To date, Property Week’s Call Off Duty campaign has largely focused on the impacts of onerous stamp duty hikes on the residential sector, and while I am in agreement that the changes have failed to produce the outcomes envisioned by the previous government and should be revised by the new chancellor, I am also keenly aware of the unintended consequences that may follow as a result.
Because property is historically taxed in the country where its assets are situated, real estate has been an easy target for successive governments. Indeed, recent analysis conducted by the Organisation for Economic Co-operation and Development (OECD) demonstrates that, at 12.7% of the total contribution, UK property taxes now represent the highest share of the tax burden in at least 35 years.
UK property taxes now represent the highest share of the tax burden in at least 35 years
The analysis goes on to reveal that Britain has bucked the international trend; since 1965 the international average has fallen from around 8%, while the UK government has increasingly relied on property taxes for its income.
This trend is unwelcome, and urges caution as to where the Treasury would look to recoup any lost income from residential stamp duties.
We don’t need to reach for the history books to understand potential victims.
Take the surprise hike in commercial real estate stamp duty rates in the 2016 Budget, for example, which increased the top rate of stamp duty to 5% without any prior consultation with the industry.
For businesses like Hammerson, this immediately hits asset valuations, which has an adverse knock-on effect on share price, market capitalisation and the pension funds that rely on our equities. It will also affect the delivery of the large regeneration projects that the government is depending on private companies to bring forward.
Hammerson’s Victoria Gate scheme in Leeds - Source: Hammerson
At a time when the government is so focused on reducing headline corporation taxes to attract foreign investment and demonstrate that Britain is open for business, it needs to be careful not to choke off supply from an industry that delivers the housing, workspace, retail and commercial areas that our economy needs to thrive and prosper.
That is why we are calling for Property Week to include commercial real estate as a key pillar in its Call Off Duty campaign.
David Atkins, CEO, Hammerson
- Editor’s note: We may well consider it in the future. However, for now we are concentrating our efforts on residential, where we believe there are some easy wins for the government and the housing sector.