UK housebuilder Berkeley has issued a veiled warning to the UK government amid concerns that the increasing tax on property is having an impact. The company has reported a reduction in sales over the three-month period to the end of February and also commented that higher end sales numbers are back to the same level as seen in the run-up to the general election. Berkeley is not the first UK housebuilder to complain about the government’s handling of the industry but what began as a whisper is now gaining volume.
The company was very vocal in its criticism of the UK government describing the current system as “one of the world’s highest property taxation regimes”. The cost of acquiring and investing in property has increased gradually over the last few years to a point where it is starting to make investors and developers think again. The buy to let market has been a particular target for the UK authorities with a stamp duty surplus charge to come into effect in April.
While some would argue that the extremely lucrative UK property market should pass on more to the UK taxpayer, let’s not forget it was already one of the highest taxed property markets in the world even prior to the recent changes.
Another concern for the UK housebuilding industry is the planning permission regulations which not only differ from area to area but local regulations often conflict with the national policy. Time and time again we have seen planning applications denied only to go through on appeal which adds both cost and time to developments. There are also signs that the likes of Berkeley are looking to spread their net a little wider and reduce their historic emphasis on the luxury end of the market.
The UK authorities seem to change their mind on a regular basis with regards to planning permission. This despite the fact the UK is hundreds of thousands of newbuilds behind the number required to fulfil even current demand let alone future demand.
The short term outlook
It is perhaps no surprise to see the likes of Berkeley, a housebuilder which has historically centred its investments on the luxury end of the market, now looking to dilute this exposure. The company has been acquiring sites for flats in outer London boroughs and other areas of the country. It will be interesting to see whether other UK housebuilders have the same opinion of both the tax regime and the planning permission regulations. If this is the case, and this is a sector wide issue, then surely the UK government will need to act sooner rather than later?
The UK market will also be influenced by the forthcoming UK referendum on membership of the European Union which is causing major problems on currency markets. Just a few weeks ago the clever money was on a clear win by the “remain in Europe camp” but recently we have seen an increase in support for the “out of Europe camp”. We certainly have some interesting times ahead for the UK property market.