Budget tax hikes threaten investment, say UK real estate market
Over a third of property experts believe tax restrictions announced in the 2024 Autumn Budget will be a key barrier to real estate investment this year, according to RSM UK’s Real Estate 360 survey.
Research commissioned by leading audit, tax and consulting firm RSM UK shows that 35% of businesses said that additional tax restrictions will be a key barrier to investment, jumping 12% on the previous year.
Economic recession took the top spot as biggest barrier (50%) for the third consecutive year, however it fell from 61% in 2023. The survey found that business rates (33%) and political instability (31%) were also perceived as major barriers to investment in addition to tax measures announced in the budget including changes to capital gains tax, inheritance tax and stamp duty.
Conversely, real estate businesses think access to funding has improved on the previous year. But, less than one fifth (16%) say it will be easier in 12 months’ time, despite government’s pledge to boost public investment by over £100bn over the next five years.
Nearly a third (31%) think capital gains tax and stamp taxes should be reformed to increase investment. However, despite restrictions, real estate market optimism has increased by 13% this year, with 68% of businesses feeling positive.
Stacy Eden, partner and head of real estate and construction at RSM UK, said: “Despite government’s commitment to rebuild Britain and accelerate public spending, the punitive tax measures announced in the budget are holding the industry back from long-term growth. Economic recession remains a major concern, but it’s no surprise that tax restrictions are perceived as the second-highest barrier to investment, as many real estate businesses feel that lack of capital gains and stamp duty tax reform are stifling liquidity and growth in the market.
“As a result, this could potentially discourage domestic and foreign investors from entering the UK real estate market, which could lead to a slowdown in the development of new homes and make the government’s mandatory housing targets even more unattainable. The housing shortage remains a critical issue, but the government’s National Planning Policy Framework is a step in the right direction and will help to resolve the supply and demand imbalance. While this will go some way to making home ownership more accessible, reforming property tax is essential to unlocking long-term economic growth.”