UK - UK government proposals to temporarily scrap rate for empty properties with an estimated value of less than £250,000 (€299,110) are nothing more than empty spin and do little to help the market, according to property experts.

Alistair Darling, chancellor of the Exchequer, revealed in his pre-budget speech earlier this week only empty properties with an estimated annual rental income of under £15,000 would be exempt from paying business rates for fiscal year 2009-2010.

According to Darling, this exemption covers an estimated 70% of all empty properties, but real experts say this figure also included things that are not considered properties, such as cash machines and advertising hoardings.

Moreover, the cost of the tax cut is £185m - only 20% of the £1bn the government hopes to raise through empty property rates, said Liz Peace, chief executive of the British Property Federation.

"Rate relief for signs and ATMs will be of little solace to struggling businesses. You can't set up an office on an advertising hoarding after all. This is spin to help Labour keep votes, rather than help businesses keep going," said Peace.

She continued: "It will do nothing to avert demolitions, nothing to save jobs and nothing to encourage the kind of investment we need in our communities if we are to come through recession. Only the smallest properties will be saved in what can only be described as a very cynical and short-term response to a massive, long-term burden on business," she added.

The BPF, which has led a year-long strong campaign for the scrapping of empty rates tax on properties with the support of over 125 MPs and businesses, believes the change will not help mainstream properties in London and the South East or industrial properties in the North East, which on average have a rateable values of £40,000 a year.

"The chancellor said this would help 70% of properties, but buried in the small print is the revelation that this will only give back around £185m of the predicted £1bn hit to business. And the change is neither retrospective nor immediate. The smallest firms will somehow have to struggle on until next April," she added.

The BPF warned pension funds with investments in portfolios of commercial property would also suffer, affecting thousands of savers.

The government's move is also likely to affect larger developers who are in charge of renovating and regenerating communities.

Peter Damesick, head of research at CB Richard Ellis, said: "The disfiguring blight of empty sites in towns and cities across the country will continue to spread as property owners act to avoid empty rates. Regeneration prospects will remain stifled by the deterrent to development that results from the risk of new properties suffering cost penalties while finding occupiers."

Speaking at Schroders' Media Roundtable, William Hill, head of property at Schroders also dismissed the impact of the temporary rate relief: "The Government has not exactly made it easy for people owning real estate where tenants are disappearing and where you have voids, because although the pre-budget gave small amounts of relief on empty rates for very, very small properties it has not made any change to mainstream assets."

The chancellor also announced the government would legislate the Finance Bill 2009 to prevent businesses who are not property investment companies from participating in the UK Real Estate Investment Trust (REIT) regime.

According to advisory firm PricewaterhouseCoopers LLP, the chancellor's decision to stop businesses with insufficient rental income from third party tenants from converting to Real Estate Investment Trusts (REITs) will limit expansion of the scheme and discourage institutional investors from investing in the housing market.

Rosalind Rowe, real estate tax partner at PricewaterhouseCoopers LLP, said: "The government's approach which, in future, will extend the income tests to the activity of a wider economic group, will stop residential landlords from converting. They need income from ‘turning' part of their portfolio to boost returns to acceptable levels."

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