MIPIM 2016: A downpour of rain in Cannes appeared to be the appropriate backdrop for chancellor George Osborne’s budget as he announced a relatively gloomy forecast for the UK economy and increased taxes for large-scale property investors.
Gasps were heard from a small number of spectators who chose to eschew lunch in the JLL pavilion on the Croisette to watch the Budget when some of the tax changes were announced.
The 3% SDLT surcharge for purchasing additional homes revealed in the Autumn Budget will apply to institutional investors in addition to second-home owners.
Commenting from MIPIM, BPF chief executive Melanie Leech said: “This is going to be a significant deterrent to the institutional investment currently poised to settle in the purpose-built rented sector, which has the opportunity to deliver a significant number of new, quality, affordable homes.”
In what appears to be another significant hit for the industry, the chancellor announced a decision to take forward the OECD’s recommendation to restrict the tax deductibility of interest to between 10% and 30% of earnings.
“As a capital-intensive industry, real estate is going to be really badly hit by these proposals. Today’s announcement is particularly frustrating as the sector is not even the target of these proposals,” Leech said.
Changes to business rates were cautiously welcomed by New West End company chief executive Jayce Tyrell.
“I think on rates it’s good but we need to look at the detail. I think it’s good for small retail but obviously in the big city centres like the West End, and up and down the country, we’ve got to look at the costs on medium to large retailers.
“I think we’re facing up to an 80% increase in the West End next year so we’ve got to look at transitional relief so jobs and growth will be outside of London.”
However, he was happy to hear that business rates would be devolved to the GLA, as the New West End Company pays £400m in rates every year.
As business continued unwittingly around him in the busy JLL pavilion, chief executive Guy Grainger shared his initial thoughts on the announcements.
“There was quite a lot in there on property, which to a certain extent is a worry because he is trying to raise money and cut the deficit, and property can be an easy target,” he said.
“In the last year, we’ve seen quite a lot of changes to residential taxes and now the focus is on commercial; so changes to commercial stamp duty tax, the top rate going up – it will be interesting to see how that plays out.”
However, he was positive about announcements for greater transport infrastructure in the regions, which he said was critical to attracting future commercial investment.
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