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UK’s fledgling Build to Rent sector dealt stamp duty blow
The UK’s fledgling Build to Rent sector has been dealt a blow with the announcement that large investors will not be exempt from a new extra stamp duty surcharge that is introduced in a few weeks’ time. From 01 April there will be an extra 3% stamp duty payable on additional homes and it has been hoped that those investing in more than 15 properties would be exempt, and Chancellor George Osborne had indeed hinted at this. However, in his Budget announcement he confirmed that large scale investors in buy to let properties will pay the extra 3% which will apply equally to purchases by individuals and corporate investors. Melanie Leech, chief executive of the British Property Federation, said the move would hit the private rented sector. ‘The government’s decision to not include an exemption for investors who are purchasing large portfolios of properties for rent is extremely disappointing, and deals a huge blow to the build to rent sector,’ she pointed out. ‘This is going to be a significant deterrent to the institutional investment currently poised to settle in the purpose-built rented sector, which has the opportunity to deliver a significant number of new, quality affordable homes,’ she added. The failure to give relief from the additional stamp duty levy for large investors could inhibit the development of a much needed institutional private rented sector, according to Lucian Cook, Savills UK head of residential research. ‘While purchases of six or more residential properties can be treated as a non-residential transaction, the reform of stamp duty on commercial properties is likely mean greater entry costs for large scale residential investors one way or another. Our recent analysis suggests there will be demand for another one million private rented households in the next five years despite policies to boost home ownership,’ he explained. Investors could be put off, according to several experts, including Steve Sanham, development director at HUB. ‘A threshold on how many homes the stamp duty surcharge applies to is also crucial for institutional landlords and investors. The aim of delivering more homes will not be achieved if investors are put off from creating large developments of new homes to begin with,’ he said. Elizabeth Bradley, head of the corporate tax team at international law firm Berwin Leighton Paisner, also believes investors will be discouraged. ‘Much of the British property industry will be very disappointed with the Budget changes,’ she said. ‘The Chancellor has acknowledged the need to build more homes but the extension of the extra SDLT rate on buy to let to large investors will discourage investment in the private rented sector,’ she added. Continue reading
New stamp duty rates for commercial property in the UK announced
Investors in larger commercial property in the UK see a rise in stamp duty rates but buyers of smaller properties will benefit from a reduction in the tax payable. The way stamp duty on freehold commercial property and leasehold premium transactions is calculated has changed. The rates used to apply to the whole transaction value but from today (17 March) new tax rates and bands come into force. The new rates and tax bands are 0% for the portion of the transaction value up to £150,000, 2% between £150,001 and £250,000, and 5% above £250,000. It means that buyers of commercial property worth up to £1.05 million will pay less in stamp duty. Stamp duty rates for leasehold rent transactions will also change, with a new 2% stamp duty rate on leases with a net present value over £5 million. Opinion over the effect of the change is divided. According to the British Property Federation (BPF) it is not all good news. ‘Commercial property investment can often act as the catalyst for regional growth and as the economy has recovered investment has been spreading out from London to the UK’s regions, but will now undoubtedly slow,’ said Melanie Leech, BPF chief executive. ‘The real set back is that development in places like the Northern Powerhouse and Midlands’ Engine will now be held back as a result of this out of the blue raid on commercial property transactions,’ she explained. ‘Over a decade ago, the Government of that time decided to decouple the commercial and residential rates of SDLT recognising that the sectors were driven by very different factors and there was no logic in charging the same rates of SDLT on commercial and residential property. We can only hope that today’s announcement isn’t any unravelling of that logic,’ she added. However, Mark Tighe, managing director of capital allowances tax specialists Catax Solutions, believes that the reduced stamp duty payable will drive demand in this key asset class in the months and years ahead. But he warned that the resultant increase in transactions, among both businesses and private individuals buying commercial property, will potentially cost billions as a largely unused tax relief is lost forever. ‘Capital allowances are a highly valuable tax relief available to owners of commercial property but under current legislation they are irrecoverable if they are not identified and realised at the point of sale,’ he explained. ‘Currently, very few commercial property owners, along with their accountants and lawyers, are aware of unused capital allowances tax reliefs. Therefore as transaction levels increase in volume and momentum, commercial property owners are set to lose significant tax rebates to the tune of thousands, tens of thousands or even hundreds of thousands of pounds,’ he added. Continue reading
Second cross rail link for London will have huge impact on housing
A new north-south cross London railway set to link Broxbourne and Wimbledon will provide a huge boost to certain residential neighbourhoods and the creation of 200,000 new homes. The announcement in the UK Budget that Crossrail 2 will go ahead will boost prices and demand in key suburbs such as Wimbledon, Clapham and Tooting but also in key commuter town such as Cambridge, Basingstoke, Woking and Guildford as travelling times into central London will be reduced. It is excellent news according to Robin Paterson, chairman of UK Sotheby’s International Realty. ‘We will see pockets of accelerated growth emerge, much like we have seen around Crossrail stations such as Ealing and Slough. The new route will provide a huge boost to neighbourhoods such as Clapham and Tooting in the south, cutting journey times to The City of London in half and I would expect a future jump in prices to reflect this,’ he said. Crossrail 2 can help deliver 200,000 homes by acting as a catalyst for development and regeneration, but only if communities accept higher densities, according to real estate firm Savills. ‘Intensifying land use might not be an issue in post-industrial areas that are being regenerated but could face local opposition in semi-rural locations adjacent to the Green Belt. Savills research shows there is tremendous potential to increase density in London. We calculate that theoretically there is the potential to deliver 1.46 million new homes in London by building at higher densities. Furthermore, our analysis highlights that the greatest opportunities are in the outer boroughs,’ said Susan Emmett, Savills residential research director. ‘The big question will be whether the affected communities are ready to embrace this brave new world. They must be reassured that delivering higher densities does not require turning Shepperton into Singapore. Done well, higher density can bring benefits by enabling better shops and services that support vibrant communities,’ she explained. ‘A design led approach where the focus is on creating attractive places along traditional street patterns must surely be the way to go. We would need to change planning policy and attitudes to density to fulfil this target. Design led approach is therefore crucial,’ she added. Steve Sanham, development director at HUB, pointed out that Crossrail 1 has demonstrated that major infrastructure projects can have a serious regenerative effect and unlock new opportunities for housing by boosting connectivity within cities. ‘Investment into key infrastructure like Crossrail 2 is infinitely more useful in helping to deliver real affordability into the market than many of the short term housing initiatives we have seen recently,’ he said. ‘Starter Homes will only help a lucky few, and these discounts don’t solve the structural issues that make it difficult for first time buyers to get on the ladder. Opening up new areas of London as viable locations for housing will increase choice for Londoners looking for sensibly priced homes,’ he added.4 ‘A threshold on how many homes the stamp duty surcharge applies to is also… Continue reading
