The Spring Statement sets out the government’s spending plans and cuts, but what effect could it have on the UK property market?
Chancellor Rachel Reeves made her Spring Statement speech in parliament today, offering an update on public finances as well as an outline of the government’s latest spending plans.
One of the most highly anticipated parts of the announcement was related to welfare cuts, after the Chancellor had already announced benefits spending reductions last week; but overall, there were no ‘big surprises’ in today’s Spring Statement, which instead largely reiterated the plans set out in the Autumn Budget.
Ahead of the Spring Statement, there was some positive news in that inflation (CPI) had eased to 2.8% in February, having risen to 3% in January, which brings it closer to the Bank of England’s 2% target. This could see an interest rate cut in May that gets passed onto mortgage holders.
The overall feeling of the statement was one of “hard choices” and a revisiting of the message that “there are no quick fixes” according to the Chancellor.
When it comes to the property market, the wider economic and political outlook along with general market confidence and sentiment all play a part in its performance, but the Spring Statement – and the more in-depth Autumn Budget – can also have a more specific influence on the sector.
Housebuilding boom
Housing reform was a huge part of Rachel Reeves’ Autumn Budget and Spring Statement announcements, with a continued focus on “getting Britain building” by unlocking the planning system and changing strategies on building.
The government has already published a new planning policy framework, and the Planning and Infrastructure Bill continues to make its way through Parliament.
In the Spring Statement, Reeves revealed that these changes would help the UK build more than 305,000 homes a year by the end of the forecast period, with the Office for Budget Responsibility (OBR) predicting that housebuilding will reach a 40-year high as a result.
“The government’s planning reform measures have led to the biggest positive real GDP effect that the OBR has reflected in its forecast for a policy with no fiscal cost,” Reeves said, in response to the OBR forecasting GDP growth of 0.2% as a result of the reforms – worth around £6.8bn.
“This improvement in the growth outlook reflects only the changes to residential planning,” she said. “The government is going further and faster to drive growth through ambitious supply side reforms, including via increased capital spending, regulatory reform and the Planning and Infrastructure Bill.”
Stamp duty unchanged in Spring Statement
Back in October, it was revealed that stamp duty rates and thresholds would revert back to their previous levels. While some in the industry may have loosely hoped for a reprieve in the Spring Statement, there was no U-turn in today’s announcement, meaning the changes are set to take effect from 1st April.
What this means is that residential buyers will pay stamp duty land tax (SDLT) thresholds on homes priced at £125,001 or more, as opposed to the current £250,000 which was temporarily brought in in 2022. For first-time buyers, the threshold from 1st April will start at £300,000 (rather than the current £425,000).
The move will create a bigger bill for many buyers, although the industry is largely positive that this will not deter housing market activity due to the sheer scale of demand, which continues to surpass supply in many parts of the country.
According to Rachel Springall of Moneyfactscompare, those set to miss the deadline will “need to ensure they have some decent savings” to pay the bill. She also notes: “Mortgages which help borrowers save on the upfront cost of their deal or even offer a generous cashback payment could be more attractive.”
Matt Thompson, head of sales at Chestertons, added: “We have met a lot of first-time buyers who held out hope for the Chancellor to make a U-turn on stamp duty thresholds in today’s Spring Forecast. As this hasn’t been the case, first-time buyers will now have to ensure that their budget can cover the cost increase which means some might compromise on location or type of property.
“Although the rush of first-time buyers that the market has seen earlier this year has slowed down, demand remains strong as mortgage rates are still attractive enough to motivate buyers to get on the property ladder.”
The lending market
Felicity Barnett, Lender Operations Manager, Mortgage Advice Bureau, said: “Today’s announcement that planning reforms will ensure housebuilding reaches a 40-year high, with 1.3m homes predicted to be built over the next five years, is a step in the right direction. Now, our industry must ensure we’re doing everything we can to, as Rachel Reeves highlighted, ‘come within touching distance’ of the 1.5m target.
“In the context of rising rents, house prices, and the cost-of-living, demand for more affordable housing has never been greater – especially in a post Help-to-Buy world. Following these latest announcements, more innovation from lenders is needed.
“Rather than rinsing and repeating old products, we need to apply outside of the box thinking to enact real change. Focus must shift to how we can open up the contracting market, as opposed to increasing share.”
Next steps after Spring Statement
Paresh Raja, CEO of Market Financial Solutions, said of the Spring Statement’s impact on housing: “Overturning outdated parts of government to improve efficiency has been a major focus for Labour since the election, and planning reform was raised again as a key part of this agenda.
“However, the “get Britain building” rhetoric must now translate into tangible action – bringing in new construction workers is a positive step, as the Chancellor had already announced three days ago, but much of today’s speech involved repeating the Autumn Budget’s plans to encourage housebuilding.
“Reforming the planning system is obviously important. However, investors and developers are unlikely to commit to new projects unless they see a strong and growing economy that provides long-term confidence and a return on their investment. The OBR forecasts were a blow in this regard, and the onus must now be on turning the corner to turbo-charge GDP growth.
“House prices are rising, inflation fell in February, and the base rate is expected to come down further this year. These are all positives, highlighting that the property market remains bouyant, and this is important given how significant the sector’s contribution to GDP is.
“In future statements and budgets, we need the Chancellor to focus more energy on supporting homebuyers and borrowers, which will further stimulate growth in the market.”
