COMMENT: The chancellor’s Budget indicated to the world that the UK will remain open for business after Brexit. But we must work out which parts of the UK property market can benefit after we leave the EU, writes Ezra Nahome, chief executive, Lambert Smith Hampton.
Is austerity really coming to an end, as the chancellor Philip Hammond said in the Budget? Despite his opening words, what he really seemed to be saying is ‘wait and see’.
In a speech designed to get the UK on side as we stare into the melee that Brexit currently offers, a lot of extra public sector funding was announced. However, the announcement threw up more questions than answers for our economy. When we should have sent a reassuring message to international onlookers and potential investors, what we really transmitted was more confusion.
Help or hinder?
Taken at face value, the Budget will help and hinder the property sector in equal measure. Some elements suggest a brighter future could be ahead for certain elements of the UK economy, notably smaller retailers and those who rely on infrastructure spend. But as far as the wider property industry is concerned, more changes need to be made to the current tax system if we are to get back on the path to growth.
Let’s start with the positives; business rates cut for small businesses is good news. We’ve been waiting for the government to act decisively on business rates for some time, to reduce the stress on high streets.
Similarly, increasing UK infrastructure spend to £38bn by 2023/24 is extremely encouraging on the surface. We need to improve roads, rail lines and to develop our digital infrastructure to ensure world-class connectivity.
There is also good news for housing – a £5.5bn boost to the Housing Infrastructure Fund, new alliances with housebuilders and a consultation on reduced planning laws when converting unused retail to housing.
Piecemeal solutions
Each of these positives, though, throws up more debate. Small retailers will absolutely benefit from rates relief, but what about the larger retailers? Debenhams is the latest high street stalwart to be making sweeping cuts and closures.
Without named anchor tenants, many shopping centres will continue to struggle too. It seems clear that now is the time for the entire business rates system to be reviewed. Piecemeal solutions, albeit welcome, don’t seem to go far enough to save our ailing high street.
Similarly, the £5.5bn boost to the housing infrastructure fund is a hefty figure, but we are still faced with the question of where these 650,000 new homes will be built, and by who. And the infrastructure pot will make a difference, but will it be a big enough one? We need investment in road, rail and connectivity across the whole country – is the fund big enough to make sure our country is fit for purpose today, and tomorrow? The jury seems to be out.
Open for business
The Autumn Budget was surely an opportunity to tell the rest of the world that the UK will still be open for business post-Brexit. There’s a chance it succeeded on the face of it, with a boost to public spending and the lowering of income tax.
Digging deeper though, Hammond has put a lot of decision-making on hold until a full spending review next year. If the Institute of Fiscal Studies is to be believed, tax rises in coming years will be made to pay for the funding announced by Hammond, which overseas businesses looking to come here aren’t going to like one bit.
Despite all of this, a flurry of major property deals propelled UK investment volume to £17bn in Q3, the strongest quarter since Q2 2015 and 14% above the quarterly average. This, alongside the quarter being exceptionally busy, shows the depth of confidence in the fundamentals of the UK property market.
So, while much has been penned about a doom and gloom scenario as we drive towards Brexit, the truth lies nearer the sentiment that uncertainty always brings opportunity. The opportunity is to work out which property sectors will create most value next year, and beyond.
