Reflecting the mood of MIPIM
Not surprisingly, the key issue that everyone is discussing is the UK’s imminent exit from the EU. There is a continuing need for greater clarity over the way forward on Brexit. A very real uncertainty still exists over the medium and longer term impact, which is likely to affect short term investment.
The potential extension of the Brexit timetable avoids the significant risks of a no deal Brexit, but leaves many other issues open. Markets do not like uncertainty and many want to await further developments. The Sterling remains good value for overseas investors, who we should see coming back into the market in the medium and longer term. In particular, there appear to be significant funds in the US, Middle Eastern and Asian markets looking to invest in UK property when the time is right.
Tax impacts
There are still concerns over the London prime residential market, which has been hit hard by the high Stamp Duty Land Tax (SDLT) rates and economic uncertainty which is depressing London values generally. There is perhaps greater appetite for investment in key regional centres, including particularly Bristol, Cardiff, Birmingham and Manchester and other asset classes in particular student accommodation and light industrial.Tax changes are continuing to hurt the market. Business rates and high SDLT costs are the main concerns, but recent changes such as taxing all UK developments, extending Capital Gains Tax to all non-residents and all property types, as well as interest restrictions and the change to corporation tax on overseas corporate investors, are a further stress on the UK market. It was therefore welcomed that the Chancellor did not announce any significant new measures for the UK property market in his Spring Statement yesterday. It was, however, strongly felt that the Government view the property sector as a soft target for tax increases.
Housing supply
While the Chancellor made an effort to address the issue of housing supply by announcing a new £3 billion Affordable Homes Guarantee scheme in the Spring Statement, more still needs to be done to address the shortage which remains an important issue. In addition to this, there was also a general consensus at MIPIM that the planning process was not fit for purpose.Tax reliefs
At Autumn Budget 2018, the Chancellor announced the introduction of a new capital allowance for new non-residential structures and buildings – a measure designed to respond to a long standing request from business to fill a gap in the available tax reliefs for capital expenditure on commercial property. In his 2019 Spring Statement, he has published (and invited consultation on) secondary legislation reflecting how some elements of the relief have evolved following representations from industry, the property sector and the interested professions.
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