The Grant Thornton Real Estate Annual Dinner proved once again to be a fantastic success. This year it was held at the Tracey Emin room at 34 Grosvenor Square and, though not nearly as controversial as the artist herself, it certainly gave rise to lively discussions.
Guests were informally asked their views on a couple of topical areas, broadly based around the Budget and Brexit, and their effects on the real estate investment market. As expected, opinions differed markedly from `business as usual’ to `where is the plan?’ although the broad opinion was that businesses will deal with each day as it comes due to lack of certainty in the market.
A consequence of continued uncertainty is the inability of businesses to plan for the long term, which in turn is countered by investors’ increasing desire for long term stability and re-assurance. Consequently, investors remain cautious, resulting in greater analysis and delays to transactions. Interestingly, this view was balanced by the argument of `more of the same’ as businesses have got used to working within uncertain times.
The recent announcement that non-resident landlords will be subject to UK tax on gains on commercial property provided suitable commentary. It became clear that businesses are currently evaluating the viability of holding UK property offshore, as the associated tax advantages are due to be minimized. Whether the government had fully thought through the effects of closing this perceived tax loop is doubtful. How this will affect Foreign Direct Investment into the UK remains to be seen, however investors will be seeking alternative structures. REITs were a common talking point in discussions with guests, so perhaps we should expect to see more of these as and when the new laws take effect.
While few guests believed the governments’ aim to build 300,000 new homes each year by the mid-2020s would be met, the initiatives that were announced at the recent budget were broadly welcomed, although many felt that these in isolation would not solve the housing crisis. Discussions among guests centred on how we will get the skilled workforce to achieve this level of construction, with certain guests already noting construction workforce shortages resulting in a rise in labour costs, so perhaps this question is the driver for change that we should be focussing on.
As the evening drew to a close, it became clear that while the future may be uncertain, the UK still remains an attractive place to invest.
Should you wish to discuss your views on how the real estate announcements in Autumn Budget 2017 will affect your business and would like to join the conversation, please get in contact with Jessica Patel at Grant Thornton.