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RESI Conference 2017 :: RESI Round Up Day 2
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RESI round up - Wednesday 14th September

Stamp duty steals the show at RESI

After Build to Rent stole the headlines on the first day of RESI, many were no doubt expecting another ‘B’ – Brexit – to dominate the second, with the day opening with an interview with former Chancellor and prominent Leave campaigner Lord Nigel Lawson. But our speakers had something else on their mind: stamp duty reform.

Britain’s departure from the European Union did of course feature heavily in the chief Brexiteer’s musings, as he discussed the impact of the Out vote with former Conservative transport minister Steve Norris, now chairman of Soho Estates.

Lawson warned “there is no way the EU is going to reward us for having a divorce” leaving “no chance of a special deal” but downplayed the need for access to the Single Market, saying Britain will “join the rest of the world.”

Dismissing concerns a loss of passporting rights will severely damage the City of London as “scaremongering”, he pointed to the capital’s convenient time zone and network of professional services firms as reasons it would continue to be a global financial centre.

Turning to the effects Brexit would have on the residential market, Lawson said he could not see “in principle” why it would do any damage, adding residential property’s performance would likely rise in line with the wider economy.

Far more damaging he argued was stamp duty, which he slammed as a “tax on mobility” and attacked current levels as “absolutely crazy”. Reducing stamp duty rates could even net a greater return for the Treasury, Lawson argued, with levels at the moment being too high and inefficient.

Talk of Brexit and stamp duty continued into the financial panel after. Discussing how investors have had to adjust to new market conditions, the consensus was that most have made minor adjustments to reduce the amount of leverage and increase equity. “All that Brexit did was bring us back down to where we were before and we’re happy with 70% LTC and an 8% IRR,” said Marc Bladon of Investec.

As the panel then considered how the fundamentals of different tenures might appeal to investors, Bladon suggested such comparisons could be harmful to build to rent: “What we’re hearing time and time again is that when you’re looking at PRS just doesn’t stack up against build for sale.” He went on to propose that the sector may benefit from it’s own planning consent that would differentiate it from the usual C2 class.

Fiona Freeman, managing director at FTI Consulting, countered that the playing field could be leveled for build to rent schemes by removing the additional stamp duty burden from the emerging asset class. Speculating that this move was entirely possible now, she noted, “This wasn’t something done by this government, t’s now within their remit to be able to make this change.”

By the end the panel had all agreed on one thing: constant fiddling with stamp duty rates caused major headaches for those trying to build up new asset classes.

Wrapping up RESI was a keynote speech from Simon Woodroffe, founder of YO! Sushi. Tasked with explaining how brand innovation can win new markets, there was no mention of Brexit or stamp duty, but his rollercoaster account of how YO! Sushi came to be left the audience holding on to the edge of their seats.

Concluding, Woodroffe explained the key ingredient to achieving what you want is having a clearly defined goal. But for the government, which is looking to deliver one million new homes by 2020 that may not be enough. We’ll have a better idea at next year’s RESI. 

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