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British Property Federation celebrates budget for property

The property industry has welcomed Chancellor of the Exchequer George Osborne’s budget, which went further than even the most optimistic within the industry could have predicted.

Notable successes included the disaggregation of stamp duty on bulk house purchasing, potential changes to the UK REIT regime, a simplification of the planning system and allowing businesses to lead neighbourhood planning in predominantly business neighbourhoods - all of which the BPF had been encouraging the government to deliver.

Whilst changes to the planning system had been widely expected and trailed ahead of the budget, changes to the way stamp duty is calculated and a potential lowering of the REIT barriers were two pleasant surprises.

Stamp duty has long been cited as an obstacle standing between large institutional investors, such as pension funds, and investment in residential property. If institutions could be attracted in greater number into the residential sector, a significant increase in new homes would result. For example, a fund of £1bn could see as many as 5,000 new homes built, based on average house prices.

The removal of some of the barriers to entry to the REIT regime should also provide a timely boost to investment in UK property and the REIT sector.

Liz Peace, chief executive of the British Property Federation, said: “This is a budget that the property industry will want to get behind. It has a general thread that is supportive of enterprise and a number of issues on which our industry can genuinely feel it is being supported.

“We are particularly pleased that the government has been willing to engage on issues such as planning reform, REITS and the stamp duty bulk purchase rules. The government has listened to ours’ and others’ representations and you cannot ask for much more than that.

“Some aspects remain work in progress, such as the use class issue and REIT reform, but I am sure the industry will continue to provide its considered expertise in support of the government’s objectives.”

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Contact the BPF on 020 7828 0111

Patrick Clift, Media and Public Affairs Manager, on 07834 439 505 or at pclift@bpf.org.uk

Paul Sweeney, Media Assistant, on 07841 732 194 or at psweeney@bpf.org.uk

Notes to editors – quotes on specific policy announcements

Changes to stamp duty:

Ian Fletcher, director of policy at the British Property Federation, said: “This is impressive backing for a long-standing BPF campaign to have stamp duty on residential portfolio trades reformed. It will provide an important boost for the private rented sector and we hope will tip the balance in encouraging institutional funds into building homes. Using the average price is fairer and a welcome measure of support for those in need of rented housing.”

REITs:

Peter Cosmetatos, director of Finance at the British Property Federation, said: "We are delighted that the government has grasped this opportunity both to make the UK REIT regime more attractive for new entrants and to make it work better for the UK’s REITs.  The forthcoming informal consultation covers many of the issues we have lobbied government on in recent years and in some respects goes even further, with the mooted abolition of the 2% conversion charge which is such a barrier for offshore funds tempted to come back to the UK.

"We are optimistic that, taken together, these proposals could have a real impact on boosting investment in UK property and in the scale and health of the UK’s REIT sector, and look forward to participating in the consultation."

Firstbuy scheme

Ian Fletcher, director of policy at the British Property Federation, said: "This package broadly makes sense, because it targets home deposits, and is about as much as the government could realistically do in current circumstances. It is important that any government spending at this juncture is also supporting growth and jobs and we would like to have a seen a refined policy which targets such aid at homes yet to built or completed, rather than a means of house builders selling unsold stock."

Presumption in favour of sustainable development:

Liz Peace, chief executive of the British Property Federation, said: “The government has indicated its intention to introduce a presumption in favour of sustainable development as part of the National Planning Policy Framework. We see the presumption as a crucial part of the government’s pro-growth agenda and as a counterweight to concerns that localism could equate to nimbyism in practice, however, it must not be hedged around with so many restrictions as to be meaningless in practice.”

Greenbelt land:

Liz Peace, chief executive of the British Property Federation, said: “It is right that planning should prevent urban sprawl but the designation as green belt should not mean ruling out any development – the green belt should be an additional hurdle, not an insuperable barrier. Removing the targets for the proportion of new development on brownfield land should inject more flexibility, allowing much needed housing and new development to take place where brownfield land is scarce. That includes much of the South East where housing pressures are so acute.”

Land auctions:

Liz Peace, chief executive of the British Property Federation, said: “It is right that government should look at innovative approaches for bringing forward more land for development. However, we have serious doubts about the practicality of land auctions. We find it difficult to see how they can be compatible with the current planning system or with the government’s localism agenda.”

Planning system:

Liz Peace, chief executive of the British Property Federation, said: “We welcome measures to streamline the planning system and related consents regimes through the removal of bureaucracy, particularly as local authority resources are stretched thinly at the moment. We welcome the 12 month guarantee, however we are concerned that this additional pressure could result in unnecessary rejections.”

Use class changes:

Liz Peace, chief executive of the British Property Federation, said: “We hope local authorities will view this very positively. Supporting office to residential conversions will provide them with a double boost to their income, via the New Homes Bonus and the fact that there are replacing a central government tax – business rates, with local council tax receipts. If that were not enough, conversion work will provide a much needed boost to jobs and growth and revitalise some rather shabby looking blots on our townscapes.”

Enterprise Zones:

Liz Peace, chief executive of the British Property Federation, said: “The BPF supports the setting up of new enterprise zones. Previous enterprise zones in the UK served to kick start a process of regeneration which would not otherwise have been possible with new factories, offices and other commercial development being delivered in some very challenging areas and times. The long-term transformation of London Docklands bears testament to this."

Land Remediation Relief

Peter Cosmetatos, director of finance at the British Property Federation, said: “We are disappointed to see land remediation relief abolished.  As we told the OTS in January, we believe that the policy rationale for it – essentially to promote brownfield development over greenfield by reducing the economic barrier posed by contamination – remains as valid today as it ever was.  Maintaining a focus on brownfield development is valuable in environmental terms and enhances communities by removing urban blight.  There is industry support for LRR to incentivise the remediation of brownfield land and make its use more economically viable, and the loss of this relief (particularly at this time) is likely to reduce investment, particularly in more marginal brownfield sites.

“It is however some comfort that the abolition of the relief is deferred for a year to give businesses time to react.”

Business Premises Renovation Allowances

Peter Cosmetatos, director of finance at the British Property Federation, said: “We are delighted that the chancellor decided to extend BPRA for another five years.  As the expected end of this relief approached, widespread concern was emerging, particularly in Scotland and other assisted areas, that the end of this relief would have stymied otherwise unviable brownfield development in some of the UK’s most disadvantaged areas.”

Tax avoidance

Peter Cosmetatos, director of finance at the British Property Federation, said: “We support the government’s efforts to close the tax gap both by clamping down on illegal tax evasion and fraud, and through sensible measures designed to close down loopholes and stop avoidance.  The important thing – and the consultative nature of the new approach to tax policy making can really help here – is to get anti-avoidance measures right so they achieve their objectives without causing unnecessary problems or uncertainty for taxpayers who aren’t using aggressive tax planning.”

Deregulation

Peter Cosmetatos, director of finance at the British Property Federation, said: “The main tax area affecting real estate is SDLT, and we are disappointed to see no suggestion of the government really grasping the nettle to simplify aspects of a hideously complex regime.  Uncertainty and complexity in a transactional tax like SDLT increases frictional costs and discourage transactional activity – whereas what both the business community and the government really want to see is more transactional activity.

“In the light of the chancellor’s strong focus on deregulation in the Budget, we hope to see a greater commitment to remove and simplify some of the parts of the SDLT regime that cause headaches for business without generating revenue for the Exchequer.”

Empty rates

Peter Cosmetatos, director of finance at the British Property Federation, said: “While the extension of small business relief from business rates will no doubt be very welcome, it is very disappointing that those with unproductive property – including low rateable value property – will not be similarly benefited, with even the limited relief from empty property rates that has been available for the last two years disappearing at the end of this month.  This is an unfair anomaly and the government really should think again.”

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