SPRING BUDGET 2013 PREVIEW – What’s the potential for property?Digital Manager
Tomorrow the Chancellor will deliver his most difficult Budget of this Government, as he will have to concede that the economy’s growth will be lower than expected and that it will take longer than previously predicted for public sector debt to begin to fall. Meanwhile he will also reiterate’s the Government’s commitment to forging ahead with the increasingly unpopular austerity first programme.
But how will the property sector respond to the Budget? The industry felt that George Osborne’s Autumn Statement was supportive but it did not go far enough. The Statement included a new empty property rate relief on newly built commercial properties between 2013 and 2016. But the British Property Federation has called for Government to include an extension of empty rates relief for existing buildings, to allow businesses to bring vacant shops, offices and factories back in to use in tomorrow’s Budget. Figures have shown that the tax collected more than £1 billion from businesses last year.
George Osborne tried to stimulate the private-rented sector (PRS), introducing a £200 million fund to provide equity finance and the NewBuy scheme has been deemed a success by house-builders. The Government is expected to provide further stimulus, such as extending the NewBuy scheme and beefing up the Funding for Lending scheme, which helps make mortgages cheaper. But house-builders will like to also see policies that improve the supply side of land such as a sell off of public sector land and facilitating retail and residential conversions.
In December the Chancellor also announced that he would extend the temporary doubling of the Small Business Rate Relief for a further 12 months from 1 April 2013. While this policy was welcomed, the debate on business rates has since focused on the Government’s proposals to delay the revaluation of business rates. The retailers are campaigning for the rates to now be calculated by Consumer Price Index, which is viewed as a cheaper and fairer method for indexation rather than Retail Price Index. However, we think George Osborne will probably stay away from Business Rates in the Budget as the policy is currently being debated as part of the Government’s Growth and Infrastructure Bill.
As part of the Autumn Statement the Government tried to encourage further infrastructure development by launching PF2 and confirming investment into a number of projects including the Northern Line extension, new road developments, affordable housing and broadband connectivity. The PF2 announcement was long overdue but it didn’t do enough to rebuild confidence among developers and investors. Around 65% of the UK’s infrastructure is privately developed, and if we are to unlock new projects the Government needs to show a stronger long term vision for infrastructure. They also need to provide more incentives for interested investors. By introducing a formal consultation on tax reliefs for new infrastructure policies in the budget tomorrow, the Government would go along way to show private investors that UK is open for development.
George Osborne has shown strong leadership in sticking to his deficit reduction programme. Now he needs to be bold if he is to bring confidence back to the property sector, which is so important to kickstart economic growth. Some of these policies may not be popular with the electorate, but neither is his austerity driven economic strategy. The Chancellor knows he will be judged on the long term performance of the economy rather than his approval ratings. So the property sector can be slightly hopeful in anticipation of the Budget.
Andrew Todd, Senior Account Executive