Deloitte’s real estate specialists have told industry stakeholders that the political and economic changes currently affecting the sector can offer opportunities for the islands to benefit.
The firm recently hosted its annual real estate breakfast seminar, attended by those interested in the implications of trends and themes across the major UK commercial property market sectors, real estate finance, UK legislative changes to the taxation of real estate and an analysis of accounting updates.
Today’s political and economic climate has put the UK commercial property market in the spotlight, with real estate as an asset class under continued scrutiny from investors, taxation authorities and regulators alike. Against this difficult and somewhat uncertain backdrop, industry fundamentals are expected to continue to provide opportunities for the islands to benefit where such challenges can be overcome.
The critical message delivered by Deloitte’s specialists from across the firm, including individuals from their London real estate valuations and research team and tax team, as well as local audit and assurance staff, is that taking a systematic approach to the changes impacting the real estate sector will continue to provide opportunities for growth.
Deloitte real estate’s valuation insight highlighted that Brexit headlines have yet to show a real, tangible impact on property market fundamentals or returns, though investors remain very wary of its potential impact and the definition of “prime” has narrowed within each sector. Significant structural challenges exist in the retail sector, while the industrial/logistics sector has had a stellar year, and several further landmark large lot size transactions have been completed in the office sector.
Whilst the planned imposition of capital gains tax and other tax changes for non-UK resident investors will be a material change in the taxation for real estate vehicles, Deloitte’s tax team highlighted how the changes mean that Channel Islands structures will still be important to the investment market and investors, though investors and managers will need to review their structures in light of the changes. They explained how the UK government has listened to the industry and crafted the rules to eliminate multiple tax charges for some structures.
Deloitte also reported on the growth in share of the UK commercial finance market for alternative lenders (including real estate debt funds), clearly evidencing investor appetite for this asset class, which is structurally more secure than it has been at any point since the financial crisis.
The final session of the seminar covered some of the lessons learned from the application on new accounting standards in the real estate sector and in the most part this should give an opportunity for reporters to better communicate their results to investors during implementation.