The dust has now settled after the Budget and the excellent news for the property industry is the impetus given to building homes to help alleviate the chronic housing shortage in the UK.
Coupled with the recent changes to planning regulations, this will provide a potentially powerful tool to open up the housing market for more people and encourage growth in the property and construction sector.
The introduction of the shared equity scheme (providing up to 20% loan finance to purchasers of new homes), along with the new mortgage guarantee scheme, should have a significant positive impact in this area.
The guarantee scheme, coupled with five-year, interest-free loans, could mean the government ends up supporting £130bn of new mortgages in 2014, so this is a major move.
The government’s announcement that it is to increase its Build to Rent fund from £200m to £1bn to support the development of more homes in England, while addressing the long-standing lack of housing in the UK, should also create significant jobs in the construction sector and have added knock-on effects in the wider economy.
Indeed, with these initiatives, plus the government’s announcement of £3bn investment in infrastructure a year for five years starting in 2015, we may need to address whether we have a sufficient labour force to deliver on all of these. It will also be interesting to see what impact this has on non-new-build residential properties and buyer demand for them.
From a tax perspective, the chancellor announced the reduction of the corporation tax rate to 20% from April 2015, bringing the rate for UK-based real estate investors into line with overseas investors, who pay 20% tax on rental income. This means there will be a more level playing field for UK investors when competing with those from overseas.
With regard to stamp duty reserve tax, the chancellor announced two changes to the 0.5% SDRT rate, including the abolition of the tax for AIM shares. The removal of SDRT when trading in AIM-quoted stocks is a boost for real estate and construction businesses listed on that market.
One of the few disappointments was that the chancellor did not take the opportunity to further alleviate the burden for businesses in relation to empty property business rates, a long-standing bone of contention for the industry.
However, overall this was a welcome Budget for the property industry – arguably the property and construction sector was the biggest winner of all from the 2013 Budget – as the chancellor made clear his desire to boost what has been seen as a flagging sector, albeit it does appear to be firmly in favour of housebuilders as opposed to the other sub-sectors in the industry.
Clare Hartnell is global head of real estate and construction at Grant Thornton UK
