For the first time since 1963 UK public debt exceeds 100% of GDP. At the same time, this year’s budget deficit is likely reach double-digits, as a percentage of GDP.
This is not shocking news given the vast economic damage caused by the corona crisis. It should also not be surprising to anyone that the Treasury will be considering a range of policies to start rebuilding the nation’s balance sheet. Rishi Sunak will deliver his budget in November and speculation has already begun about possible revenue-raising measures – i.e. tax hikes.
The press has so far lined up a rise in Corporation Tax and Capital Gains Tax (CGT) as front runners. Inevitably, there are fears that property investors and landlords will get clobbered. There is trepidation amongst some investors that the recent market buoyancy from the stamp duty holiday will be taken back by possible changes to CGT. I have heard some investors looking to use the current positive sentiment to throw in the towel, calling this the end of an era.
But if we step back to consider what really matters to property investors and developers, we would find more in common with the economy and the public (read: electorate) than we had expected. What’s good for property investors is also good for the public and the electorate – and vice versa. Given this unlikely alignment, it would follow that property investors should not panic about future policy changes.
The economy and property investment in harmony…
A healthy housing market
Around 60% of homes in the UK are owner-occupied with 35-40% being rented, either socially or privately. Although the ownership ratio has been falling, property remains the largest asset class in the UK, making up 51% of our net worth, which is the highest in the G7 and double that of Germany. It is estimated there are around 2.5m landlords in the UK. We are, and remain, a nation of home owners.