How the Budget will affect the property market

Posted on 15 March 2024
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How the Budget will affect the property market

The last Budget before any General Election is, of course, a chance for the serving Government to impress the electorate and secure their vote. As such, the emphasis is normally on making people feel like they’ve got a little bit more money to spend. That’s why we’re answering how the Budget will affect the property market.

The Budget is also a chance to reform processes to stimulate the economy, boost public faith in the leadership, change how the Treasury generates income and maximise the spending power of certain departments.  

Bricks and mortar have often been at the heart of past Budgets – how we buy, sell, invest and how much it costs to do so. The property industry was full of reform rumours, with experts predicting major changes. So, did the 2024 Spring Budget live up to the hype? 

How the Budget will affect the property market:  Stamp duty 

Commentators were convinced the Chancellor would tinker with stamp duty to make it more favourable to move home. The majority thought the focus would be on ‘last-time buyers’ – a fairly new name given to empty nesters selling large family homes to purchase smaller properties. It was thought a lower-cost, last-time buyer stamp duty bracket was going to be introduced, designed to stimulate sales and free bigger houses for families. 

Instead, the Chancellor left stamp duty thresholds unchanged, failed to introduce new initiatives and chose to scrap Multiple Dwellings Relief (MDR) from 1st June 2024. MDR is a tax perk that sees a reduced stamp duty bill applied when more than one freehold or leasehold property is bought in a single or linked transaction. 

MDR was introduced to encourage property investment – especially from landlords at new build developments. Now, the reverse could be true. With no incentive to make multiple purchases, portfolio landlords could pause their investment activity, which would detrimentally affect the supply of new rentals and push rental values higher as more tenants chase fewer properties. 

How the Budget will affect the property market: Capital Gains Tax 

The industry has been awash with talk of how the Government could halt the exodus of private landlords from the buy-to-let market but one of the headline Budget announcements appears to give them even more incentive to leave. 

The higher rate of Capital Gains Tax – a levy paid on any profit made when selling an additional property, such as a buy-to-let – is reducing from 28% to 24%. Essentially, this makes it cheaper for a landlord to dispose of a property asset. 

Figures from 2023 showed that confidence among landlords was low and with cheaper costs attached to selling a buy-to-let, the Chancellor’s move may encourage wavering property investors to quit. As with the scrapping of MDR, the supply of rental properties could be further compromised. 

How the Budget will affect the property market: Furnished holiday lettings regime 

The rise of the staycation and onerous tax burden of running a long-term rental saw thousands of landlords pivot to the short-term holiday market but one of their major tax perks is set to be abolished. 

The Chancellor is scrapping the furnished holiday lettings (FHL) regime from April 2025. Owners have just a year to benefit from the ability to offset full mortgage interest relief, enjoy special capital allowances for furniture and pay a lower rate of Capital Gains Tax. 

Holiday let owners were quick to argue the move will force many of them out of business, as they would be paying the same tax as landlords running long-term rentals do. An added complication comes in the form of some councils charging full, double or even triple-rate council tax on holiday homes. 

A shortage of holiday accommodation is also something owners feel would jeopardise local tourism economies and livelihoods. The Government, however, wants to address the issue of ‘local homes for sale to local people’, and envisages holiday lets that are put up for sale being purchased by local owner occupiers.  

National Insurance 

While it wasn’t a direct property announcement, estate and letting agents have welcomed the cut to National Insurance Contributions (NICs) as it boosts financial sentiment and may give more people the confidence to move home. 

It’s reported the average worker may be £450 richer as a result, with the main rate of Class 1 employee NICs reducing by 2p from 10% to 8% from 6 April 2024. The main rate of Class 4 NICs, paid by the self-employed, will be reduced by 3p from 9% to 6% from the same date. 

How the Budget will affect the property market: High income Child Benefit charge 

The change to Child Benefit should have a similar effect on the property market as the cut to NICs. From 6thApril 2024, the threshold for the High Income Child Benefit Charge will rise from £50,000 to £60,000, while the tapered charge will be between £60,000 and £80,000. As a result, thousands more parents will qualify for the full or a tapered rate on Child Benefit – adding to their monthly income.  

How the Budget will affect the property market: Nom-dom tax regime 

The way non-UK domiciled (nom-doms) are taxed is changing from April 2025, switching to a residence-based regime that will see nom-doms not pay taxes on non-UK assets for the first four years. The question on agents’ lips was ‘will the change put off international property investors and buyers?’. The answer is still being fully formed and there will be a transitional change that skews the true effects but the general consensus is a mild reform will not put off overseas investment in UK property. 

How the Budget will affect the property market: Levelling up 

The current Government has been obsessed with what it calls ‘levelling up’ – bringing other areas outside the capital in line with London in terms of investment, infrastructure and opportunities. That’s why there were raised eyebrows when the Chancellor declared that Canary Wharf and Barking Riverside would be in receipt of £242 million in order to build up to 8,000 new homes and encourage life science firms.  

An additional £400m in fresh investment to extend the 10-year Long-Term Plan will result in more towns undergoing regeneration projects, including Eastbourne, Darlington, Canvey Island, Peterhead, Harlow, Thetford and Runcorn. A further £24m will go to two shovel-ready regeneration projects in Bradford and Ashfield. 

The resulting new homes will go some way to easing a shortage of properties but the split between social housing, property for private sale and  Build to Rent remains unclear at this early stage.  

If the Budget has affected your property plans, Viewber may well be able to ameliorate some of those financial losses by helping with efficiencies . Our services cover several marketing, sales, lettings and tenancy management aspects, so think about including Viewber in your reactive planning. 

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