CBRE Responds To The Chancellor’s Budget – March 2014
BRE, the world’s largest property advisor, has issued its response to the Chancellor’s 2014 Budget and outlined the likely implications that the proposed measures will have on the residential and commercial property sector.
Impact of the budget
Neil Blake, Head of UK and EMEA Research, CBRE, commented:
“The chancellor has fallen into line with other forecasters by raising the expected rate of growth for the UK although this is largely for 2014 and the long-run underlying rate of growth appears to be little changed.
“This confirms our view that 2014 will be a good year for UK commercial real estate with rising output and employment helping to boost rents for industrial and office properties, particularly those in London and the South East.
“There were also a lot of measures that will boost household incomes – tax allowance increases – including for the 40% threshold, fuel duty freeze, alcohol duties cut, pensioner bonds and more flexible rules on taking money out of pensions all in addition to a forecast of the first growth in real incomes for many ears. This should provide a boost to consumer spending – possibly by more than the chancellor has factored in.
“In the longer-term, the new pension rules will make defined benefit schemes more attractive and will provide a boost to both savers and to the pensions industry and increased pensions savings tend to be good for commercial real estate investment .”
Impact on the housing market
Jennet Siebrits, Head of Residential Research, CBRE, commented:
“We welcome any initiative implemented to support the national housing market, however in this Budget we believe more could have been done.
“During 2013, we recognised a significant improvement in the market on the back of funding for lending, Help to Buy and an improving economy. But, while house sales have reached the highest
level since 2007, they still only totalled 1.1 million, well below the long term average of 1.5 million. This reflects continued constraints for many buyers, and a continued lack of housing supply (both in new build and second hand stock) which is putting pressure on prices.”
Help to buy
“The resulting uplift in demand for housing due to the extension of the ‘Help to Buy’ scheme will be directly offset by new supply which should help moderate the impact on price inflation. It will help boost the housing supply; we are building well under half the levels of homes we need in this country.”
“The 15,000 new homes planned for the new garden city at Ebbsfleet is clearly a step in the right direction for an area where pressure on housing has been high. This particular region of the South East currently benefits from the high speed train links and wider regeneration of the area which is long overdue and CBRE would like to see more of these initiatives going forward in the future.”
“It is disappointing that the Government has not used this opportunity to reform this outdated tax.
“Ideally, I would have liked to have seen the introduction of a graduated tax system. This would stop the unfairness and bunching caused by the current slab system. But at the very least, we would have liked the Chancellor to review the bands as they haven’t been upgraded for over a decade and this is
causing massive fiscal drag.
“The £250,000 band has been in place for 15 years. At this time average property prices were under £60,000, now prices are nearer £180,000. If the banding had been increased in line with property prices it would now by over £750,000. Cleary the Government is taxing by stealth.”
“We are pleased that the introduction of a 15% stamp duty on properties over £500,000 will not affect those rented out. The majority of overseas investors either live in their properties or rent out. As with the introduction at £2m, we do not expect it to have a marked impact on the wider market.”
On business rates
David Cownie, Business Rates Technical Director, CBRE, commented:
“By not extending reliefs on business rates in today’s Budget outside of the Enterprise Zones, the Chancellor has missed an opportunity to support and stimulate businesses in locations yet to see economic recovery. There is currently a three or six month rate-free period on empty properties, which is clearly insufficient in many regions. An extension to the rate-free period – to six and twelve months – would be welcomed and would enable businesses to divert rates payment towards investment in improvements.
“With substantial refurbishment typically costing the equivalent of two to four years rent the Chancellor could potentially stimulate investment into the economy of up to eight times the foregone rate liability. Further many landlords find that when a lease expires the rate free period has been used up by the outgoing tenant. We would like to see the Chancellor introduce fresh entitlement to relief for the landlords in such circumstances. Moreover, a guarantee of rates relief on properties undergoing works of improvement would stimulate investment in renewal and refurbishment, and simultaneously by pass the dogmatic and often litigious complexity of securing such relief under the current regulations.
‘Longer term, the business rates system needs to be reformed. We would argue that the framework remains in place, but there needs to be greater transparency and congruence with property market values, with Revaluations at least at three year intervals.”
On the sale of public land and garden cities
Stuart Robinson, Executive Director & Chairman UK Planning, CBRE, commented:
“There is still plenty of scope to increase the supply of underused or vacant public sector land. One initiative which would help is changes to the public procurement system, which is grossly inefficient, a
burden on time and more often than not ends up with the wrong players involved.”
“Garden cities were a step forward in their time but what is required currently is a model very different to what we saw at Letchworth and Welwyn Garden City. And although the Mayor is gallantly using
innovative ideas to procure homes at a faster rate, the scale of the housing crisis in London will need solutions which address the heart of the undersupply in problems in the Capital.”