2 March 2016,

The Budget 2016

Darren Yates, head of Carter Jonas’ research team, responds to the Chancellor’s announcements in his Budget yesterday, offering his thoughts on the implications for the UK property industry:

• Confirmation of 3% stamp duty surcharge for large-scale residential investors:

“The 3% stamp duty surcharge on second homes and residential investment was confirmed as applicable to large-scale investors, as well as smaller players. This is despite the fact that many in the industry lobbied strongly against it. The surcharge is an additional headwind for the larger, institutional investors, many of whom are committed to the sector long term and could play a key role in improving housing supply in the next few years.”

• Stamp duty changes for commercial property:

“The rise in stamp duty for commercial property above £250,000 to 5% causes concern, and will likely act as an additional pressure on the commercial market, particularly at a time when the economic outlook is becoming more uncertain.

“In contrast, the reduction in stamp duty for smaller lot sizes could make commercial property a more attractive proposition for smaller-scale private investors, who may be looking to diversify their investment portfolios with the addition of commercial property. However, this type of investor accounts for only a small proportion of the market, and most players in the commercial sector will find the changes unwelcome.”

• The confirmation of Crossrail 2:

“Confirmation that the Crossrail 2 project will go ahead is hugely welcome as it will further support the capital’s property market. While the West End, City and Docklands will remain London’s core office markets for the foreseeable future, Crossrail 1&2 will help the growth of emerging office market locations across the city.

“The new rail infrastructure will allow London to become more “polycentric” by improving accessibility to and from more peripheral locations, effectively creating a more diverse range of commercial hubs in the capital. Importantly, it will give occupiers more choice by opening up access to cheaper office locations, notably those small and medium-sized businesses currently struggling to pay the high rents in central London.”

• The confirmation of HS3:

“The announcement that the HS3 link between Manchester and Leeds will go ahead is a much needed boost for the ‘Northern Powerhouse’. With much of the recent rail investment focused on London and the South East, HS3 will undoubtedly boost connectivity and growth in the UK’s key northern cities.

“High quality infrastructure is crucial in supporting business growth and the property market. It allows people to move around more efficiently and enables businesses to tap into a wider pool of labour and consumer spending. Some estimates suggest that HS3 will cost around half the £15 billion spent on London’s Crossrail 1, which seems like good value if we can get the UK’s key northern cities joined up on high speed rail.”