Budgeting for change
By Bridging Loan Directory -
While we’re always happy to consider all types of loan requests at Tiuta, much of our focus over the past couple of months has been on larger loans between £1m and £30m. A tranche of funds for such loans that we made available In December was soon taken up and we doubled and extended it in early February as demand for bridging loans at the higher end of the market remains keen. Everyone knows the bridging sector is going through something of a purple patch at present and it is these large loans and demand from property investors that is underpinning much of that success.
It was disappointing therefore, for the short- and medium-term lending industry, to be thrown something of a curveball in Chancellor George Osborne’s recent Budget in the form of the Stamp Duty hike on prime properties purchased through companies. Or, to paraphrase the Government’s typically out-of-touch jargon, those “bought into a corporate envelope”. The increase in the levy to 15% on residential properties worth over £2m bought in this manner has caused consternation in high net-worth circles and its immediate implementation meant the proverbial hit the fan for a number of deals across the industry that were going through last week. Osborne’s pledge to retrospectively apply a charge to properties already purchased in this manner has also led to accusations of moving the goalposts and has sent many clients, brokers and introducers back to the drawing board.
The Government is obviously within its rights to assign charges and taxes where it sees fit, but I can’t help but think it has gone after the wrong target here. This Government seems obsessed with the minutiae of loopholes and tax mitigation schemes and for all the plugging of gaps, leaks are bound to spring elsewhere. It is also unclear why it is expending so much energy on exactly who has acquired prime residential properties when there are scores of empty houses unused when we have such a shortage of supply. There are also the vagaries of objectively valuing such properties and you can guarantee there will be scores of sellers suddenly claiming their Kensington des res is worth a mere £1,999,995. It happens at all stamp duty thresholds and there is no reason to suggest it won’t be happening now at £2m.
Therefore there is bound to be an impact on deals on and around the £2m mark, but at Tiuta – as I’m sure are counterparts will be doing – we will help our brokers, introducers and clients structure deals so as to minimise the disruptive influence of this levy hike.
The establishment of our specific large loan line has given us additional experience and expertise in this area and we are well versed in getting such deals across the finish/completion line. Only recently we completed a £2m large bridging loan on a residential property in a prime London postcode, so we are equally adept at handling such transactions as we are meeting the needs of those buying at auction or completing commercial deals. The bridging industry has come this far in the face of numerous challenges and a slight obstacle like this, while disappointing, is highly unlikely to derail the progress we have made.
Steven Nicholas is Chief Executive of Tiuta