On Wednesday, the chancellor delivered some excellent news for the construction industry with the impetus given to building new houses to help alleviate the chronic housing shortage in the UK, writes Clare Hartnell.
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.
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
Comments
Comments are closed.
With the recent news from the Chancellor on the new incentives for house buyers, the industry must surely be rubbing its hands together. However in Clare Hartnells report she comments on a possible shortage of trades. This I find difficult to believe, There are plenty of skilled personnel out there, they’re simply not experienced enough. This is also a fact of the industry turning away from University graduates to those they choose to bring through the NVQ scheme, which for persons like myself who have 30 years in the industry can now no longer work as a site manager simply because I have a degree and not an NVQ (farcical). The industry itself is imploding with the uncertainty of who is actually controlling it, hence the older experienced workers have and are failing to return, whilst the younger element cannot get on site to start.
Even though the industry is set for a boost the underlying problems will persist unless there is a definitive understanding of who is controlling the industry. Sort out this nonsense with the CSCS and NVQ verses Degree and maybe we can get back the experienced elders to aid the inexperienced youngsters who wish to come into this marvellous industry.
Due to the current climate in the construction industry and salarys frozen to a all time low, I’ve decided to emigrate to Austrilia but with my qualifications NVQ / MCIOB these are not recognised in Austrilia so now I have to qualify doing a PMP / CAMP so this will be recognised. Why is the Chartered Insitute of Building in Austrilia and why do no contractors recognise this qualification in Australia?
I wholly agree with Stephen’s comment. I am a bricky and qualified with a City & Guilds but still had to go through the farcical NVQ Scheme because they would not recognise my C& G.
With the CSCS scheme these are all viewed as ways of extracting more money from us.
For example as a bricky why do I need to know what type of extinguisher to use on a fire? I would not be firefighting, I would be watching from a distance untill the firebrigade arrived.
Why do I have to renew my CSCS card? how much has changed in the few years since obtaining it? Bricklaying is still in the stone age – very little has changed.