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UK planning tax to hit house building
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UK planning tax to hit house building
The UK government risks driving small property developers out of the market and could fail to hit its target of 200,000 new homes per year if it goes ahead with a proposed new land tax, a study said on Tuesday.
In such a scenario, first-time house buyers and families looking to trade-up to larger premises could suffer because demand would continue to far outstrip supply, ensuring UK house prices rose at a faster rate than the European average, it said.
The report commissioned by the Royal Institute of Chartered Surveyors (RICS), which represents property professionals in the UK and has 120,000 members globally, said a proposed Planning Gain Supplement (PGS) would leave small developers with little operating profit margin.
The proposed PGS represents an attempt by the UK government to capture some of the added land value created by favourable planning decisions in order to help finance the infrastructure needed to stimulate the growth of local communities. But RICS said the likely net result from the introduction of PGS was that small developers would be driven out of the residential new-build market altogether.
More details on the government’s thinking could emerge in late November or early December when the UK finance minister is scheduled to deliver a mid-year budgetary update.
RICS said firms with an output of less than 500 homes per year were responsible for more than half of the extra 30,000 homes built per year in England alone since 2001.
Milan Khatri, RICS’s chief economist, said the supply of new housing in England would need to climb by 90,000 to almost 250,000 per year in order to reduce annual house price inflation to a European Union average of 1.1 percent.
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