“Impact of the Recent Budget on the Housing Market: Key Changes and Financial Pressures”

Posted on Monday, 4 November, 2024

The recent Budget has had a notable impact on the housing market, particularly for landlords and potential homebuyers. Here are some key changes and their effects:

Stamp Duty Increase on Buy-to-Let and Second Homes

The government has raised the Stamp Duty on buy-to-let and second homes by 2%, from 3% to 5%. This move is expected to increase costs for landlords, potentially discouraging new investment in rental properties. Experts believe this could tighten rental supply, potentially driving up rents and limiting options for tenants.

No New Reliefs for First-Time Buyers

Unlike previous years, this Budget did not include new reliefs or support for first-time buyers. First-time buyers may face higher costs, as there were no adjustments to Stamp Duty thresholds or incentives to reduce purchase costs. Additionally, with rising mortgage rates, affordability remains challenging, especially in high-demand areas.

No Downsizing Incentives for Older Homeowners

Industry leaders had hoped for targeted Stamp Duty reforms to encourage older homeowners to downsize, which would increase the availability of larger family homes. However, this opportunity was missed, which could limit housing market fluidity and availability of family-sized properties.

Rental Market Pressures

With increased Stamp Duty and no substantial incentives for expanding rental portfolios, the rental market is expected to experience more strain. This could lead to fewer rental properties available, especially if landlords opt to sell their properties instead of facing higher costs. This trend would likely increase rental prices, impacting tenants across the country.

Capital Gains Tax (CGT) Stability

The decision to keep CGT unchanged for landlords and property investors was seen as a small positive for those already holding properties. By avoiding additional taxes on property sales, the government has reduced the risk of a large sell-off in the rental market, which could have exacerbated housing supply issues.

Increased Focus on Housing Supply Goals

Although direct reforms in housebuilding were limited, the government reiterated its commitment to increasing housing supply through targeted funding and planning reforms. However, there is skepticism about whether these goals will be met given previous shortfalls in housing targets.

Environmental Commitments and Lack of EPC Incentives

The government has stayed firm on its net-zero commitments, but no additional incentives were introduced to encourage energy-efficient upgrades or meet Energy Performance Certificate (EPC) targets. For homeowners, this leaves the responsibility and cost of retrofitting properties for energy efficiency primarily on them, with no clear financial support from the government.

In summary, the Budget introduced cost increases for buy-to-let investors without providing substantial reliefs for buyers, potentially leading to increased rent prices, limited supply of rental properties, and ongoing affordability challenges. Experts are urging for more comprehensive housing reforms to address these pressures effectively.