What does the Autumn budget mean for the property market?

What does the Autumn budget mean for the property market?

After months of speculation, Chancellor Rachel Reeves yesterday delivered Labour’s first fiscal statement to Parliament – their first in 14 years.

Inevitably, opinions are now widely circulating as to how exactly these outlined changes will impact the property market, which until this point, has been widely considered to be ‘ticking along nicely.’

On first impressions, the potential ‘threats’ that exist within this budget to the housing sector, seem not to be as dramatic as first feared.

With activity levels in the market having been strengthening in response to softening mortgage rates, and a cut in the base rate, there was a very real fear, in the lead up to Wednesday’s announcement, that progress might stall or (even worse) reverse.

Fortunately, however, this does not appear to be the case.

Instead, industry experts are reasonably optimistic that recent trends witnessed in terms of home-mover confidence and motivation will continue for the short-term foreseeable, at least.

That said, it would be unrealistic to say that the newly-introduced stamp duty surcharge on second homes, nor the increase in Capital Gains Tax (from 10% to 18% for lower rate tax payers, and 20 to 24% for higher rate taxpayers) is not without its potential repercussions.

As an offshoot, investment demand will undoubtedly be more restricted going forward, and the fact that former rental properties comprise 12.5% of homes currently for sale is an early indicator of this trend.

Understandably, for Landlords and Brokers in particular, this news has not been especially welcomed, but Reeves defends the move on the basis that the UK still boasts the lowest capital gains tax rate of any G7 economy.

Generally speaking, the remainder of the property-specific changes in Wednesday’s budget are not as likely to alter the volume of buyer activity, as they are the pattern.

For example, the decision not to extend the first-time buyer stamp duty threshold (which will revert to £300,000 in April) has created somewhat of a cliff-edge deadline, meaning first-time buyers will simply bring their plans forward, and a false ‘lull’ will be created in the aftermath next Spring.

Not all of the other pledges, however, are quite so debatable in terms of their potential advantages to housing market conditions – a vital indicator of the economy’s health.

For example, the continuation of the mortgage guarantee scheme at a rate of 95, can only be a good thing in terms of market growth. 

Also, the Government has laid out clear-cut plans to support small house-builders, and has committed to growing housing supply, and specifically, to rectifying England’s ‘depleted’ social housing supply.

They are seemingly adopting a multi-pronged approach to this particular goal, which includes reducing ‘right to buy’ discounts (so council homes remain within the sector) and also incentivising councils to build new social housing (of the £5 billion that has been pledged to deliver Labour’s housing plan, £500 million has been allocated to the Affordable Homes Programme.)

In summary, it’s open to debate how keenly the impact of these changes will be felt by the average home-mover, going forward. 

However, with all the pre-budget speculation and uncertainty now out of the equation, clarity does at least prevail.

In addition, most of the markers for market health are still currently pointing in the right direction, and with an interest rate reduction forecast, the fact that the investment landscape has altered considerably, will likely do little to take away from the overarching appeal (and often need) to move home in 2025.

For more details on the Maidenhead property market please contact Braxton on 01628 674 234 or email property@braxtons.co.uk