29 January, 2008
Generally 2007 has been a good year both for domestic property sales and for commercial property sales. Forbes Commercial Property Department completed deals in excess of 150 million pounds in 2007 while the Domestic Property Department has also seen a high level of activity with property values rising sharply.
However, it seems to be widely accepted that 2008 will not again be a year of steadily rising property values and that there may well be falls in the value of both residential and commercial properties.
One of the key factors affecting the property market is, of course, the credit squeeze by the Banks following the sub-prime lending crisis in America but there are other factors which are likely to affect the market in both residential and commercial properties in 2008.
The introduction of Home Information Packs for domestic properties has done nothing to encourage the sale of domestic properties and it is difficult to see that they make any positive contribution to the sale process. They may well deter sellers who were tempted to put their properties on the market and see if there was any interest and who might now be deterred from doing this by the cost of providing a home information pack
Business rates on empty property is another change which is to be introduced in April 2008. At present while a property is empty no business rates are payable for the first three months and after that only 50% of the normal bill is payable. However on industrial buildings, listed buildings and small properties with rateable values of less than 2,200 pounds there are no rates to pay even after the first three months. The Government is proposing to change empty property rating relief by applying the full business rate to properties that have been empty for three months or more and removing the exemption from industrial and warehouse property so that the full rate will be applied if they are empty for more than six months. This will inevitably mean that owners of large commercial property portfolios will look carefully at the number of unoccupied properties which they hold. The increased cost of retaining such properties may well mean that there will be an increasing number of commercial properties on the market.
Another factor which may well affect the market temporarily is the change which the Government is proposing to make in the calculation of Capital Gains Tax which will be effective from the end of the current tax year. This may well mean that some owners will seek to realise their gain before the end of the tax year for tax reasons and some in turn may seek to delay it until after the end of the tax year depending on how the new rules affect them.
It looks therefore as though 2008 is going to be an exciting and challenging year for both property owners and their advisors.
This article appeared in the Lancashire Evening Post Business and Money Review 2008 on the 29th January.