A photo from the event

KUWAIT CITY, Dec 2: KPMG Safi Al-Mutawa & Partners and KPMG Advisory WLL, hosted a seminar delivered by JLL-UK , the professional services and investment management company, providing valuable insight into the UK property market and updates on its tax laws. Safi Al Mutawa, the Senior Partner of KPMG Safi Al-Mutawa & Partners welcomed the guests from Kuwait and the United Kingdom to the event Martin Hall, Head of the Kuwait British Business Centre. He briefly highlighted that there are changes taking place globally in legislation and markets and it was key for investor to be alert to those changes to make the right decisions. This event, he said, would provide you an insight both in the UK Real Estate Market as well as key changes in the tax landscape.

Heading the seminar were Tim Barber-Lomax, Senior Research Analyst at JLL UK, and Mike Walker, International Tax Partner KPMG London. Barber-Lomax, who spoke first, walked the attendees through the current positioning of the UK housing market and how it is robust before discussing JLL’s UK market predictions over the next five years. He emphasised that this requires an international perspective, because of London’s importance in the global real estate market. He analysed international factors driving the UK housing market, including the implications of the recent collapse in oil and commodity prices.

UK economic growth could be lower as a result of the problems in China and other emerging countries with broader global contagion also a threat. Meanwhile, the euro’s rumblings have been to a large extent contained. The broader domestic economic story in the UK is incredibly vibrant: Britain has one of the strongest economies in the developed world. Barber-Lomax continued by looking at interest rates in the UK which are at an all-time low. Being able to access very cheap debt has been an important factor supporting housing activity. With inflation running at or close to zero, there is little expectation rates will grow significantly. Barber-Lomax also spoke about market factors, such as stamp duty on higher value properties.

He noted that affordability is a big challenge in the UK — and London in particular — because prices have risen at a much faster rate than incomes. That has created substantial pressure in terms of rental demand, which is unlikely to recede any time soon. At a national level, he added, the drive to support greater values of housing supply continues to be an ongoing conversation in central government. He then outlined JLL’s UK growth forecasts. Rental growth is forecast to be 19.9 per cent from 2016-2020, while house price growth over the same period is anticipated to stand at 22.8 per cent. In terms of new builds in central London — an important story for international investors looking to London — the corresponding figures are 17.6 per cent rental growth, and 17.0 per cent house price growth.

Yields will probably push out modestly over the short term, and upward pressure will be applied to central rents. Ben Stroud, Director and Joint Head of Residential, JLL MENA, spoke next on Canary Wharf — an area that has undergone a huge transformation over the past two decades and is benefitting from ongoing investment. Stroud mentioned that Canary Wharf has moved beyond being just an influential Financial & Business Services (F&BS) location, but also become a residential area within its own right. Stroud outlined that average new building values are now closing in on £1,000 psf with many units particularly on upper floors, achieving well in excess of this value and the area has become the preserve of high-value employees in F&BS.

Importantly, many purchasers and renters in Canary Wharf work elsewhere in Central London, demonstrating that the area has become a desirable residential location in its own right and is no longer strictly reliant on the local employment base. Stroud went on to outline that Canary Wharf is set to benefit from Europe’s largest infrastructure project — Crossrail. Crossrail will dramatically improve accessibility to the City, the West End and London Heathrow Airport, one of the World’s busiest airports. This improved connectivity will make Canary Wharf a more attractive location to live, putting upward pressure on house prices at a faster rate than many other London locations. Zubair Patel, Head of Tax & Corporate Services, highlighted the strength of KPMG in Kuwait in terms of tax and corporate services areas and referred to the lead taken by KPMG in providing International tax services.

He then introduced KPMG Partner from the UK Mike Walker to shed light on the tax aspect surrounding UK Real Estate ownership. Mike Walker, International Tax Partner KPMG London, spoke next on the subject of UK property taxes. He dealt with a number of important aspects in the area, covering property purchases, ongoing ownership and property sales. He highlighted the fact that by 2017, there will have been at least 14 changes to the taxation of property in the UK in the 5 year period beginning 2012 — most of these affecting residential property.

Walker noted that the UK may not be out of line with many other jurisdictions that impose tax on property acquisitions, ownership and sales, but investors are faced with increasing complexity and also choices. Under current UK government proposals, more ‘traditional’ methods of holding UK property, such as offshore companies which are not currently UK assets for estate taxes purposes, may become obsolete from 2017, when such companies become transparent for UK estate taxes. Walker also talked about the annual tax on UK residential properties held in offshore companies plus the tax [capital gains tax] on the profit on the sales of such properties that has applied since April 2013.

This tax has been extended from April 2015 to all non-resident individuals or structures that make a profit on the sale of UK residential properties. And only this month the UK announced an extra 3% tax on purchase [in addition to the current Stamp Duty Land Tax rates] when a UK residential property is bought after April 2016 as second home or bought to rent out. There are therefore some ‘essentials’. Firstly have a property tax ‘health check’ and if necessary seek valuations at appropriate dates so that you know exactly where you stand with any potential taxes. Secondly, consider carefully whether to take any action before April 2017.