Does the budget add up for the construction and real estate sector

22 November 2017

Philip Hammond is clearly interested in developing our skills and is providing £40m to train maths teachers.

A SWOT analysis for the Construction and Real Estate Sector identifies fantastic funding opportunities.  He has helped the Sector by backing Crossrail 2 and infrastructure development.  Clearly there are threats.  Some would say putting companies on the same footing as individuals in terms of gains on commercial properties is not unreasonable – nor indeed the taxation of gains arising on foreign corporate entities holding UK commercial property.

There are more positives even if the opportunities (the funds) equal the strengths in terms of output, but where is the construction workforce going to come from to meet the demand?  £34m to develop construction skills seems a little tight.  Yes T levels will help but this is a conveyor belt that has yet to roll.  

Potentially the developers will be attacked for “land banking” but if you do not have the labour resources to build, that would be considered unreasonable.  Indeed, the pressure to build will mean the skilled labourer will dictate financial terms which has been prevalent for the last few years, which has been covered by a growth in house prices.  There is an obvious weakness without adequate skilled labour, it is likely that house prices will go up with insufficient numbers built – not because of land banking, inadequate infrastructure, lack of finances but because there is insufficient skilled labour.

SWOT analysis

Strengths

  • Backing Northern Power House, the Midland Engine
  • 5 new Garden Towns
  • Development of the Cambridge – Milton Keynes – Oxford Corridor
  • £300,000 SDLT exemption for first time buyers.

Opportunities

  • Finding £630m funding for small sites
  • £2.7bn for Housing Infrastructure Fund
  • £1.1bn to unlock strategic sites
  • £8.0bn of new guarantees to support housebuilding and the purpose built private rental sector.

Weakness

  • £34m to develop construction skills

Threat

  • Withdrawal of indexation relief for capital gains on property disposals
  • Councils empowered to charge a 100% council tax premium on empty property
  • CPO if companies are deemed to be land banking
  • Homes England – set up to encourage speed of development including CPO powers – but at what value 
  • Existing use or development value?

Contact us

For further information, please contact Brendan Sharkey, Partner and head of Construction and Real Estate Sector.

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