Chancellor John Healey is set to deliver the Autumn Budget next Wednesday, and while much of the fiscal agenda set to be announced remains under wraps, it is widely seen as having the potential to be market-moving.
Shake-up: property figures have a list of measures they would like the chancellor and PM to implement to unblock development
The measures will certainly give a strong sense of the economic direction that prime minister Andy Burnham and Healey are looking to take.
Budgets often don’t deliver what the sector wants, but with the industry vocal about an array of constraints on development viability, regulatory pressures and long-called-for reforms, what potential measures are top of the property wishlist?
Residential
The residential sector is certainly looking for a boost. Construction starts were down 36% in the three months to the end of August, according to Glenigan, and industry experts have been quick to state that there is no silver bullet that can alleviate the slump.
The government has already unveiled one of its trump cards, answering housebuilders’ calls to boost demand by unveiling its equity loan scheme Your First Home. The sector is now eager for more detail.
Neil Jefferson, chief executive of the Home Builders Federation, says he wants more detail on “household income and house price caps, the required developer contribution and the length and capacity of the scheme”.
Stability and certainty are the most valuable things the Budget can give industrial and logistics
Oliver Choppin, Panattoni UK
He adds: “Getting each of these elements right, such that the scheme is attractive to as many customers as possible and affordable and accessible to as many builders, will be essential to its success.”
Brian Berry, chief executive of the Federation of Master Builders, says the scheme will “probably benefit the volume housebuilders”, but might not “help SMEs and micros as much as the government thinks it will”.
He adds the government must use the Budget to ensure that “government-backed finance schemes will be accessible for small housebuilders, because in the past they’ve been excluded”.
Viability vexes
Finding a way to address challenges to the viability of development is top of the wishlist for housebuilders. Berry believes that “simplifying and extending VAT relief on home improvement works” would help to “boost domestic building work”.
He adds: “Alongside that, we’ve asked for longer-term funding for home upgrades.”
Rachel Kelly, assistant director (finance policy) at Real Estate:UK (RE:UK), is also keen to see VAT reformed. She says introducing a zero VAT rate on rents and broader residential operating costs would “help level the playing field between investment in commercial and residential property and support yields and asset values in that asset class”, in turn helping to improve development viability.
Healey should also reverse the abolition of multiple-dwellings relief on stamp duty land tax (SDLT), she adds, a tax break scrapped by Tory chancellor Jeremy Hunt in his Spring Budget of March 2024. She says RE:UK’s “number-one ask” is “for an appropriate and tailored SDLT treatment for BTR [build to rent] to be reintroduced”. She argues that abolishing multiple-dwellings relief damaged the sector and has “hampered viability ever since”.
Jefferson adds that without tax cuts, “swathes of the country will remain unviable for housing development”. He wants to see reductions in “the level of taxation and policy costs levied on development by central and local government”.
Commercial
In the commercial sector, business rates reform is the main wish, with investors, owners and operators urging the chancellor to use the Autumn Budget to cut the UK’s rates burden and warning that the system is driving away investment, occupiers and jobs.
“The business rates system is in crisis and, frankly, much of that is of the government’s making,” says John Webber, head of business rates at Colliers. “For years, the Treasury has attempted to extract more and more money from commercial property occupiers.”
The business rates system is in crisis and much of that is of the government’s making
John Webber, Colliers
Colliers’ extensive pre-Budget business rates wishlist proposes a permanent 35p-in-the-pound multiplier for retail, hospitality and leisure (RHL) businesses, compared with the present 38.2p or 43p, depending on the size of the business; the abolition of the 50.8p higher multiplier for properties with rateable values above £500,000; and a roadmap towards a maximum 35p multiplier for all businesses by 2035. It is also urging the government to consider a charge on online consumer retail deliveries.
“The higher multiplier is particularly damaging,” says Webber, as larger occupiers are considering downsizing “simply to get their rateable value below £500,000”. He adds: “That is madness. At a time when the government says it wants investment and growth, it has created a tax system that actively encourages businesses to occupy less property.”
Kelly says business rates are one of the main taxes RE:UK wants to see reformed. “One of the most damaging things we’re trying to encourage government to avoid is using the business rates system to essentially pit one part of the economy against another,” she says.
“I’m talking in particular about funding the RHL discount with a surcharge on properties worth £500,000. We’ve asked for that to be abolished. That whole rhetoric is damaging, even in the context of high streets.”
Marks & Spencer chief executive Stuart Machin agrees, and recently wrote to the chancellor pointing out that simply shuffling the rates burden on to different businesses does not help consumers: “It’s right to support the high street pubs, bars and music venues that bring towns to life. But if you do that by taxing supermarkets, you’re paying for a cheaper pint by loading costs on to the weekly shop.”
Oliver Choppin, finance director at industrial giant Panattoni UK, wants to see business rates reform “that stops penalising occupiers for investing in new, more efficient space”.
Industrial, logistics and offices
Turning to the wider industrial and logistics (I&L) sector, Choppin says: “Stability and certainty are the most valuable thing this Budget can give the I&L sector. Every development is volatile to material costs, the cost of debt and capital and taxes – unpredictability in any one of them makes schemes harder to fund.
“Realistically, we expect to see little aimed at logistics while the Treasury guards its fiscal headroom.
What would be detrimental is new taxes on property, and reshuffling of rates or allowances mid-cycle.
Investors price policy risk, and UK industrial stays investable if the rules stay consistent.”
Sentiment was similar in the office sector, until rumours emerged that Healey could implement a business rates rise on large offices to raise up to £1bn for the Treasury.
The move would hit London’s office market the hardest, and Nikki Dibley, chair of the City Property Association, says the result would likely be “less investment, fewer jobs and lower tax revenues for the whole country”.
She adds: “Increasing the cost of occupying office space to the very businesses that are the engines of our economy risks weakening the UK’s competitiveness at exactly the moment we should be making it easier, not harder, for them to locate here and grow.”
Giles Fuchs, co-founder and chief executive of office provider Office Space in Town, agrees that a raise in business rates for large offices “would damage the economy, employment, profit and therefore tax revenue”.
Fuchs says the government should instead look at targeted action to help SMEs and start-ups. “Interest rates, electricity, employment costs and business rates are all high, so intervention on all of these would fire up the economy, assisting with jobs, profit and therefore tax revenue for the government.”
But asked if he believes the chancellor will announce those interventions next week, he adds: “I’m not confident at all.”