The levying of rates on empty buildings is putting regeneration projects in jeopardy and has already stifled speculative development activity according to a trio of the region’s big hitters in the property sector.

The tax, introduced in April this year, means that the owners of empty property are now hit with full rates whereas previously, offices and shops enjoyed 50 per cent relief while industrial property was completely exempt.

According to Chris White, a director and head of the planning and regeneration team at the Birmingham office of property consultants CB Richard Ellis, said the levy is adding to the cost of projects that are, in many cases, already economically marginal.

He said: “The rates are deterring private developers from taking on projects which already have a marginal return, in what are already tough times for the property development industry.”

Another consequence of the tax is that developers are deliberately demolishing existing buildings in a bid to avoid paying it.

Mr White said: “Regeneration projects will be shelved and usable buildings will be demolished. This is the consequence of the empty rates tax, but surely not its aim?”

Julian Shellard, chairman of regional business at CBRE, said: “Empty rates are a disincentive to new supply as they increase the risks of higher costs on vacant property.

Such risks will be greater in places and periods when demand is more uncertain. Empty rates are particularly damaging for development prospects in regeneration areas. Empty rates are reducing the supply of older, cheaper property by encouraging premature demolition.  At the same time, by helping deter development, they will increase the potential for rents to rise when demand recovers.”

Mark Swallow, head of Knight Frank’s Birmingham office, said: “Developers, suffering from increased finance costs and longer disposal periods, cannot justify paying full rates on vacant properties.”