In a few days’ time Labour Chancellor Rachel Reeves will deliver her first Autumn
Budget statement since the party came into power earlier this year, and experts
predict that the UK property market will be one of the sectors to see some big
changes.
According to property website Rightmove, buyer ‘jitters’ ahead of the budget have
slowed down a typical autumn bounce in house prices. The average asking price for
a UK home rose 0.3% month on month to £371,958 in October, a smaller increase
than expected at a time of year when the market typically picks up.
Below we break down which aspects of the market might be discussed.
Energy efficiency
As building standards in the UK change to include measures aimed at reducing its
carbon footprint, energy secretary Ed Miliband recently confirmed Labour’s plans to
tighten the rules, meaning that it is something for property investors to bear in mind
for any existing or future property investments.
For landlords, investing in new-build property is one of the most popular and
potentially cost-effective ways of ensuring compliance with any upcoming energy
efficiency standard changes.
Falling inflation
Last week the Office for National Statistics revealed that inflation had fallen to 1.7%,
its lowest level in three years, and well below the government’s 2% target. This
means that property owners will likely benefit from an interest rate cut and a
subsequent mortgage rate cut.
According to Rightmove, the market is likely to be supported by lower mortgage
costs after the budget, and the average five-year fixed mortgage rate was 4.6% last
week, down from 6.11% at the peak in mid-2023.
Buyer confidence may also get a boost from interest rate cuts by the Bank of
England. Experts currently predict that the rate-setters are likely to reduce borrowing
costs for a second time next month, and that there is a chance of another drop in
December.
Capital gains tax
Labour has previously said that it won’t implement changes to this tax, which is
placed on the gain that arises when you sell an asset, but rumours have been
circulating in recent days that this could change.
Sir Keir Starmer has already ruled out charging capital gains on someone’s first
home, which is exempt under the current system, but did not extend that promise to
any rise.
An increase in the rate, or a cut in the current £3,000 threshold at which it becomes
due, would affect second homeowners, landlords, business owners, shareholders
and those selling valuable assets.
The Chancellor could either increase the main rate of capital gains tax, which is
typically either 10% or 20%, or expand the base of assets liable for the levy.
The housing shortage
To address the UK market’s growing need for homes, the Labour party has vowed to
build 1.5 million houses over the next five years, a rate of house building last seen in
the 1960s.
Labour has reinstated minimum housebuilding goals for the UK, but on a much more
targeted basis, in a bid to give a boost to the areas with the highest need, and this
could have the most positive impact on the North and the Midlands.
In recent years the strongest returns for landlords and property investors has been
found in the property markets of these regions, so a regeneration boost and
additional housing could see even greater gains in these locations. The budget is
likely to include more information related to this.
Stamp duty land tax
According to the Institute for Fiscal Studies (IFS), stamp duty ‘has a claim to be the
most economically damaging tax in the UK. It makes both housing and labour
markets less efficient, as a drag on growth.’
Currently any property sold for £250,000 or less is exempt, while the next £675,000
is subjected to a 5% levy, which reaches a peak of 12% for the most expensive
homes.
Stamp duty currently raises the sizeable sum of £13 billion a year and an increase
worth around £1.5 billion is already scheduled for April 2025, so it is unlikely that any
other changes will be announced in this week’s budget.
One likely announcement in the budget however is a 1% increase in the stamp duty
surcharge for overseas buyers. This would make buying UK properties pricier for
foreign investors but it could mean less competition in the market for UK buyers.
Tailor my Property
Consulting with an industry professional is vital to ensure you move in the right
direction for your personal financial and property goals, whether it be renting, buying
or selling property in the UK, particularly with the potential market changes arising
from the Autumn budget.
Tailor my Property’s expert network of property, finance and investment professionals
will be able to assist you with assessing the market and moving ahead with peace of
mind and clarity.
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