Budget 2021: real estate response

David Farr, Real Estate Tax Director at Grant Thornton UK LLP, said:

“As expected, the housing market received another boost with the extension of the stamp duty land tax rate cut (£500,000 until 30 June reducing to £250,000 and then reverting to £125,000 from 1 October) and the introduction of a mortgage guarantee for persons who can only afford up to a 5% deposit on their home acquisition.

“These measures will likely prop up demand and therefore house valuations which will help with public confidence and businesses linked to the housing market. The stamp duty land tax measures provide a soft-landing to the market which is welcome to prevent unfairness for those caught out by a cliff-edge return to previous rates.

“However, these measures do not address the chronic undersupply of new housing and could lead to concerns regarding the levels of debt taken on by individuals wanting to get on the housing ladder – whilst this measure may help promote a ‘generation buy’ an unintended consequence could be a ‘generation debt’.

“The government also continues to remain positive on their commitment to level up and boost economic investment in capital and infrastructure projects to regenerate certain regions with the introduction of eight new Freeports, where businesses will benefit from more generous tax reliefs and relaxed regulation. We await to see how attractive those measures will be and the impact on those areas that are not granted Freeport status.

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“The extension of the business rates holiday for retail, hospitality and leisure businesses is welcome and another short-term boost. Interestingly, there was nothing of note to address the current economic disadvantage of bricks and mortar retailers compared with online retailer counterparts. As such, we do not expect any halt in investor demand for logistics assets as compared with high street retail.

“We are keen to see how overseas and institutional investors in UK real estate and infrastructure will react to the increased rate of corporation tax to 25% from April 2023, albeit the temporary introduction of a 130% “super deduction” on certain capital expenditure and greater flexibility on use of tax losses are welcome short-term measures. Many investors are still coming to terms with an increased tax burden resulting from the recent transition from income tax to corporation tax for non-resident landlords and so will be looking carefully at how investment into UK real estate and infrastructure is structured.”

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