rates and the exclusion of companies from the charge indicates that the Government sees the freeing up of residential property currently in private hands as key to its housing policy.

“So, there will pain on the way into the buy-to-let market through SDLT and a second announcement in the Statement revealed an unwelcome Capital Gains Tax (CGT) surprise on exit. From April 2019, a payment on account of any CGT on the disposal of residential property will be due just 30 days after completion. This compares to the current rules where the settlement of the tax due can be anything up to 21 months after disposal depending when in the fiscal year the sale occurs.

“What will the affect be on the south eastern property market? Clearly landlords who have maximised their borrowings with a view to enjoying capital growth may now seek to restrict their financial exposure by disposing of parts of their property portfolios. Where such properties are standing at a gain, disposal before the CGT acceleration is due will clearly be advisable. “

David Gibbs, Partner at Alliotts Accountants said: “In his Autumn Statement today George Osborne delivered a double whammy for the estimated one quarter of a million private landlords in the South East.

“Already hit by the restrictions to tax relief on interest payments due to be introduced from 2017, buy to let investors will now be hit with additional stamp duty on purchase and a requirement to pay capital gains tax within 30 days of a sale.

“South East investors will face a hike of 3% on stamp duty for all buy to let purchases from 1st April 2016. That means stamp duty rates will run from 5% for property over £125,000 up to 15% on property over £1.5 million.

“In addition, when a property is sold from April 2019 the capital gains tax will be due just 30 days after completion.

“Ultimately this set of proposals could drive buy to let investors out of the market leading to a serious shortage of rental property in the South East”

John Elliott, Managing Director at luxury housebuilder Millwood Designer Homes, with developments across Kent, Surrey and East Sussex, commented on today’s Autumn Statement: “We welcome the Right-to-Buy pilot scheme. Britain is still a nation of homeowners and it is good to see measures to help more people’s dream of owning a home become reality.

“Help to Buy has been a very effective tool in the market and it is good to hear that more homes will be built with this purpose in mind, particularly in London. However, the Government needs to continue to keep a close watch on this. The potential for more help in the shared ownership market is also extremely welcome and continues to stimulate the overall building of new homes and home ownership.

“I welcomed the news this week from some of the banks about providing mortgages for older people, but the Chancellor needs to take a look at the whole market – as Osborne said himself we need to “extend the opportunity to all and provide homes for our families”. There are still extremely Draconian measures in place, which prevent many young folk from getting on the property ladder. Otherwise we are in danger of creating bubbles in the market.

“Overall, we need an even approach to housing with a smooth transactional process the whole way along – we need the entire chain working together. This way the industry can eventually resolve the spiralling price crisis.”

Santhosh Gowda, Founder and Chairman of London-based property company Strawberry Star Group added: The Autumn Statement clearly illustrates the Government’s awareness of the huge pressures both the industry and the public are facing when it comes to availability of housing. We are amidst a housing crisis, where demand far outstrips supply and prices continue to rocket.

“Osborne’s target for the Government to build more than 400,000 new affordable homes across England by 2020 is a much needed step in the right direction in helping to ease the problem and we welcome this change.

“However, whether this is really enough to solve the problem is yet to be determined. Conditions need to be created that will encourage housing development to move fast and create the right kind of affordable housing for those currently in need.

“Meanwhile, the Government’s pledge to provide £400m to help local housing associations build 8,000 new specialist homes for older people and those with disabilities is a commendable move.

“We strongly believe that giving more power to local authorities to invest in housing and control development in their environs is vital to solve the problem. We would like to see more schemes put in place where local government is able to provide affordable housing for their local communities.

“There are huge opportunities for investment in housing, especially in London, however, the future lies in working with investors, developers and local councils to ensure that local need is being met, while maintaining the interest of those that wish to invest. The end goal must be to provide affordable housing for local people so the crisis we’re facing can be ameliorated as soon as possible.”

Business Rates and Enteprise Zones

Luke Davis (pictured) CEO of capital investment company, IW Capital said: “From the perspective of SMEs, Osborne’s autumn statement leaves much to be desired in what was ultimately a lack-lustre outlook of what’s to come for British business. Small steps were made in the right direction for our “vibrant” private sector, without which - he claimed - growth would be non-existent.

“Corporation tax is now the lowest in the G20; Britain’s northern powerhouse was acknowledged as part of a national agenda that included a £12bn fund to support Britain’s regional enterprise zones; and the small business rate relief scheme was extended to 2016. All welcome news for the thousands of SMEs speedily sprouting across Britain, however these reforms don’t go far enough.

“While yesterday’s review introduced a modular approach to supporting grass–roots science and tech innovation, little was mentioned to acknowledge a crippling finance system that is currently resulting in more than half of new businesses failing within the first five years. The UK tax system, a lack of bank lending and the cost of running a business are cited as the top reasons for failure.

“Given SMEs populate 99% of the UK’s private sector, changes in the financing infrastructure need to be implemented if the growth Osborne alludes to is to be sustained.

Keith Cooney, Head of Business Rates at Knight Frank: “The Chancellor has given the Authorities the right to set their own multiplier instead of the Government’s Uniform Business Rates in 2020. However, this is only to allow them to reduce the rates charged.

“They are prohibited from increasing the multiplier unless they go through the process of electing a city-wide mayor who will be able to add a premium under certain conditions.

“Although the announcements to extend Small Business Rates Relief to April 2017 and to increase the number of Enterprise Zones by 26 are welcome it is difficult to see how the significant cuts to Authorities of over 54% in central grant funding by 2020 can possibly be offset by the changes announced today.”

Jim Duffy, CEO, Entrepreneurial Spark said, “The small business rate relief scheme being extended for another year is good news for start-ups, but I’d like to see the Chancellor go deeper and provide more tax breaks and support for entrepreneurs. We’d like to see more initiatives to help start-ups recruit, plus easier access to funding for high potential businesses.”

Mark Sismey-Durrant, Chief Executive Officer at Hampshire Trust Bank, comments on the devolution of business rate setting to local councils: “The new power handed to councils enabling them to set local business rates should boost regional economic prosperity, as councils will now have responsibility for creating thriving local environments for growth. However, with greater power comes greater responsibility.

“Any potential business rate rises need to be carefully considered in how these could impact the thousands of SMEs which operate across the country. The UK’s smallest businesses need less red tape in order to grow and prosper and therefore we hope to see local councils look to support smaller businesses when making future decisions on business rates.”

Do you run an SME in London or the South East? Get in touch direct at ellen.forster@bdaily.co.uk to contribute to future content.

This was posted in Bdaily's Members' News section by Ellen Forster .