Best investments UK – Part 4 Property News

Hult Private Capital

BEST INVESTMENTS UK – PART 4

UK Property News

Frank Schwartz – HULT Private Capital

H.M. Government Planning Red Tape Removal and Future Property Taxes

In the wake of the COVID pandemic, at the beginning of August 2020, the U.K. government announced that it would be revamping the current process of planning approval.  The U.K. Housing Secretary Robert Jenrick said in a Telegraph article that a “permission in principle” will be given to developments on land designated “for renewal” to speed up building, including the renewal of properties in Prime Central London (PCL), which has historically been a complicated process to pass.  When properties fulfil the planning process requirements, they can immediately gain significant value; in some cases, a ten-fold increase.  Mr. Jenrick clarified that “under the new rules, land will be designated in one of three categories: for growth, for renewal, and for protection.” New homes will be granted “automatic” permission to be built as part of a strategy for sweeping planning reforms in England.

If the bill does pass, these moves increase the London property profit potential significantly, and especially that of properties in PCL.  This deregulation by the current U.K. government would also have a knock-on effect on real estate funds with a London focus.   The secretary stated that “We are cutting red tape, but not standards.” And, “I am completely overhauling the system so we can build more good quality, attractive and affordable homes faster,” Mr. Jenrick added.

There was pushback against these U.K government moves by local municipalities claiming that the bill could take the rights away from the regional leaders.  Currently, protestations against the bill, which is in the early white paper stage, claim that the legislation could also lead to certain cases in which local authorities would not be able to block developments that are in designated “growth” zones.  However, the real estate and building industries see these moves as positive and, if passed, will keep development healthy.  Prime Central London will undoubtedly contain some of these growth zones which is a boon for HULT PCL.

In the Secretary’s Telegraph article Jenrick also stated that the planning changes result in a “once in a generation” chance to build homes and amenities families need, “outdated and cumbersome” planning rules, which previously took, on average, for new housing developments, five years to approve.  This lengthy process was fuelling a “generational divide.”  Younger buyers can not compete with older homeowners when struggling to get on the property ladder.  These are now problems of the past.  How ever the Government is marketing these changes, they mean one specific thing.

They are a net positive for property funds with a central London focus, HULT Private Capital is already in the position to take advantage of the moves.  The majority of our investments being in PCL, Greater London, and Home Counties.

Besides the stamp duty holiday, there are currently no plans for increased land taxation by H.M. Government; however, the COVID crisis has resulted in an all-time high of £2 trillion in total governmental debt.  Therefore some tax increases will likely be seen.  It would be only speculation to say to what extent the Government’s discussions regarding the Capital Gains Tax may encourage some wealthier homeowners to accelerate decisions to sell.  A large portion of household wealth is in housing, and tax policy related to property will likely become the subject of increasing debate over the next decade but only until it does should there be any knock-on impacts for the functioning of the market.

 

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