autumn budget uk housing market

Will Thursday’s budget rattle or rally the UK housing market?

Experts are wading in to predict what might emerge from Jeremy Hunt’s autumn budget statement on Thursday, with speculation over what could change in the property sector.

We have already been told that the government will “be asking everyone for sacrifices” when it announces its budget later this week, as the country tries to tackle rising inflation and energy costs – along with a potential recession.

Apparently, prime minister Rishi Sunak would like to close the “£40bn black hole” in the country’s economic situation, and has been open about the fact that this is likely to include tax rises.

Two of the tax changes being speculated upon that could have a direct impact on the UK’s housing market are council tax – which might be raised to bring more money to local councils – and inheritance tax, which could be changed so that it kicks in at a lower level.

However, there has been speculation that the tax-free allowance for capital gains tax (CGT) could be cut in the budget, or that rates could be aligned with income tax. This would mean higher tax bills for property investors or second homeowners when they come to sell.

The effect of changing CGT

If the budget this week were to announce such changes to CGT, which would be likely to take effect in the next financial year from April 2023, this could see a surge of sellers hitting the property market as they try to offload assets before the change comes in.

This could have a knock-on effect on house prices, and Nimesh Shah, of Blick Rothenberg, has come forward to say he believes the government is unlikely to go too far with any CGT changes in the budget.

Shah says: “The annual exemption may be halved to £6,000 or abolished, which would affect landlords selling lower-value properties but I’m not sure they will go as far as to align rates with income tax.

“Landlords have been squeezed hard in recent years and this would annoy their traditional voters without raising a lot of money.”

Shah adds that if any major changes are announced on Thursday with regards to CGT, he believes the government would defer the effects of this for a couple of years.

Budget could see small stamp duty change

While stamp duty was only recently overhauled in September, while Liz Truss was briefly at the helm with Kwasi Kwarteng as chancellor, there are rumours that a further, relatively minor change could be made – and this could be significant for some property investors.

HMRC has been carrying out a consultation on stamp duty land tax (SDLT), seeking opinions on the application of the non-residential rates of SDLT for mixed use property, and on Multiple Dwellings Relief, which is currently available on the purchase of two or more dwellings.

This relief allows the investor to determine the amount of stamp duty they owe based on the average value of the dwellings purchased, rather than their combined value, which can create a huge saving. HMRC has called for a reform on this tax.

While any changes in this regard may not be implemented in the upcoming budget, some believe it could be mentioned.

PRS is ‘lifeblood’ of economy

As the cost of living crisis, inflation and rising interest rates take their toll, it is inevitable that more people will be pushed to rent for longer, and delay their first step onto the property ladder – or even return to renting.

This means the private rented sector (PRS) is likely to be even more in demand, which is already becoming apparent by both rising rents and reports of soaring demand for each rental property. The industry attitude is that the government should therefore be doing all it can to support the sector in its budget.

Savvas Savouri, chief economist at asset manager Toscafund, says: “My guess is the government is preparing the ground for something very onerous that in reality won’t turn out to be as bad as feared.

“Sunak will understand that the private rented sector is the lifeblood of the economy, and you would expect the government to want to incentivise landlords to remain landlords.”

Self-certified Sophisticated Investor

Please read

I declare that I am a self-certified sophisticated investor for the purposes of the restriction on promotion of non-mainstream pooled investments. I understand that this means:

I am a self-certified sophisticated investor because at least one of the following applies:

I accept that the investments to which the promotions will relate may expose me to a significant risk of losing all of the money or other property invested. I am aware that it is open to me seek advice from someone who specialises in advising on non-mainstream pooled investments.

High Net Worth Investor

Please read

I make this statement so that I can receive promotional communications which are exempt from the restriction on promotion of non-mainstream pooled investments. The exemption relates to certified high net worth investors and I declare that I qualify as such because at least one of the following applies to me:

STAY AHEAD OF THE MARKET

Sign up for first access to new developments and exclusive property investment opportunities.

We send limited and targeted emails on new launches and exclusive deals which best fit your areas. We are trusted by over 30,000 active buyers as their source for new stock.

  • New property developments
  • Professional market reports
  • Property deal alerts
  • Development updates
Manchester property investment

FIRST FOR NEWS AND KNOWLEDGE.

Receive trending news straight to your inbox and stay up to date on all of the property market trends and advice.

Established since 2005 we are a leading voice of authority and commentary on the UK property market. Our news is trusted by Apple News & Google News.

  • UK housing market
  • Mortgage & money
  • Buy-to-let landlords
  • Guides & advice

Talk to us

Speak to our UK property experts today:

 

+44 (0) 333 123 0320

Open from 9am-6pm GMT

 

+852 6699 9008

Open from 9am-6pm HKT