267: Experts eye English industrial property tax hit
Navigation trail: / latestnews / archive / 267 - published: 27-03-07
LONDON, March 26 (Reuters) - Changes to tax treatment of empty commercial property will hit owners of English industrial property especially hard and could drag on their share prices, property experts said on Monday.
"This is quite a shocker and the only people who will have noticed are commercial investors and advisors," Ludo MacKenzie, manager of the Henderson UK Property Fund, said. "Over the next few months, investors are likely to re-calculate their future liabilities."
The British government said in its annual budget statement last week it will end the 100 percent local tax relief granted to owners of empty industrial property such as distribution warehouses and business parks if a property was vacant for more than 6 months.
Scottish industrial property was unaffected by the changes, making it a more attractive bet because valuations in the far bigger English market were likely to be adversely affected over time, MacKenzie said.
"I don't expect to see any immediate change in valuations, which tend not to factor in void costs but as the impact of these changes draws closer we may see it reflected in cost-explicit NPV (Net Present Value) calculations," MacKenzie said.
In a statement, the Royal Institution of Chartered Surveyors (RICS) said the new rules were likely to weigh on the share prices of firms with significant holdings of industrial property.
Britain's biggest owner of industrial property, Slough Estates (SLOU.L: Quote, Profile , Research), warned though against jumping to conclusions.
"It is obviously an unwelcome development but it is too early for us to quantify the effect of the empty property relief provisions and we're still assessing the possible impact of the detail," a spokesman for Slough told Reuters over the telephone.
The British government also said that it planned to phase out an annual tax allowance worth 4 percent of an industrial building's value.
RICS predicted a wave of vandalism by affected property owners, citing a precedent in the 1970s.
"The restriction of rate relief on vacant industrial property from April 2008 could lead to owners deliberately damaging buildings to remove them from the ratings list and exempt them from the empty rate," RICS said in a statement.
New commercial property developments might also be negatively affected due to the additional cost of holding property before it was let, MacKenzie said.
"It may temper our enthusiasm for 100 percent speculative developments, unless we are very confident of letting prospects," he said.
Source:
Reuters - Investing