A survey by the Royal Institution of Chartered Surveyors, conducted after the EU referendum result, has shown that surveyors across the UK believe that the commercial property market is in the early stages of a downturn in the aftermath of Britain’s vote to leave. Nearly two fifths of RICS members surveyed said that a downturn in the market had begun, while the report revealed that investment inquiries had dropped at their fastest quarter-on-quarter rate on record. A net balance of 21% reported a decline in occupier demand, while the capital value of commercial buildings is also due to fall “in almost all areas of the market”, especially medium-sized shopping centres and office buildings. Surveyors were also concerned that speculative building would now be at risk in regions outside London, and most expect rents to decline across the board. Similar warnings have been heard in respect of residential property, especially high-end residential property in London.
Not welcome news for property investors, of course. But it does potentially mean that now might be a good time to consider afresh structural changes in the ownership of portfolios. The point is that moving properties into or out of a company, or transferring between family members, changing partnership shares or putting property into trust will generally trigger a deemed market value disposal for Capital Gains Tax purposes, as well as (depending on the transaction) Inheritance Tax and Stamp Duty Land Tax. And, unlike for shares in trading businesses, there is no easy and generally-available means of mitigating IHT or deferring any CGT arising. Lower values mean lower taxes: so a (hopefully temporary) dip in the value of property assets brings with it the potential for an opportunity to re-organise ownership at a lower tax cost than would otherwise be the case.
To discuss specific plans or to chew over the opportunities, please contact your usual BKL Property Group partner.
