2023 rateable value shifts and new UBR
The purpose of each rating revaluation is not to increase the total tax collected, but to rebalance the rateable value pool to reflect shifts in the value of property in different regions and sectors.
A 2023 revaluation will represent a major re-allocation of the tax base, moving away from traditional retail to the logistics and distribution warehousing sectors, where strong growth has been driven through online retail.
England
Our analysis suggests that the total pool in England 's Local List will fall by just 2.5% to £62.2 billion. When combined with the Central List, we forecast a fall of just over 1% in the overall rating pool to £66.6 billion from 2023.
As a result, Avison Young is expecting the UBR in England to increase from 49.9p to 52.5p at the start of the new 2023 rating list.
Wales
In Wales, the rating pool is forecast to fall more steeply by 6.6% to £2.4 billion (including the Central List) and therefore we predict the UBR will increase from 53.5p (assuming the Welsh Government will also freeze the multiplier in 22/23 at 21/22 level) to around 59.6p.
Offices, retail and industrial comprise approximately three-quarters of the total rating pool in England & Wales. We are predicting that the retail sector, which was comfortably the most dominant sector in the 2017 revaluation at £21.5bn, is now third, having dropped in value by 26% to £15.9bn.
Logistics and industrial take top spot increasing their total rateable value pool from £14.6bn to close to £17.9bn. Offices remain broadly static moving from £15.5bn to just over £16bn.
The 2023 revaluation will deliver the long-awaited rebalancing of the tax base, to the benefit of traditional retail, yet at a cost for the logistics/distribution sector.
Restricted transactional evidence
The greatest challenge for the 2023 revaluation is valuing at 1st April 2021, during a period of national lockdown when there was considerably less market activity.
At any conventional revaluation, the VOA will typically have around 35,000 rental transactions in the year preceding the AVD. In contrast, in the year ending 31st March 2021, market activity was notably reduced. Avison Young research suggests that rental transactions were down by close to 50%.
RENTAL TRANSACTIONS
Our research suggests that in the most struggling markets, such as traditional retail, the quality of open market evidence was even more limited. We have very specific concerns around secondary markets, where in many cases there is simply no evidence because the markets just stopped transacting.
To further complicate matters, most transactions will have been implicated by temporary action taken by the Government during Covid-19 to protect businesses and jobs. In undertaking this 2023 revaluation, the VOA must be mindful not to elevate values as the economy picks up. Valuations must reflect the actual position which existed at the 1st April 2021, rather than the subsequently improved position in the recovering market. Lettings done today do not reflect the sentiment that existed six months ago.
In addition, there are other matters to be taken into consideration, such as the impact of Brexit. These are more difficult to quantify and are currently being masked by the impact of Covid-19 in the market. We expect the valuation implications of these matters to materialise over the coming months.
All of these factors make for a very challenging valuation exercise in most markets. There will be instances where quality evidence will not be available and, in these cases, the VOA must use common sense to acknowledge the state of the market at the 1st April 2021 valuation date. They must not suggest that no evidence means no rateable value change.