What the Autumn Budget Means for the UK Housing Market

Chancellor Rachel Reeves has just unveiled Labour’s first Budget in 14 years, marking a critical moment for the UK’s housing market and broader economy. Taking the reins amidst high living costs, soaring energy bills, and an ever-tightening mortgage squeeze, Reeves has outlined a bold approach to reshape the market. But what does this mean for homeowners, renters, and those looking to buy?

A Snapshot of the Budget’s Impact on Housing

The housing market is at the heart of the new Budget, with the government pledging £5 billion to revamp the housing landscape, aiming to boost affordable housing and keep the dream of homeownership alive. Key projects include £500 million earmarked for the Affordable Homes Programme, which will see 2,000 new homes spring up in areas like Liverpool Central Docks. And for renters, there’s a further £25 million set aside to deliver energy-efficient homes, pushing to ensure that affordability doesn’t come at the cost of sustainability.

This surge in investment signals a commitment to housing that goes beyond short-term fixes. I must admit, it’s refreshing to see such a forward-looking approach—building new homes is essential, but addressing affordability and sustainability is the game-changer.

Stamp Duty: Changes on the Horizon

Perhaps the most immediate concern for buyers and property investors is the adjustment to stamp duty rates, particularly for additional properties. As of October 31, 2024, anyone purchasing a second home will see the stamp duty surcharge jump from 3% to 5%. This is a move likely to give many prospective landlords pause, as it adds a considerable amount—sometimes over £7,000—on top of the usual purchase costs.

For first-time buyers and home movers, however, there’s a reprieve—for now. The current elevated stamp duty thresholds will remain until March 2025, after which they’ll drop to pre-pandemic levels. When the threshold decreases, first-time buyers purchasing a property over £300,000 will face a 5% stamp duty on a portion of the price. Home movers, too, will see the threshold fall back to £125,000, meaning many buyers could find themselves paying an extra £2,500 or more come April 2025.

One can’t help but wonder if these changes might spur a frenzy of activity in the coming months. It takes roughly 152 days to close a property transaction, so anyone keen to beat the increase will need to get moving now!

Find out more about the current stamp duty rates with our Stamp Duty Calculator.

Capital Gains Tax Remains Unchanged for Landlords

There was widespread anticipation that Capital Gains Tax (CGT) might rise, especially given the increased chatter around landlords selling off properties due to tax pressures and rising mortgage rates. Surprisingly, CGT rates on residential property remain at 18% for lower-rate taxpayers and 24% for higher-rate ones. This might come as a relief to many landlords, though the fundamental issue—limited housing supply in the private rental market—still persists.

Addressing Housing Supply and Affordable Housing

One of the Budget’s most notable elements is the focus on long-term housing supply. Reeves’ pledge of £500 million to build 33,000 affordable homes is a positive step, though the issue is undeniably complex. Reeves’ proposal includes reducing Right to Buy discounts to keep more social housing within the sector, a smart move given the steady depletion of council housing stock.

There’s also a £1 billion commitment to remove dangerous cladding on high-rise buildings, an essential action following the Grenfell tragedy in 2017. It’s reassuring to see the government taking steps to make sure homes are not only affordable but safe.

Richard Donnell, Executive Director of Research, rightly points out that the lack of supply is one of the most pressing issues in today’s market. It’s not just about building more homes; it’s about creating the right mix of properties to meet different needs. To me, that’s the real crux of the matter—a housing market that truly works for everyone requires more than just a few large-scale projects; it needs a balanced and sustained approach.

The Road Ahead: Challenges and Opportunities

This Autumn Budget reflects a deep awareness of the challenges facing the UK’s housing market, from stamp duty and affordable housing to landlord tax burdens and social housing supply. But as with any sweeping policy, the proof will be in the implementation. For those looking to buy or sell in the coming months, staying informed and acting sooner rather than later could make a substantial difference in the face of these upcoming tax changes.

In all, this Budget gives us a glimpse of a housing market that might, just might, become more accessible and balanced in the years ahead. We’ll see if these ambitious promises lead to the sustainable growth our housing market so desperately needs.