Coupled with the recent changes to planning this will provide a potentially powerful tool to help address the shortfall in available housing.
The introduction of the shared equity scheme (providing up to 20% loan finance to purchasers of new homes), along with the new mortgage guarantee scheme, should have a significant positive impact in this area. The guarantee scheme, coupled with five-year interest free loans, could end up with the government supporting £130bn worth of new mortgages in 2014, so this is a major move.
This is not a paywall. Registration allows us to enhance your experience across Construction Management and ensure we deliver you quality editorial content.
Registering also means you can manage your own CPDs, comments, newsletter sign-ups and privacy settings.
The government’s announcement to increase its “Build to Rent” fund, from £200m to £1bn to support development of more homes in England, is also good news for addressing the longstanding lack of housing in the UK. This should also create significant jobs in the construction sector and hopefully have added knock-on effects for the wider economy.
Indeed, with all of these initiatives, plus the government’s announcement to invest in infrastructure to the tune of £3bn a year from 2015 for five years, we may need to address whether we have a sufficient labour force to deliver on them all. It will also be interesting to see what impact this has on “non-new build” residential properties, and buyer demand for them.
From a tax perspective, the chancellor announced the reduction of corporation tax rate to 20% from April 2015, so the rate of corporation tax for UK-based real estate investors will now be comparable to overseas investors who pay 20% tax on rental income. This means it will now be a more level playing field for UK investors when competing with those from overseas.
With regard to stamp duty reserve tax (SDRT), the chancellor announced two changes to the 0.5% rate, including the abolition of the tax for AIM shares. This removal of SDRT when trading in AIM quoted stocks is a boost for real estate and construction businesses listed on that market.
One of the few disappointments for the construction industry was the failure to mention any simplification of the compliance process regarding the annual tax on enveloped dwellings (formerly known as the annual residential property tax). [This is a tax on properties owned by companies, to discourage the practice of buying property through a Special Purpose Vehicle company then selling the shares rather than the property in order to avoid tax.] Nor did the chancellor take the opportunity to simplify the administration on this new tax.
However, overall this was a very welcome Budget for the construction industry as the chancellor made clear his desire to boost what was seen as a flagging sector. Indeed, arguably the construction industry was the biggest winner of all from the 2013 Budget.
Clare Hartnell is global head of real estate and construction at Grant Thornton UK LLP
