I'VE referred before to the Welsh Assembly setting up a panel to investigate the impact of empty rates on the Welsh economy and asked: "Why not England?"
The impact was to take out an estimated £50m from the local economy, of which about £500,000 a year is from local councils in the North East region.
So I was pleased to see in the Estates Gazette this week that Julian Sturdy, MP for York Outer, has been asked by the Chancellor to form a working party to produce proposals for how empty rates could be changed.
The Royal Institution of Chartered Surveyors (Rics) has been reporting for some time about the impact of empty property rates and the surveyors in the North East have put forward their views.
Empty rates payment increased about six years ago when the property market was booming. The Treasury’s argument for the introduction of a more onerous payment by owners of empty property was that it was to stop landlords keeping property empty.
I reported to government at the time that this was an erroneous argument. Demand was beginning to fall in the North East and any landlord was pleased to see the property let. I claimed that the charge of empty property rates was just another tax.
The recession then bit and no landlord in their right mind would voluntarily keep property empty. In 2009, a survey carried out by Rics and Lambert Smith Hampton concluded that empty property rates were encouraging demolition of perfectly sound properties and discouraging investment in new property.
The decision of the Chancellor to form a working party is welcome. But let’s look carefully at what we need as a region to help us move toward economic growth.
There is no doubt that the imposition of the tax encourages landlords to let the empty property with little delay. Incentives to attract tenants have increased and rents have softened. I doubt if the impact would have been as much had the empty property rate not existed. But I consider this to be a short-term measure to encourage lower property costs for occupiers who in turn can be more competitive in their business.
I have previously forecast that at the present rate of occupancy, the North East is likely to run out of new industrial units within about nine to 12 months. Similarly, for new office space in Newcastle city centre, we have about 18 months supply remaining.
No new development is occurring without some public sector support. At present this is in the form of loans (since the banks are not lending to carry out development). If we are to attract investors into the development sector and to kick-start the construction sector we need to give confidence that development is viable and is without a public sector ‘prop’.
The removal of empty property rates for a period for new development would be helpful to create this confidence and encourage such investment. For how long? is the difficult question.
We need to keep up pressure to encourage the availability of space at a competitive rate, but we also need to encourage rental growth to achieve viability for development and to encourage investment.
The working party has a difficult balance to find to ensure that this region, as with others around England, can achieve the economic growth and job creation most desperately needed.
:: Kevan Carrick is a partner at JK Property Consultants LLP and a policy spokesman for Rics North East
