» Stamp duty rise concerns:
WALES’ leading commercial property developer, Paul McCarthy, said Wales will be seen as “closed and not open for business” after the Welsh Government confirmed it is increasing stamp duty on the biggest commercial property deals.
Mr McCarthy, who as chief executive of Cardiff-based property company Rightacres Property is behind the one million sq ft Central Square regeneration scheme in the centre of Cardiff, said the increase in stamp duty by 1% on commercial property transactions with a value of more than £1m, would only deter investment into Wales.
The rise, scheduled to come into effect next spring, was announced by Finance Secretary Mark Drakeford while outlining a new Welsh Government budget last week.
Following his announcement a number of Wales’ leading firms of chartered surveyors, including Fletcher Morgan and Cushman & Wakefield expressed their concerns that it would deter investment into Wales’ commercial property market.
They said there was no consultation with the sector prior to the Welsh Government’s decision to increase the now devolved tax from 5% to 6%.
And now Mr McCarthy, who also plans in a joint venture with SA Brain & Co to develop up to three million sq ft of new office, residential and leisure south of Cardiff train station with the Central Quay scheme, has voiced his concerns too.
Mr McCarthy said: “The Welsh Government’s slogan ‘Wales is open for business’ should now read ‘Wales is closed for business’.
“In accepting devolved powers for our tax system, the Welsh Government had the opportunity to make Wales an even more attractive place in which to live and work.
“By increasing stamp duty as proposed, they will do the absolute opposite and drive investors, businesses and potential commuters back across the bridge.
“What possible sense does it make to make Wales a more expensive place to invest?
“The bridge tolls have been lifted but by increasing this tax they will effectively negate a huge percentage of the economic benefits this might have generated.”
A leading chartered surveyor, who didn’t want to be named, said: “A 1% rise could deter developers from building new and much needed office space, as well as investing in refurbishing existing properties.”
He added: “When a developer, who takes the risk, say, in building a new speculative office scheme, comes to sell the investment on – which then helps to finance the next project – a big pension fund is likely to negotiate the price down to offset the rise in stamp duty.
“Margins are already tight and this additional cost could deter at source bringing new office schemes to market, which are required to attract new jobs and investment into Wales.
“And if that wasn’t bad enough, the tax, by deterring new developments, could result in an actual reduction in tax receipts on £1m plus property deals that the Welsh Government receives.”
While the number of deals on commercial properties with a value of more than £1m are relatively small (at around 5% of the 6,000 non residential transactions in Wales a year), they account for a significant percentage of the total stamp duty tax take. Major recent investments include £32m for the 3 and 4 Callaghan Square office building in the centre of Cardiff – which based on the new 6% rate would have meant an additional £320,000 in stamp duty for the acquiring German investor.
A spokesperson for the Welsh Government said before Mr Carthy’s comments: “These changes are designed to make it easier to do business in Wales and ensure we maintain our attractiveness to commercial enterprises.
“As a result of these new tax rates, more than 90% of non residential transactions in Wales will pay the same or less tax and we expect the changes to lead to an increase in commercial activity across Wales.”