In anticipation of the April 2021 changes to IR35, the delayed introduction of the private sector off-payroll working rules, HMRC has recently published regulations (SI 2020/1150)…
Long term, property is definitely a very safe asset class. Short term the position is much less certain though.
Like the world at large, property is being impacted by both significant economic forces and dramatic social change. The combination is making life very difficult for property owners and developers. There will be winners and losers and as a consequence some market prices will need to adjust. The impact of Covid-19 will vary by property type, physical design of the buildings concerned and location.
The most obvious impact so far has been on the retail property but even in that case the impact is not consistent. Essential retailers are better placed than others, so out of town is implicitly favoured over the high street. Modern, open and adaptable buildings are more attractive than narrow and restricted period buildings. Luxury stores are favoured over more down market outlets as such shops tend to be more spacious. Certain coastal locations tend to have fewer essential stores and so the shops concerned there are more competitively positioned. All of this makes life very hard for valuers and for market prices to adjust quickly. As a result one possible approach might be to link rents more closely to turnover of outlets, a way of spreading risk more fairly between the occupier and the landlord.
Turning to other commercial property, a move away from globalisation, Brexit, reducing just-in-time delivery and an increase in online sales is likely to necessitate a need for more warehousing and a focus on more UK based supply chains which could also increase UK manufacturing. As such, good quality modern industrial units should be in even more demand. The future office needs are not yet clear but it is possible that building footprints could be smaller and what is currently desired may change. As with retail this suggests that more modern flexible buildings in good locations are likely to be the most desirable.
At the same time, older buildings currently being used for offices and small shops are likely to be considered ripe for conversion back to residential. The economics of that can be doubtful and it is also dependant on local authorities having a clearer strategic vision as to what they want happen so that change of use is readily forthcoming.
The prospects for residential property are even harder to predict. Economic forces will drive the wider market – especially earnings levels and unemployment. That could result in a greater proportion of social housing compared to open market houses and regardless of this, building design may have to change. Public tastes in the second hand market are likely to alter with more spacious properties, larger gardens and rural locations looking far more attractive than flats in a major city with a very small balcony.
For construction and building firms more generally then there are many other business issues to consider including access to finance, having sufficient skilled workers and complying with government regulation especially compliance with Covid-19 social distancing and working practice requirements. This is likely to push up the cost of construction in the short-term which will have implications for existing contractual agreements. In the longer term demand for services and pricing is likely to be driven by the wider property market and how the world turns out over the next year or two as we learn to live with coronavirus.