Autumn Statement reaction round up: Part Two

Alvarez & Marsal, Tax team comment on the stamp duty reform structure

Following today’s Autumn statement on stamp duty reform; Charles Beer, Managing Director of Alvarez & Marsal Taxand UK said:

“This is a fundamental reform of the stamp duty tax structure and there are big winners and losers in the process. The reforms will substantially reduce the amount of tax paid in the lower and middle parts of the market, helping first time buyers and those wanting to trade up from their own first homes. The Chancellor will be hoping that the likely increase in the volume of property transactions will go some way towards paying off the £800m per annum it is costing the Government to implement the new structure.”

For properties at the top end of the market, the rates are now very high by international standards. This will impact the central London market disproportionately and could have the effect of continuing the slow-down in growth we have witnessed over recent months. Even outside the centre, a normal family house in inner London can now cost substantially more than £1m, and the new rates of duty will only increase this further”.

WSP Autumn Statement response

Following the Autumn Statement and the 5th iteration of the National Infrastructure Plan WSP’s UK managing director Mark Naysmith said it was encouraging to see infrastructure continue to be high on Government’s agenda.

“The UK has great ideas and plans for improving our infrastructure, but we are lacking a critical path to delivery. Implementation needs to be our primary focus now, including measures to tackle some of our key challenges such as skills and efficiency in public procurement.”

“The nature and scale of infrastructure projects mean they extend beyond the political lifecycle, so cross-party support remains key. We know world-class infrastructure is critical to our long-term recovery – we have already seen the benefits particularly in attracting global investment – and it would be a pity to lose the momentum gained over the last few years due to political posturing.”

Scape Group Autumn Statement construction comment

Mark Robinson, CEO of the Scape Group, commented:

“The National Infrastructure Plan will spend £466 billion on projects across the UK which could create over 2.3million construction jobs according to government estimates. While this type of investment is fantastic news for UK plc, we at the coalface know that finding skilled labour to build these projects is going to be exceptionally challenging. Alongside this investment in our infrastructure we need to see a recruitment drive to show people that construction is not a vocation but a respected career which is instrumental in shaping Britain’s future. This is something that we are committed to within our business model”.

PwC comments on impact on construction sector

Commenting on the infrastructure announcements contained within the Autumn Statement, Chris Temple, engineering and construction leader at PwC, said:

“Given the slower growth currently experienced in infrastructure, the Autumn Statement provides further clarity on the medium-term opportunities. There’s a lack of significant projects in the short to medium term and the Chancellor is now providing greater focus on where the spend will be deployed. Roads and flood defences are in need of investment and the Statement is a strong signal of intent to spend.”

“This renewed commitment to infrastructure spending will be welcome to the construction sector and the jobs tax holiday for apprenticeships is also good news for the industry.”

“The northern hub will be welcomed, given concerns that the UK is increasingly capital-centric in its nature, and will contribute towards the rebalancing of the economy across our regions. It will also divert spend away from the south east to the north, where it is much needed.”

“It is important that this intent is maintained to prevent further delays to projects.”

“Continued rises in labour and material rates in the construction sector have the potential to be further exacerbated by these growth opportunities; this calls for further action to address these issues.”

Autumn Statement: Government and high end residential to pay the price for stamp duty savings

Toby Price, director of the Stamp Taxes Group at Deloitte Real Estate, comments on the changes in stamp duty:

“The changes to remove the ‘pinch points’, which previously saw houses prices bunching at, or under, each stamp duty land tax (SDLT) rate increase, is welcomed. Also welcome is the reduction in the effective rate of SDLT for the vast majority of purchasers.”

“However, with eight per cent of purchasers of homes in London paying in excess of £1m, an increase in SDLT to 10% and 12% is likely to have most impact in the London property market. For £1m plus homes, we would expect to see an impact on prices, liquidity and properties being built. In contrast with the changes coming into effect in Scotland, which are fiscally neutral, the changes to SDLT are projected to cost the Exchequer roughly £800m per annum.”

James Pargeter, head of residential projects at Deloitte Real Estate, comments on the housing as infrastructure announcements in the Chancellor’s Autumn Statement.

“The various housing announcements this week in the Government’s National Infrastructure Plan and Autumn Statement confirm that housing supply is now rightly regarded as infrastructure. Notable measures include:

  • Extension of the Affordable Homes Programme (AHP) to the end of the next parliament in 2020. As the figures match the current programme (average £17,400 grant-per-unit), it implies a continuation of the ‘affordable rent’ model, rather than the return to ‘social rent’ model that many have called for.
  • A pilot scheme for direct commissioning by the Homes and Communities Agency (HCA) of 10,000 homes at Northstowe. As an element of the additional supply required this is an interesting move, and it will be interesting to see how the design, procurement and sales process is tackled. If deemed a success, this model will no doubt be used on more of the 150,000 homes due to be provided on release of public sector land by 2020.
  • Housing associations are to be consulted on ways to increase their borrowing capacity for additional development.

“In conclusion, this Autumn Statement provides more for the UK housing sector than was probably envisaged in advance. There remain huge challenges ahead to meet the issues of demographic change and affordability across the whole spectrum of housing types that are needed to house the nation into the future. This cannot be limited to a single-parliament timescale, and I hope that broad agreement can be reached by politicians and the wider sector so that a genuinely long-term and collaborative housing strategy can emerge.”

Mortgage Advice Bureau comments on Stamp Duty reform in the Autumn Statement

Brian Murphy, Head of Lending at Mortgage Advice Bureau (MAB), comments

“The stamp duty reform will give homebuyers a long-overdue break and is a significantly fillip for the housing market in general. In a climate where many potential first time buyers struggle to raise enough money for a deposit and second-steppers still have low equity in their existing homes, the fact that 98% of people will pay less in stamp duty should encourage more movement and take a load off buyers’ minds.”

“It should help bring an end to a false market which incentivised sellers to price their homes just below the nearest stamp duty threshold to avoid scaring off potential buyers. The changes will leave a more balanced market where houses can be priced in a way that better reflects their true market value.”

“Stamp duty still remains an imperfect tax in that it makes no regional allowance for differing house prices. Buyers in the country’s more expensive regions will still pay more stamp duty than those in cheaper areas for properties of a similar size and quality. This can be a significant burden to those with home owning aspirations in London and the South East – but their outlook has still improved as a result of today’s announcement.”

Autumn Statement: Headache for homeowners despite progressive Stamp Duty Land Tax

Introduction of Stamp Duty Land Tax (SDLT) is a fair move but some homeowners in London and the South East will suffer, says Stephen Hemmings, director at Menzies LLP:

“From tomorrow, Stamp Duty Land Tax (SDLT) on residential property will be charged at a progressive rate. This is more equitable than the previous system where the entire value of a property fell into the highest banding rate, inevitably causing a distortion in the housing market.”

“Whilst it would seem that purchasers of residential property will pay less stamp duty than they did previously on property at the lower end of the valuation spectrum, more expensive housing will be subject to a higher SDLT tax. For example 10% will be charged on property portions over £925,000 and then 12% on portions over £1.5 million. The previous rate for properties valued up to £2 million was only 5%. Our initial calculations indicate that someone paying more than £937,500 but up to £2 million for a property could be paying over 50% more SDLT, depending on the transaction value. The old and new rates are very similar just above the £2 million value, but then SDLT accelerates at a higher rate again under the new regime. Inevitably this will have a disproportionate impact on house purchasers in London and the South East.”

“As the new rules take effect from tomorrow, solicitors in the South East are likely to have a busy night exchanging on properties before the rule change.”

Addleshaw Goddard comment on Autumn Statement

Paul Hirst, head of transport, Addleshaw Goddard, said:

“Whilst there is firm commitment to the highest investment in the road network since the Seventies, the much needed investment in rail transport in and between Northern Cities at this stage remains a work in progress. A study into the new HS3 East West rail line will report with options in March 2015 and so remains in the aspirational category. The announcement that bidders for the Northern and TPE rail franchises will be encouraged to replace out of date pacer trains and bring all other trains up to modern standards reflects exactly what is required – but how is this major investment to be funded?”

Mike O’Connor, head of infrastructure, projects and energy, Addleshaw Goddard, said:

“With low yielding bonds and volatile equities markets, the marketplace to invest in infrastructure is really competitive. This is potentially a line of attack our chancellor could make more of in paying for the roads, railways and energy plants.”

“However, any roadmap for infrastructure has to look at jobs and housing alongside it and currently there’s too much of a silo mentality around different parts of government. A credible long term National Economic Plan is needed to map out everything alongside each other: for instance, HS2 has potential to create whole new communities along the route just as Crossrail in London is bringing new, previously disconnected districts into being. It’s vital there’s strategic oversight of these opportunities with the funds and impetus to kick start them.”

Marnix Elsenaar, head of planning, Addleshaw Goddard, said:

“Garden cities are fine in principle but we shouldn’t forget Gordon Brown’s eco-towns which are now nowhere to be seen. What’s crucial is considering what makes a place: jobs, social infrastructure and connectivity. A growing focus on urban living means we should prioritise satellite towns around London and Manchester which have good connections to jobs and where land exists to develop. Speeding up planning, investing in transport and potentially building homes with public money all make sense.”

“Tough decisions are needed in planning in terms of building new developments and transport links. That’s why it’s important decisions don’t get lost in short-term political point scoring and it’s why we need a genuine generation-spanning plan.”

“Our view is having a National Economic Plan setting out what we build and where enables many of the debates to be had up front and vastly reducing legal battles later on.”

“Ultimately, we’ve got a pronounced shortage in housing supply yet no politician will stand up and say, “Let’s reduce house prices.” The public sector owns swathes of land it could use for homes and as we know house prices are unlikely to fall over in the long term, this could be a sensible investment in our economic as well as social future.”