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Call for UK to drop tax on new prime property developments
The UK Chancellor George Osborne should pause housing tax at the top end of the market or risk distorting the wider market, it is claimed in anew analysis report. Up to a 100% rise in stamp duty on high luxury homes has seen buyer interest drop at a time when there has been a 40% rise in prime properties planned in London, according to the report from design and consultancy firm Arcadis. It points out that the unintended consequences of successive stamp duty rises means projects in development for a number of years have been disproportionately affected and the delivery of affordable homes could be threatened as a result. Despite initially encouraging investment in prime residential property as a means of stimulating wider economic growth, the government has since changed policies mid-cycle, the report suggests. It says that this is regardless of the fact that many developers have already committed to major schemes. Since the end of 2014, the stamp duty alone on a £6 million home has almost doubled, rising from £420,000 to £810,000 when bought as a second property. The timing of these reforms has come just when certain parts of the market had already begun to slow. In order to ensure sales, some developers who had committed to schemes before 2014’s reforms have been forced to discount prices or resort to ‘stamp duty paid’ deals. These sales discounts have hit margins by as much as 4% on prime homes and up to 7% on super prime properties. Meanwhile, others have opted merely to delay construction, meaning that a significant number of affordable homes, planned as part of the original development, are not being built as quickly. Furthermore, with fewer would-be purchasers willing to pay such high rates of tax, many investors are eyeing homes under the £1.5 million price threshold. This additional wave of interest risks distorting the mid-market and inadvertently pricing out those people who would typically be looking to purchase these as family homes, the research adds. According to Mark Cleverly, Arcadis head of commercial development, to accelerate the delivery of affordable housing currently in the pipeline and ensure the construction sector remains sustainable, the Chancellor must impose a temporary reduction in stamp duty on new build properties. In tandem with this, he must better focus the debate onto ensuring acceptable levels of affordable housing are delivered as part of new developments. Cleverly suggests that this approach would get the market moving again, meaning both a steady flow of affordable homes coming onto the capital’s market and making schemes viable again for developers, safeguarding jobs and ensuring development can proceed as planned. ‘The Chancellor has to act on prime property tax. Despite initially encouraging investment in prime housing, the government since changed its mind and attempted to stem demand through ongoing tax increases and new fiscal regulations. This has prompted a drop in buyer interest at the very top of the market, creating… Continue reading
Outlook for investment in Scottish commercial property market positive
With talk of another referendum in Scotland if the UK votes later this month to leave the European Union new research has found that Scottish independence is not a priority for UK property investment. Investors believe that they will still invest in commercial real estate in Scotland as long as yield outperforms other regions as the issue of Scottish independence ranks lower in importance than rental yield, capital growth and a stable tax environment. Just 21% of property investors said independence was an important factor, less than half the 46% who mentioned rental yield, according to the Morton Fraser survey. Overall one in four property investors is open to investing in Scotland with 11% actively monitoring or currently pursuing opportunities. Proportionately, this is above the nation’s 8.9% share of the UK commercial real estate market. It also shows that 85% believe that leaving the EU would have no impact at all on their likelihood to invest in Scotland and 79% of property investors claimed Scotland separating from the UK would not affect their decision to invest. ‘It is easy to overestimate the potential impact of Scottish independence on the property market. Investors are ready to enter the market if the right opportunity arises, regardless of the political status of the country,’ said David Stewart, commercial real estate partner at Morton Fraser. ‘That gives us optimism for the future of the Scottish real estate industry. If the price is right and the market conditions are at least on a par with other regional areas across the UK, investors will follow the returns. The prospect of a neverendum in Scotland may drag investment, but it’s not the deciding factor for many,’ he added. With rental yield the number one criteria for potential British property investors looking to enter the Scottish market, Morton Fraser has uncovered the ‘tipping point’ at which a yield premium would encourage investment. Of the property investors likely to invest in Scotland if there was a higher yield premium, 70% said a benchmark of more than 3% or higher would encourage them to invest, with 31% saying more that 5%. That figure should be viewed in the broader context of many respondents being initially cold on investing in Scotland, so the true figure for active investors is likely to be sharper. ‘Many investors are prepared to overlook ideological or political issues to run the rule over Scottish property investments. The yield gap between Scotland and other regional cities in the rest of the UK can always be met with a quality opportunity whether you are looking to invest in Edinburgh or Manchester, Glasgow or Bristol, a high quality asset will always stand on its own merits,’ Stewart added. Continue reading
Demand from buyers in UK falls to two year low
Demand for housing in the UK is at its lowest level in two years with the number of house hunters making enquiries down by a fifth in April, new research shows. Estate agents also reported that the number of sales made to first time buyers fell in April. The April Housing Market report from the National Association of Estate Agents (NAEA) shows there were 325 house hunters registered per member branch on average last month. This was the lowest number recorded since March 2014, when there were 313 house buyers recorded at each estate agent branch. This means demand has decreased by 22% from 417 in March. Last month, the supply of houses available for buyers also decreased by 35% from 54 properties available in March to 35 in April. Some 26% of the total sales made in April were to first time buyers, a decrease of 2% compared to March. However, some 33% of estate agents expect sales to this group to increase following the buy to let stamp duty changes as buy to let landlords exit the market, potentially freeing up properties for first time buyers. The monthly research also found that 24% of estate agents expect house prices to decrease and a further 23% expect demand to decrease if Britain votes to leave the European Union in the referendum on 23 June. Indeed, a recent Brexit report from the NAEA and that Association of Residential Letting Agents (ARLA) revealed that by 2018, a Brexit would reduce the average UK house price by £2,300 to £300,900. However, if Britain remains in the EU, the average UK home could cost £303,000 by 2018. ‘It’s no surprise that demand dropped significantly in April. Some 80% of agents saw an increase in purchasers trying to beat the buy to let stamp duty changes before the 01 April deadline, so we expected to see a slow down immediately following the deadline,’ said NEA managing director Mark Hayward. ‘Whilst the number of house hunters registered per branch dropped in April, the supply of available housing to buy also fell quite sharply, so supply and demand are still moving in the opposite direction, rather than balancing out,’ he explained. ‘Additionally, the upcoming EU Referendum means we’ve entered a period of uncertainty, as buyers put off their hunt in anticipation of the result, and what might happen to prices as a result,’ he added. Continue reading
