Chris Cummings, director, AMI On the Treasury's website, alongside the Budget download, is an opportunity to glance through the PIF consultation paper. What is it, what should we do about it, and wherein lies opportunity?
This consultation picks up on the main themes of the Miles and Barker reports. As Ruth Kelly, the financial secretary to the Treasury, remarks in her foreword to the consultation paper: “A healthy and stable property market is a key element in any successful economy.” So far so good, but she then goes on to say: “Over recent decades the UK property market has been a source of destabilising cycles – too often a barrier to growth and productivity.” Are you hearing echoes of the Miles' review? In publishing this consultation paper the government wants comment on its belief that PIFs could stimulate more institutional investment in the residential sector, so securing: “ more efficient management, greater renewal and preservation of property and a more liquid supply of housing.”
It seems that the government has set stability in the housing market as a policy priority. Nobody can argue with the economic benefits a stable housing market would bring, but we have to be alive to the side effects of too much government interference: extra layers of regulation, increased costs and a less dynamic market.
This is a Treasury consultation paper and there are 19 questions, the responses to which must be with the Treasury by July 16 (preferably by email). AMI is developing an industry response on behalf of members.
One message that comes through the consultation paper is that there will be no extra money from the government either to make this proposal happen or in the form of tax breaks. It is repeated several times that the chancellor is not looking to reduce his tax-take from the market by introducing this measure. Indeed, questions 10 and 12 specifically make mention of the Treasury's desire “to ensure no overall cost to the Exchequer”.
Chapter one looks at the overseas experienced of PIFs, real estate investment trusts, or limited property trusts. They are not only common in the US but also in Australia and across the Far East in Japan, Hong Kong and Singapore.
Apart from commercial property the government is clearly looking at PIFs for the residential sector. An emerging theme is that the government believes PIFs could present a solution to the worry that the buy-to-let sector is becoming overheated.
Chapter three presents some interesting thoughts on Stamp Duty. The consultation assumes the current Stamp Duty system remains stable with a scale of 1% to 4% charged for property transactions (Stamp Duty Land Tax), and Stamp Duty Reserve Tax at 0.5% on the value of share dealings. However, it notes that if successful, the PIF scheme would lead to fewer land transactions and more trading in the indirect market.
A warning note is sounded as any fall in the tax-take from SDLT might need to be made up elsewhere. Question 12 looks at these matters and asks for your bright ideas.