What the Budget Means for the UK Property Sector

Despite fears of a major tax raid, the property sector got off relatively lightly in the budget, but without an extension of help to buy the sector could soon see headwinds.  

Rishi Sunak continued his track record as a big spending chancellor with an ambitious budget. As always, all eyes were on what, if anything, it would mean for the property sector. Here are a few highlights. 

  • New housing: multi-year housing settlement of £24bn comprising £11.5bn or affordable housing and £1.8bn on homes for brownfield land. 
  • Cladding: Responding to criticism from home owners that they were being forced to pay for the removal of unsafe cladding he announced a £5bn fund. This will partly be funded through a residential property developers’ tax which is to be levied on developers with profits of more than £25 million at a rate of 4%. 
  • Business rates: He resisted calls to abolish business rates but did announce a series of reforms including more frequent revaluations, every three years starting from 2023 and a new green investment relief to encourage those companies which adopt environmentally friendly technologies. Retail, hospitality and the F&B sector will also get a maximum tax cut of £110,000 for small businesses. This will be worth almost £1.7bn. 
  • Greener homes: There are also measures to make the country’s homes greener. £3.9bn is being allocated to de-carbonise homes. Many sales and lettings agents may get involved in this as minimum EPC standards are brought in firstly for the rental sector with owner occupied homes following later. 

What’s not in it?

However, the budget is almost as notable for all the things which are not in it. 

Firstly, the sector was somewhat relieved that it had been left more or less untouched. Fears of a tax raid on the major players in the property sector never materialised aside from the residential property developer’s tax.

Secondly, there was no extension for the help to buy scheme. This has been a regular feature of past budgets, but there was nothing new here. As things stand, help to buy is scheduled to end in around 18 months. Some builders, such as Bellay, have said they will be scaling back their operations to anticipate for this change. 

What impact will the budget have? 

Overall, then, this was a relatively light-touch budget. Even so there are signs that the market is changing. The pandemic has sparked a boom in property prices. According to Nationwide, the average house price is now more than £250,000. That’s a whopping 9.9% rise from last year. That bonanza, according to the OBR, is likely to come to an end. By 2026, they expect property prices to be rising at a slightly more modest, 3.5%. Rental prices are likely to go up as are mortgage rates, which could make life more difficult for people looking to take their first steps on the housing ladder.

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