CBRE, the world’s largest property advisor, has issued its response to the Budget and outlined the likely impact that the proposed measures will have on residential, retail and commercial property.
CBRE has commented on the following:
• Stamp duty land tax
• Mansion tax
• Right to Buy
• Impact on the housing market
• Impact on retail
• Suspension of Sunday trading restrictions during the Olympics
• Impact on commercial property
On stamp duty land tax
Jennet Siebrits, Head of Residential Research, CBRE, said:
“We endorse closing the offshore stamp duty loophole. Although stamp duty of 15 per cent on homes bought through corporate envelopes appears harsh, buyers can purchase through traditional means and pay 7 per cent. If stamp duty is paid on even a fraction more homes, it will generate significant revenue for the Treasury. It is unlikely to discourage overseas buyers in the medium to long term, as the prime London residential market is still seen as a safe haven for their money while the global economy is recovering.
“However, we would have liked the Government to address stamp duty in a more holistic way instead of using it to score political points by targeting the top end of the market. The incremental stamp duty bands create unfair market distortions at each increase, so by making them more graduated the Government could implement a fairer system. It would also allow for higher and lower rates at both ends of the spectrum, which would be more effective than simply adding the 7 per cent band to homes over £2 million. Much like the stamp duty holiday, this is relatively inexpensive and could give a much needed boost to first-time buyers.”
On mansion tax
Jennet Siebrits, Head of Residential Research, CBRE, said:
“Given the increase in Stamp Duty we are disappointed that the Government is also planning to consult on mansion tax. In doing so, the Government is seeking to capitalise on one of the economy’s bright spots. Prime residential is currently the heart of the housing market because transactions in this arena rely less on mortgage finance. The Government should not be distorting the market by making homeownership in any segment more expensive. It is a revenue raising exercise that penalises homeowners in London and the South East.. There are no discernible benefits for the housing market unless the money generated is recycled back into affordable housing or is used to aid first-time buyers.”
On Right to Buy
Jennet Siebrits, Head of Residential Research, CBRE, said:
“The return of substantial discounts will no doubt revive Right to Buy enabling more people to access homeownership. Nearly two million households have benefited from this scheme since it came into effect in the 1980s. The Government intends to replace each property sold with a new affordable home, but this puts a great deal of faith in the replacement mechanism.
“Such mechanisms have not worked sufficiently well in the past and housebuilding conditions have arguably got worse. If we reach the 1988 level of over 54,000 sales again, the already depleted Local Authority stock could diminish even further as we are only building around 26,000 affordable homes each year.
“On the flip side, taking a property out of Local Authority control and into private ownership relieves the council of cost commitments potentially saving more money over the long term. Those who buy their council property are also unlikely to enter the private sector voluntarily so these homes will not help reduce waiting lists anyway.”
On the housing market
On the housing market
Jennet Siebrits, Head of Residential Research, CBRE, said:
“With the exception of prime London residential, the housing market is volatile and very much in recovery. Increasing the personal allowance will mean that people have more money in their pocket, so those keen to get on the housing ladder could potentially save for a deposit more quickly. However, it is unlikely to have a huge impact on the housing market because at best it will shave off a few months of saving, not years.
“Mortgages are at the heart of the problem and the Government needs to take decisive action to remedy the situation instead of tinkering around the edges. At the peak of the market in 2007/08, revenue from stamp duty was over £14 billion – it halved to £7 billion in 2009/10. The Treasury has highlighted that money is tight, but it could significantly boost its revenue by investing in the mortgage market.”
On the impact to retail
Jonathan de Mello, Head of Retail Consultancy, CBRE, said:
“The aspects of the budget that are most relevant to the retail sector include the increase in personal tax allowance, and the relaxation of Sunday trading laws.
“While these measures will generally be welcomed by retailers, the reality is that the impact will be fairly negligible to an industry that is already weathering the effects of a massive shift in consumer behaviour and a fall in spending power.
“More than any other measure in the current budget, we look forward to welcoming an extension to rate relief for retailers as an increase in business rates would directly affect their margins, which are already tight. The rate relief extension stands out as the biggest opportunity to help struggling retailers, particularly those in the fashion sector that have been so affected by the rising global cotton prices as result of India’s imposition of export restrictions. This would help keep the number of businesses falling into administration down and particularly benefit retailers located in areas such as Scotland, Northern England and Wales that have seen margins fall in the face of public sector job losses and lower salaries. The increase in personal allowance will, of course, make the biggest difference in these areas.
On the relaxation of Sunday trading restriction during the Olympics
Jonathan de Mello, Head of Retail Consultancy, CBRE, said:
“The relaxation of Sunday trading restrictions to encompass the Olympic period will provide a positive boost to UK retailers at a time when it desperately needs an injection of optimism. The Olympic Games will attract a huge amount of tourists to the UK, and it would be a major missed opportunity to not capitalise on the significant additional expenditure that they will bring.
“However, the fact remains that the Government needs to do more to boost public spending power if it is to support the retail market and protect the jobs within an industry that is the second largest private sector employer in the UK.”
On the impact on commercial property
Peter Damesick, Chief Global Economist EMEA, CBRE, said:
“For all the noise about individual measures, the Budget is fiscally neutral overall without any unfunded giveaways. It is unlikely to alter the short term economic outlook for the UK or the demand for commercial property.”