The Royal Institution of Chartered Surveyors (Rics) has made several suggestions about how the government could help encourage institutional investors to enter the UK's residential property sector. In its budget submission, the organisation acknowledged the reforms to real estate investment trusts (REITs) unveiled at the end of 2011 are "a positive step forward". However, the body noted there is more that could be done to make residential real estate investments more attractive to this demographic.
Among the ideas put forward by Rics is to "level the playing field between commercial and residential", as this is likely to make the latter a more viable option for investors. The organisation suggested reducing the VAT charged on residential property maintenance to match that currently levied on commercial assets, as well as boosting capital allowances for expenditure on housing. Rics cited findings from Cut the VAT research, which it co-sponsored, pointing out a 15 per cent reduction in VAT on the labour aspect of maintenance and repair works for dwellings would result in an economic stimulus of approximately GBP 1.7 billion in 2012, in addition to providing a boost to spending on energy efficiency measures.
Another option to encourage the creation of more residential REITs is to deliver tax relief on rental properties where long-term assured tenancies have been established. According to Rics, this would "encourage institutional investment in the private rented sector (PRS) by providing certainty for investors". A report published by HM Treasury last year highlighted the importance of the PRS in helping the UK meet its housing needs. The government department predicted institutional investment in the sector will "grow significantly in the short to medium term", with a particular focus on new-build schemes designed specifically for the buy-to-let market. This is because the cost of managing multiple properties across several locations is "likely to be prohibitive for larger-scale investors".
- Friday 17 February 2012