What does the chancellor's summer statement mean for the real estate industry? Matt Maltz covers all the key points of the announcement and the implications for the sector.
Yesterday, we had the summer economic update from the UK’s Chancellor of the Exchequer, sort of a mini-Budget. Rishi Sunak has only been in the job for five months, yet he has already delivered more budgets than many other previous chancellors.
These are, of course, uncertain times, with the UK economy in forced hiatus for some three months. Yesterday’s announcements were targeted at getting the economy kick-started again. Some of the measures were expected while others were far wider than anticipated.
Boosting the real estate market
Of particular note is the emphasis on boosting the housing market, which is intrinsically linked to the British public’s perception of economic prosperity, and hence that all-important social spending'. Any stimulus will have a knock-on benefit for the whole UK economy.
A recovery of transactions in the housing market also tends to encourage significant other spending, be that on the supply chain involved in the buying and selling of homes or on discretionary spending once people have moved.
Stamp duty land tax and grants for 'green' real estate
It is also encouraging that the cut in stamp duty land tax on residential home purchases is not limited only to home owners, but also those buying second homes and investment properties, although the latter will still have to pay the 3% surcharge.
This comes after years where private residential property investors, in particular, have been demonised, even though they play a very important part in the provision of homes in the UK.
Similarly, the 'Green Homes' fund is available both to home owners and investors to make homes more energy-efficient, with a grant of up to £5,000 or £10,000 for low earners. Given the great variability of the UK’s housing stock, this is welcome news and should help the country reduce its carbon footprint. A similar fund will be available for social housing.
Recognition for real estate contributions to the economy
As gloomy economic news will undoubtedly continue to come in for some time – the ONS estimates a 25% reduction in UK GDP between February and April 2020 – it is not surprising that the other measures are also very much aimed at preserving and creating jobs.
A raft of infrastructure projects had already been announced in the March 2020 Budget – the first one, remember that? Some of those projects are now being accelerated with a focus on schools, hospitals, roads and other public infrastructure.
There is broad recognition that the construction sector has a high economic multiplier. It employs lots of people, both directly and via the supply chain, and generates spending in many other parts of the economy. The question of skills shortage remains though and can probably only partially be answered by the other incentives such as the kickstart and apprenticeship schemes.
A welcome start
For now, the immediate concern remains injecting confidence back into the public - to feel safe to return to work, and to start spending again. And not just from Monday to Wednesday with a 50% voucher. Otherwise businesses in the retail and hospitality sector in particular will have some extremely difficult times ahead of them, irrespective of reduced VAT rates for some.
Yesterday’s announcement was a welcome start, and more measures will be required as we move further through 2020.
To discuss the impact of the summer statement on the real estate industry further, get in touch with Matt Maltz.
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