Wednesday, 7 March 2018

Brexit is the property sector’s chance to spur real investment ask for some tax breaks

The 'chief executive of First Property Group' in yesterday's City AM presents the usual Homey shopping list:

If I were chancellor, I would aim to make Britain a more attractive place to invest than the EU. That must be basic common sense. So here are some ideas for Philip Hammond.

First, roll back the punitive levels of stamp duty ratcheted up by successive chancellors, particularly George Osborne. Stamp duty means fewer transactions and higher property prices. What we need is a vibrant housing market with smooth transactions.

This applies equally to commercial property. Stamp duty of five per cent is vast considering the yield available on commercial property. In central London, yields are as low as three per cent per annum, requiring a hold period of nearly two years just to recover the cost of stamp duty.

Second, lower business rates across the board to lessen occupational costs for businesses. Business rates have been far too high for too long. In particular, we need to eliminate business rates on vacant buildings – it is wrong to tax a landlord on a building which yields no income.

Third, reverse the chancellor’s short-sighted decision to abolish capital gains tax relief for foreign investors. Our market relies on foreign investment, so why attack the geese that bring their golden eggs to Britain?

Fourth, once out of the EU, abolish the requirement to adhere to Solvency II. Under Solvency II, insurance companies do not need a capital buffer for investing in Greek government bonds, for example, but must hold one of at least 25 per cent when investing in property. This is misconceived regulation, and we would be better off without it.

Our banks must be enabled to lend without the hindrance of punitive regulations. In Poland, you can raise cheaper debt on better terms for commercial property investments when compared to the UK. That makes no sense given the comparative sizes of our respective economies and markets.


Graeme said...

Some of these seem quite exotic. For example we do depend on a surplus on the capital account to finance the balance of payments so has anyone looked at how cgt affects this, or is it just nonsense? I suspect it's nonsense - taxing non resident landlords is always going to be difficult. The one about not taxing empty buildings is obviously wrong. If John B's diagnosis was right,that landlords keep buildings empty until they can get a tenant at the right rent, then taxing them must be the right thing to do to encourage a proper equilibrium rent

Graeme said...

The 4th point also seems misguided. We saw in the last mini slump - 2016?- that some property oeics had to stop withdrawals because they could not sell properties fast enough. A solvency requirement is obvious good sense

Ben Jamin' said...

Point 2 should be conceded as long as landlords cannot charge rent when their tenants make no profit. Whats good for the goose.

Mike W said...

1.Shameless 2 Shameless 3 Shameless

Fourth, no capital buffer for bonds (even Greek), but 25% for property.

Why? Why? Why? Our top of the range property deals in East London, the Mug and Scoot development, for example, planned for 2021, are as good as any guv bonds.Safe as the Thames mud and sand they are slapped down on. Every wise and well informed investor, like you dear reader, knows that. Just ask my bankers. Oh sorry, nearly forgot, last, 'Our banks must be enabled to lend without....'

Mark Wadsworth said...

G: "taxing non resident landlords is always going to be difficult"

It's not actually. It's a rule of thumb of tax law that rents are taxable in the country in which they arise - regardless of where the landlord lives. See endless tax treaties. It's a teeny tiny nod towards land value taxation.

G, the fourth point is clearly insane. High loan to value ratios = bubble.

BJ, indeedy. But in practice landlords don't charge rent when their tenants don't make a profit - because the tenant has gone bankrupt.

MW, agreed, beyond shameless. These people have no self awareness and think that what they are saying makes sense. They're like religious nutcases.

mombers said...

If landlords shouldn't pay rates on empty premises, should the fire brigade and police provide free service or tell them to hide and go f*ck themselves if they need them? Esp the police if they want squatters fed up with empty buildings removed...

Mark Wadsworth said...

M, that's the spirit!