International property buyers and institutional investors are stepping up their capital commitments to UK property assets in the backdrop of various initiatives of the government. This trend is being accelerated by legislative reforms, including a first phase of REIT changes expected in April 2022, a new regime for qualifying asset holding companies (QAHCs) from April 2022, as well as business rates reform for retailers.
The latest Autumn Budget and annual Finance Bill combine a number of measures designed to enhance the UK’s profile as an international investment destination. The latest REIT changes, for example, make it easier for institutional investors to use REITs as a vehicle for UK property investment, according to KPMG analysis. By alleviating administrative costs and other constraints, a greater diversity of both local and international investors are motivated to use this investment vehicle to foray into the UK real estate market.
Further, the chancellor's commitment to “levelling up” includes a £1.7bn fund invested in local areas across the UK as well as business rates reform offering relief to retail, hospitality and leisure sectors. A discount of 50 per cent was confirmed in England for 2022-23, up to a maximum of £110,000 whilst there is ongoing consideration of an online sales tax. This would be used to further reduce business rates for brick and mortar retailers, effectively rebalancing rates relative to online retailers.
A residential developer tax of 4 per cent was announced as expected with exclusions for student accommodation, retirement living housing, build to rent, and corporate residential property developers with profits under £25m. This serves to continue to incentivise investment whilst shoring up government capital reserves in raising the over £2bn tax income forecast over ten years.
A number of additional legislative reforms include an extension of time period to pay capital gains tax on sales of UK residential property, the rollout of the first special economic zone freeports, and a new QAHC regime. These changes serve to enhance the UK’s real estate international competitive appeal as a best in class long term investment asset.
Foreign ownership of homes in England and Wales has reportedly nearly tripled over the past , as wealthy eye the UK’s coveted property. Nearly 250,000 homes in England and Wales have been registered with overseas-based buyers, a figure which has swelled from fewer than 88,000 homes in 2010, according to the Consumer Financial Protection Bureau (CFPD).