Opinion: What Does The Budget Mean For The Property Sector, With Thomas Pearso
Thomas Pearson - Real Estate Partner, JMW Solicitors.
JMW's corporate team experienced a flurry of activity ahead of the budget announcement. Perfectly normal, as most individuals and businesses prefer the certainty of a current tax regime rather than the unknowns held in a new budget.
I work closely with clients and representatives in the Real Estate industry, and after the announcement noted, that the budget had been well received by all in that sector.
Despite the events of the last 12 months, JMW Real Estate has been fortunate enough not only to sustain levels of work from existing and new sources but expand into new sectors.
Development
For residential developers, the news that SDLT (Stamp Duty Land Tax) will be extended by three months and then tapered is welcome. Those who will benefit from tax savings will not complain. However, there are sceptics. Some do not see the point in an extension, as another batch of would-be purchasers will simply miss the new deadline.
The stamp duty holiday on properties worth up to £500,000 will be extended from the end of March until the end of June 30th, 2021. After which the limit will be lowered, to £250,000, until the end of September. In October 2021, the threshold will then return to the pre-Covid level of £125,000. The chancellor also announced guaranteed 95% mortgages to help those who can only afford a 5% deposit.
JMW, have several schemes in the North West with phases near PC: Blueoak’s Crossford Court and Whitecroft’s Shot Tower. It is satisfying to see our clients, who we work with from initial acquisition and throughout the life cycle of a scheme, reach this stage in-line with the budget’s deadlines.
Retail
Retail has been hard hit by Covid, and many in the industry question if the £5bn pledged to 'Save the High Street' will be enough to do so. Larger retailers, for the most part, have weathered the storm. Nevertheless, we have seen a significant number of well-known brands go into administration.
What the high street will look like going forward no one truly knows, but it's worth noting it was under considerable pressure before the pandemic arrived. If the high street is to survive, it must focus on placemaking to fill the voids Covid has left behind. The announcement of £1bn 'Towns Fund' for 45 areas across the country will hopefully have a part to play in filling those voids in those towns.
Changes to the retail landscape are more pronounced online. Aside from Amazon, who continue to expand with their first till-less store opening in London last week. Others such as Next are doing equally well. Next, focused on logistics for a number of years now and are reaping the rewards of this investment in tech, space and expansion to cover other brands..
The pandemic has caused a demand for more supply and development in the food, retail and C store, markets and JMW are currently working on over 60 transactions in these sectors across the UK for a number of clients, developers and investors alike. We are seeing no shortage of interest and new opportunities and investment sales are returning decent yields here.
Leisure & Hospitality
The pandemic has dealt the hospitality and leisure industry the heaviest blow. As with retail, some have gone into administration or had to restructure. The reduced 5% rate of VAT for the sector has been extended until the end of September 2021. A 12.5% rate will then apply for a further six months until 31 March 2022 before returning to 20% in April.
The reduced rates and extension of furlough is welcome news and allows those in the sector to rest a little easier as the extension will cover the industry's important summer season.
The 'business rates holiday' aimed at high street businesses forced to close during the pandemic has been extended to the end of June 2021. For the remaining nine months of the financial year, business rates will be discounted by two thirds, up to a value of £2m.
Talking to clients in the sector, there are doubts the £5bn in new grants worth up to £6,000 for non-essential retailers and £18,000 for pubs, restaurants, and gyms are enough.
Investment
As with any budget, the devil is in the detail. I'm interested to see how businesses use the 'Super Deduction', (projected at £25bn). The ability to reduce their taxable income by between 100% and 130% of the amount they invest in plant and machinery will drive investment, worth noting the other category in Real Estate (structures and building allowances) did not benefit from the budget.
Is it a little ambitious to expect the economy to return to pre-Covid levels by the middle of next year? Who knows, but the vaccine rollout, business recovery and attracting new investors will contribute to our economic restoration.
It took years to recover from the 2008 crash, but there is far better funding and support available to businesses this time around. There is cash to be spent, opportunities to take advantage of, and an appetite to get back out there.
Partner
Real Estate Commercial
