Last Thursday lunchtime in the City, Montagu Evans managing partner Rob Bower summed up the mood of the sector as “jittery”. There is reassurance at the mending economic outlook, but jumpiness each time higher-priced money causes a financial fuse to blow, resulting in yet another repossession in a market hardwired to 10 years of cheap money.
Not unwelcome news to attendees at a conference organised by Nara, the Association of Property and Fixed Charge Receivers, later the same day. You could hear a grenade pin drop as General Sir Mike Jackson outlined four possible outcomes of the Ukraine war. “But I’m no prophet,” shrugged the ex-head of the British Army, failing to settle nerves on the war.
Nervousness added to by Mark Berrisford-Smith, head of economics at HSBC, who predicted the cost of money was going to rise further. We’ve been here before. This fingers-crossed mood feels just a touch like June 2008, when optimism rose after the 2007 crash before being dashed by the Lehman Brothers collapse in September. But things are always different.
One optimistic indication comes from just-in results of four top REITs. Lessons from that old crash have been learned. Valuers have been cutting faster this time around. Hesitancy in 2006-07 brought deeper disaster in 2007-08. Loan-to-value (LTV) ratios are now far lower. Then 50% to 65%; now 25% to 40%. Cost of debt servicing is, of course, way down.
In February 2008, the top four REITs discounted shares valued at £8bn to raise £2.5bn to prevent LTV breaches. Huge shock. In 2023, British Land has gone from making £954m in 2022 to losing £1,039m. Landsec from an £875m profit to a £622m loss. SEGRO from a £4.3bn profit to a £2bn loss. Hammerson from a £450m loss to a £143m loss. But all sold well and are trading well. The LTV issue has been defused.
No shock.
Keep levy simple, stupid
Three quarters of the way through filing responses to questions posed in a government consultation on a proposed Infrastructure Levy last week, I broke, bellowing at the screen: “Are you [expletive deleted] crackers?!” Yoking a tax as collectable as stamp duty to a 300-page treatise on the ‘potential effects’ on payers? Mad. Why add concrete boots to an idea with legs? Why not ignore a planning mafia, proffering mathematical abstractions as proof of lowered land prices and fewer ‘affordable’ homes.
You have until 11.45pm on 9 June to have your say. Meanwhile, imagine commissioning the National Farmers’ Union (NFU) to carry out a study to test the impact of a cabbage tax on the price of cabbage fields and how that might reduce the supply of subsidised cabbages to the poor. Then suggesting a 10-year ‘test and learn’ introductory period because the NFU raised fears of cabbage shortages. All based on the agricultural equivalent of theologians calculating how many angels might dance on a pinhead.
Tithing both commercial and residential developments is admittedly trickier than taxing cabbages. But the current regime is surely trickier? Section 106 and Community Infrastructure Levy tithes are based upon subjective opinions. An entire sub-industry of guides, expert in wayfinding the ‘viability’ maze, stand available to charge. An army still needed if the Infrastructure Levy passes in its present form. Many divisions could be stood down if a simplified Infrastructure Levy is allowed to live.
Holding on to nurse for fear of something worse is the present mood. The consultation will be filled by nit-picking objections. So why not keep it simple? Impose a universal low-percentage figure tithe on each residential and commercial transaction defined as new build or rebuild. Collection? Easy as stamp duty. New-build stamp duty land tax? Easy to figure the take. Impose after a year’s fair warning. Squabble over the distribution during the wait. At least there will be a tax to distribute. Right now, the levy is facing death by 1,000 nit-bites.
Peter Bill is a journalist and the author of Planet Property and Broken Homes
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