A "tax cut bonanza"
Making sense of the latest trends in property and economics from around the globe
3 minutes to read
Mortgage rates
The Bank of England's decision to hike the base rate by 0.5% yesterday puts interest rates at their highest level since 2008.
There was little surprise in the Monetary Policy Committee meeting minutes, though there were several hints that the MPC believes the government's "growth plan", due to be announced as a mini-budget later today, will be inflationary.
Forecasters including Capital Economics now see the base rate moving past 4% around the middle of next year, and colleagues at Knight Frank Finance have outlined what that would mean for mortgage rates. Headline five year fixed rates sat at 1% as recently as December and have since risen to about 3.5%. If we do see the base rate reach 4% around the middle of next year, we'd expect the best five year products to sit around 5.35%.
The BoE's interviews with more than 700 businesses across the UK suggest that planning delays and concerns about rising build costs are slowing the pace of new residential projects starting. By contrast, commercial construction activity remained strong, in particular for office developments in prime locations.
Mini-budget
Today’s mini-budget will include 30 measures intended to drive economic growth, according to this morning's Times.
Reversing the rise in national insurance payments, freezing corporation tax, axing the banker bonus cap and some form of cut to stamp duty have all been trailed widely. The Times bills it as a "tax cut bonanza in bid to stop the economic rot" and several data points out this morning do suggest that the economy is flagging.
The consumer confidence index from market research firm GfK, for example, fell to -49 in September from -44 in August, which is the lowest reading since records began in the mid-70s.
Green premiums
Almost half of the 4,000 respondents to the new RICS sustainability report say that commercial buildings that are not classed as green or sustainable are subject to a reduction in rents and prices compared to green or sustainable buildings.
Roughly a quarter believe that discount is up to 10%, with a fifth believing it could be even higher. Globally, around 40% of contributors report that the gap in rents between buildings classed as green/sustainable buildings and those that are not has risen in the past year.
Our research suggests that there is an 8-18% sales price premium for green-rated buildings compared to equivalent buildings without a BREEAM or NABERS rating, depending on the level of green rating
The Costa del Sol
Spanish nationals and foreigners with worldwide assets in excess of €700,000 living in Andalucia will no longer pay tax on their worldwide assets.
The region is home to some of Europe’s top second home hotspots stretching from Malaga to Seville and encompassing the numerous resorts of the Costa del Sol. According to the region’s president, Juan Manuel Moreno, the move, along with a reduction in income tax, is aimed at stimulating the economy by attracting more investment.
The measure comes on the back of a reduction in stamp duty implemented in 2021 and a lowering of inheritance and gift taxes earlier this year.
Expect more moves by governments globally to attract the increasingly mobile wealthy.
In other news...
Britain to overhaul public company registry in dirty money crackdown (Reuters), and finally Manhattan apartment rents plateau after months of record highs (Bloomberg).