Ralph Mitchison – Property and Construction sector expert
This sector has experienced real challenges of late. Growth has been subdued, with issues of housing supply, scarcity of affordable land, tax changes, and planning approvals remaining a problem.
Property and construction sector advice services
We advise commercial and residential developers, contractors, owners and investors, as well as sector-dependent clients. We work closely to find solutions to industry issues, utilising our expertise in everything from business strategy and corporate finance, to audit and tax advice.
Menzies is a recognised supplier of the National Landlords Association (NLA)
The NLA seek a fair legal and regulatory environment for landlord and tenant, and actively lobby the government at all levels on behalf of our members.
We also help ensure that our members are aware of their statutory rights and responsibilities.
Key challenges for the Property and Construction Industry
Supply of land/property
New-build home targets of 240,000 completions per annum keep being missed. Meanwhile, the trend towards shorter commutes and ‘live work’ campuses continues, creating a greater emphasis on using brownfield land. Relaxed planning permission is expected to help, though brownfield land values are increasing at 10% pa. The SME business sector appears confident, leading to an increased demand for commercial/office space.
Despite interest rates being low, there are still issues with credit supply, which are preventing certain projects from being undertaken. Whilst the high street lenders are very risk averse (aided by valuations that continue to be on the low side), there has been a growth in mezzanine finance and specialist funders.
There is a government focus on encouraging innovation in the construction sector and we have made a number of successful R&D tax credit claims for clients as a result of increased rates and relaxed qualifying conditions.
Global economics mean UK property is seen as a safe investment, which affects demand and increases prices. There is an increasing issue of affordability among the migrant and young population. For developers, it will be essential to keep costs down to maintain margins.
Property and construction tax changes
Changes in capital allowances have increased the cost of acquisition, changes in SDLT are impacting on residential developers planning to build £1m-plus properties, IHT changes will also hit high value properties held by offshore vehicles, and the residential rental market may slow as the reduction in mortgage interest relief for buy-to-let landlords forces rentals higher or creates a shortage of units.
It is ever more important for companies to review their tax position, including indirect taxes such as SDLT and VAT, and consider structures such as Special Purpose Vehicles to help minimise the tax burden.
Property and construction skills shortages
The construction sector continues to face skills shortages, although the influx of migrant EU workers has helped somewhat. The increase in the national minimum wage is expected to push up costs and reduce margins for the sector.