In what has to be one of the most challenging of peace-time budgets the Chancellor, Rishi Sunak, has identified what are perhaps best described as investment opportunities for the property and development sector as part of the economic road to recovery from the acute damage caused by Coronavirus – dealing with an economy that has shrunk by 10% and levels of public borrowing at their highest since World War 2.
The Chancellor pledged to do three things in what will inevitably become the work of future governments:
- Whatever it takes to support people and businesses
- Fixing public finances
- Begin the work of building our future economy
Whilst raising a glass to freezes on alcohol duty we identify the following key themes for the housing and development sectors:
Housing Market – Turning ‘Generation Rent’ into ‘Generation Buy’
Only an obvious few of the Chancellor’s measures were levelled at the housing market, but house-builders should be encouraged by the fact that proposals around personal income tax (i.e. freezing personal nil and higher rate thresholds) will hopefully sustain confidence in the market and keep transactions moving:
Stamp Duty Land Tax – surprising many the Chancellor announced that the nil rate band to £500k will be extended to the end of June this year, to allow many home buyers the opportunity to complete transactions which would otherwise have been frustrated by an anticipated March cut-off; but unsurprisingly the nil rate will be tapered off with an interim band to £250k to end of September then returning to £125k level in October.
Mortgages – the launch of a scheme to bring back 95% mortgages. The Government will guarantee a new 95% mortgage product aimed at first-time buyers with a number of high-street banks already confirmed as offering the product from April. As part of its existing proposals around the ‘First Homes’ scheme (a new form of market discounted Section 106 affordable housing) the Government had already identified that mortgage availability was a significant barrier to entry – so lowering the first rung on the property ladder through access to borrowing will hopefully help to sustain activity at the entry-level as the SDLT holiday fades away.
The Development Industry
Jobs and Skills – the current 80% of pay furlough scheme will be extended to September of this year (albeit with employer contributions to support that scheme in its last three months), but beyond that the Chancellor’s focus moved quickly to investment in employment opportunities. The UK’s 0.5 million construction industry workers received specific mention and apprenticeships and traineeships ranked highly in the message to employers – with a doubling of incentive payments (to £3k) for apprenticeships and funding to triple the number of traineeships.
Investment-led Recovery – business grants, bounce-back loans and a new Leeds-based UK green infrastructure bank were all mentioned as part of the £100Bn worth of Government support for UK business, but investment in what the Chancellor termed ‘Green Growth’ attracted very significant attention in the form of a ‘Super Deduction’ against corporation tax. This will allow those businesses to reduce their tax bill by 130% of the cost of their investment and will run over the next 2 years. Never before tried in the UK, the OBR predicts that this could boost total UK investment by 10%. The challenge for the development industry is to identify where those opportunities for investment will be – whether in training/skills, modern methods of construction, improvements in fabric and design, digitalisation, energy efficiency or other PropTech. The colour ‘green’ and the transition towards net zero carbon was a key theme in the Chancellor’s message to UK business.
‘Freeports’ – with our departure from the EU the Chancellor highlighted the importance of ‘freeports’ as a means of boosting international trade and (again) incentivising investment. 8 new ‘freeports’ were initially announced for England and we can expect to see proposals for simplied infrastructure consenting regimes for these locations to unlock private sector investment. The development industry will need to understand what opportunities or economies of scale these new trading and infrastructure zones could represent for the wider UK property sector - perhaps as sources of enabling infrastructure around supply chain, energy or carbon capture.
If you would like to discuss how any of the issues raised in this article could affect your business or development opportunities please contact Christopher Stanwell or Andrew Morgan.
