Chancellor Rachel Reeves made her highly anticipated Budget announcement yesterday, in what was the Labour party’s first Budget in 15 years. We look at the initial reactions from the property market.
Yesterday’s speech revealed a huge increase in spending, alongside a hefty hike in taxes, in what was a historic Budget by all accounts. While it consists of the biggest tax-raising Budget since 1993, it also included major investment in a bid to “get Britain growing”.
For the UK property market, the rumour mill had been churning profusely over recent weeks as to what tax hikes awaited it, as well as whether there would be any support for the rental market. Under the Tories, landlords had seen tax hikes in the form of both stamp duty and changes to mortgage interest relief, and many were calling for a step-change to boost the sector.
In the end, the Budget was a mixed bag for the property market. Reeves solidified her promise to invest in housebuilding, with a £5bn investment in housing in 2025/2026 and a renewed focus on energy efficiency in the housing market. There was also a stamp duty hike, however, for second home owners and investors, meaning the surcharge is now 5% (up from 3%).
Capital gains tax for property disposals stayed the same, causing a sigh of relief from many in the property market, while the inheritance tax threshold has now been frozen until 2030 (extended by two years from the initial freeze brought in by the Tories). This will effectively mean a greater number of people will face a bill – but there are ways around it for property investors.
Comments from the property market
Here we look at some of the first comments emerging from the UK property market, with some welcoming parts of yesterday’s announcement while others are disappointed at how some of the changes could impact the property market.
Nicky Stevenson, Managing Director at national estate agent group Fine & Country, said: “Today’s budget gave a mixed outlook for the property market, with second-home owners feeling the full force of these tax rises.
“We had hoped to avoid increases in property-related taxes that could slow market growth. With the upcoming rise in capital gains tax, landlords of investment properties will now face critical decisions about whether to sell. Fortunately, this increase does not extend to residential properties, which provides some relief for homeowners.
“Labour’s announcement also brings another significant blow to homeowners with multiple properties, as the stamp duty charge for second homes is set to rise from 3% to 5% from tomorrow. This increase is bound to reshape decision-making for current and prospective sellers in this bracket.
“These tax changes could potentially lead to a slowdown in property sales as owners now have to weigh up the cost of selling against reduced returns.
“Meanwhile, Labour’s abolition of the non-dom tax regime will bring further changes to the property market. This move will end the longstanding tax benefit for UK residents with permanent homes outside of the country who currently avoid tax on their foreign income.
“The removal of this regime could reduce demand for high-end properties often favoured by foreign investors. Reduced interest from wealthy international buyers may lead to a softening in prices at the luxury end of the market.
“Today’s budget has spared first-time buyers, however, with the government explicitly focusing on wealthier, older demographics. This approach aims to shield younger buyers and those entering the property market from further financial hurdles, especially given the persistent pressures of high housing costs and elevated mortgage rates.”
Paresh Raja, CEO of Market Financial Solutions, said: “The Government had warned of tax rises to fill the black hole in public finances, so there was apprehension across the property and finance sectors heading into today’s Budget. Unlike previous budgets – think Kwarteng’s mini-budget – Reeves opted for a more measured approach, refraining from pulling any proverbial rabbits out of the hat – although the increase to the Stamp Duty surcharge on second homes was unexpected. This approach should calm the lending and property markets, easing some of the uncertainty that has lingered in the lead-up to this announcement.
“In general, the clarity offered today is certainly welcome, though we’ll need to see how these policies translate practically. While certain tax reforms may require careful consideration from investors and brokers alike, I anticipate the market will soon shift back to ‘business as usual’ – particularly as some of the tax increases were less substantial than many were expecting. This is promising, as the property sector has shown great resilience in recent months amid an improving economic outlook. Today’s steady fiscal approach should help maintain that positive momentum, provided that investors are able to navigate the more unexpected changes that have been made with confidence.
“Indeed, some of today’s announcements will undoubtedly put a slight dampener on investors’ moods. As such, it’s up to lenders and brokers to work together to provide financial products that can help them navigate the evolving market conditions with confidence in the months ahead. The property investment landscape may have shifted, but through collaboration and innovation, there’s no reason why it can’t continue to thrive in the aftermath of today’s announcements.”
Nigel Bishop of Recoco Property Search says: “The decision to not raise Capital Gains Tax on residential property will have an immediate impact on the second home market as owners are now less inclined to sell their property. This could present new challenges for house hunters who were hoping for the increase in taxes to trigger a selling frenzy that would have created a larger pool of properties to choose from. As this is now not the case, previously hesitant buyers will be motivated to finally start their property search to avoid missing out.”
Adam Jennings, head of lettings at estate agency Chestertons, adds: “With no changes to Capital Gains Tax, we expect fewer landlords deciding to sell their property. Despite this, demand for rental properties continues to outstrip supply which means asking rents are unlikely to see a downward adjustment.”
Matt Thompson, head of sales at Chestertons, says: “The majority of first-time buyers will label the Budget a missed opportunity as there was hope that the Chancellor would retain the £425,000 Stamp Duty threshold for first-time buyers. There is no doubt that it will become challenging for many aspiring homeowners to get on the property ladder now that Stamp Duty rates return to previous levels; particularly in London where property prices are above the UK average.”
