Property and the Spring Statement: Is anything going to change?
Labour faces some tough choices with its Spring Statement: after increasing business taxes and public spending last autumn, the government now has to grapple with unhappy companies and a maxed-out credit card.
The last budget was a mixed bag for the property market: there was widespread concern amongst landlords that the government would hike up capital gains tax.
An increase of four per cent was, by and large, accepted by the market.
There were also loud calls for an extension to first-time buyer (FTB) relief. The government ended up cutting stamp duty relief for FTBs, and increasing stamp duty on second homes.
So, can we expect any more changes in the property sector this spring?
A stamp duty extension?
In last October’s budget, the government upped stamp duty for second homes from three to five per cent with immediate effect and removed first-time buyer relief for the levy.
There is now a “massive log-jam” of movers whose home purchases have stalled as hundreds of thousands of buyers clog the process.
Rightmove’s stamp duty report has identified an estimated 74,000 moves, which includes 25,000 first-time buyers, that will just miss the March 31 deadline and complete in April.
“We’re hearing from brokers that transactions started as early as January may not complete in time.
“We urge the government to extend the deadline to support the estimated 75,000 homebuyers at risk of missing out and facing higher tax bills,” Tony Hall, Head of Business Development at Saffron for Intermediaries, said.
Rightmove has also called for the deadline to be extended, along with a host of estate agents.
Housing affordability
The lack of affordable housing in the UK has been a political hot topic for years. The government has already made significant strides towards improving long-term affordability, including plans to simply the planning system as well as investments in affordable housing.
However, experts have said there’s more the government could do in its spring statement.
“Greater recognition of rental payment history as evidence of affordability would help more buyers get on the ladder,” Hall said, as well as allowing lenders to set their own boundaries on loans.
Paul Rickard, Chief Executive, Pocket Living, said: “If the Government is to succeed in delivering its ambitious target of 1.5m new homes by the end of this parliament, then planning reform is clearly not enough… That is why the most radical action is needed now”.
Rickard suggested measures to boost the small and medium companies within housebuilding sector, as well as further investment in construction skills.
Unintended consequences?
It’s also possible that announcements in the Spring Statement may have the unintended consequence of reducing affordability.
If the government makes decisions which encourage the Bank of England to hold interest rates, mortgages – a key barrier to affordability – may remain high.
“The Spring Statement in the UK may contain some tax and spending decisions which influence the interest rate committee one way or another,” Laith Khalaf, head of investment analysis at AJ Bell, said.
“In April we will see the chancellor’s national insurance and minimum wage hikes come into effect which could also serve to increase prices for consumers, thereby making the Bank of England wary of cutting rates.”
Ultimately, however, it’s unlikely that the Chancellor Rachel Reeves will be able to make too many waves with Wednesday’s budget.
“Given the number of changes the Chancellor made in the Autumn Statement at the end of 2024, we’re not expecting a huge number of tax-specific announcements from the upcoming statement,” Tom Shave, President of Europe and Asia-Pacific (EAP) division at Ryan said.
“It will likely to be more of an economic update focused on spending cuts rather than tax changes,” he added.