Chancellor's Autumn Statement
By Paul Norman - Tuesday, November 29, 2011 12:27
Chancellor George Osborne will outline plans to lift the UK's struggling economy at 1230 GMT. Follow updates on the key points for the property industry at CoStar News.
Osborne will deliver his update on the state of the UK economy and respond to economic forecasts from the Office for Budget Responsibility.
The property industry will be eyeing a series of measures to boost markets.
Osborne has already announced this week that he has signed an agreement with the UK’s largest pension funds which will see £30bn of investment in major domestic infrastructure projects over the next decade.
It has also been widely trailed that Osborne will announce an enterprise zone at the Nine Elms Opportunity Area in London, intended to encourage investors to fund an £800m Northern Line Extension from Kennington into the Battersea Power Station site.
Peter Damesick, EMEA chief economist, CBRE, has called for change in three key areas – business rates reform, stamp duty reform and REITs.
On business rates reform Damesick said: “Business rate reform is still a priority, particularly for retailers. The 5.6% rise in the rate bill next year due to inflation-linking could create additional pressure for a sector facing a marked slowdown.
"In view of the exceptional rate bill increase in 2012 resulting from inflation, businesses should be allowed some measure of deferment.
“With rents flat or falling, rate liabilities will rise as a proportion of total occupancy costs leaving rate bills out-of-line with market conditions until the next revaluation in 2015. Some businesses could be paying more in rates than in rent in this period. The solution is more frequent revaluation and swifter implementation of new rating lists.”
CBRE is also calling for reformation of the stamp duty regime.
“Stamp Duty is currently payable on the total price of a house at the rate applicable above a given threshold. This creates highly distorting step jumps in the duty payable above each of these thresholds,” said Damesick.
“A first-time buyer, for example, would currently pay no Stamp Duty on a purchase of £245,000, but £7,650 (3 per cent) if the price was £255,000. The regime should be reformed to smooth out these distorting jumps, so the amount payable rises progressively with price.”
On reform of the UK’s REIT legislation CBRE wants the balance of business test to modified for residential REITs.
“The government should amend the rules on REITs to improve the prospects for the creation of residential REITs. Residential investment portfolios typically comprise a proportion of “trading stock” which creates problems in meeting the requirement for 75% of REIT assets to be “investment property”.
“Further complications can arise from the inclusion of homes held on a shared ownership basis or other forms of intermediate tenure, given the increasing share of these tenure types in the residential market.
“The balance of business test should be modified for residential REITs, so that a residential investment company could qualify if at least 75% of the homes held in its portfolio during any year are let, available to let or subject to shared ownership arrangements.”
pnorman@costar.co.uk