David Melhuish: Property sector gets Santa’s coal

SWINNEY added to growing pressure says David Melhuish

John Swinney's budget has added pressure on the property sector. Picture: Neil Hanna
John Swinney's budget has added pressure on the property sector. Picture: Neil Hanna

The mid-December timing of the latest draft Budget, combined with Holyrood’s new capacity to exercise new revenue-raising powers, left seasoned onlookers wondering in advance who would be on the finance secretary’s Christmas “nice list”, and whose stocking would be laden with coal.

When it became clear that income tax wouldn’t be touched this year, the focus shifted to where else John Swinney might look to top up government coffers. The result was a series of changes that are troubling to the business community more widely and the commercial property sector in particular.

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The spending review proposes a radical change to empty property rates for the industrial sector, which will effectively lose exemption. On top, we’ll see the initial three months 100 per cent relief for offices and shops reduced to 50 per cent only in first three months, before it drops to just 10 per cent. Industrial property will now get 100 per cent relief for three months, followed by 10 per cent relief thereafter. Added to this the application of a supplement that will now be double the proposed level in England means that for many of our larger businesses there is a noticeable difference in occupation costs for like-for-like business properties north and south of the Border.

Weighed against historic decisions over income tax, this might all seem of marginal significance but here’s why it matters.

Long-term analysis shows that, over 15 years, the costs of investing in industrial sites have risen some 50 per cent, while rents are up by just 11 per cent. The budget went further by effectively pricing out any prospect of speculative industrial development at a time when those jobs are needed most.

There may be light at the end of the tunnel – a long overdue review of the rates system is at last in the pipeline. Our message to government is that we need to fast track that review.

• David Melhuish is director of the Scottish Property Federation