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News Release

London

2012 Budget – JLL React to Measures Announced for the Residential Property Market


London, 21st March 2012 – Jones Lang LaSalle reacts to the residential property market changes in the 2012 Budget, announced by the Chancellor of the Exchequer George Osborne on 21st March 2012.
 
The key announcements set to effect the residential property included:
 
·       Stamp duty on properties worth more than £2 million to increase from 5 percent to 7 percent.
 
·       Stamp duty on properties worth more than £2 million bought through companies will pay a 15 percent rate.
 
·       The intention to investigate options for affordable housing REITs
 
Jon Neale, Director, Residential Research at Jones Lang LaSalle, said: “Stamp duty, a transaction tax, is recognised by most economists as the worst kind of tax. The Chancellor praised Adam Smith’s principles of taxation at the start of his speech, but Smith would surely have disapproved of these increases.  It is a pity that the Chancellor has chosen to leave the system intact, and increase it at the top end, rather look at broader reforms that could make the market work more effectively – such as removing the slab structure.”
 
“The 7 percent rate for properties worth over £2m makes great headlines, and will only affect a few thousand transactions at most. The current rate is 5 percent, so the overall increase in revenue will not be that significant. That is, of course, provided it does not deter rich people around the world from buying property in Britain. To be honest, given the apparent attractions of London, it seems unlikely that it will in itself.”
 
“The punitive rate of 15 percent stamp duty introduced for properties held in companies is rather more significant, although the devil will be in the detail. Enforcing this, particularly on overseas entities, may be more difficult than in appears. I can understand the merits in enforcing stamp duty on these buyers, but not at over twice the top rate.”
 
Neale continued on the announced consultation on affordable housing REITs:
 
“It is welcome that the government has announced its intention to investigate options for affordable housing REITs. The sector is facing a ‘perfect storm’ in funding – government grant has dropped while debt has become more scarce – and urgently needs new sources of finance. It is disappointing that no new measures were announced to incentivise greater institutional investment in more general residential development.”