The chancellor Jeremy Hunt has just concluded delivering his 2024 Budget.
He also confirmed that the OBR’s forecast for UK economic growth remains broadly unchanged from what it forecast at last November’s Autumn Statement.
Gross domestic product will be marginally higher this year at 0.8%. In 2027, the OBR projects that the economy will grow by 1.8% compared to November’s prediction of 2%. By 2028, it will drop to 1.7%.
Successive interest rate rises and cost-of-living pressures weighing heavily on household budgets have impacted the UK housing market significantly over the past couple of years, and so there was a lot of interest in today’s Budget announcement from the property industry to see what measures would be introduced to provide a much-needed boost for the sector.
Of note, the chancellor announced that capital gains tax is to be reduced from 28% to 24%, with a view to boosting revenues and increasing property transactions.
He has also announced that the government is scrapping stamp duty relief for people buying more than one dwelling.
Additionally, the chancellor says he will scrap tax breaks which make it more profitable for second home owners to let out their properties to holiday makers rather than to long-term tenants to rent.
Hunt says he will abolish the furnished holiday lettings regime.
Additional highlights:
+ A further 2p cut to National Insurance – following the 2p reduction which was announced in the Autumn Statement.
+ Non-dom tax regime, for UK residents whose permanent home is overseas, to be replaced with new rules from April 2025
+ Full child benefits to be paid to households where highest-earning parent earns up to £60,000, limit is £50,000 currently
+ Partial child benefit to be paid where highest earner earns up to £80,000
+ The Household Support Fund, which allows local councils to help families via food banks, warm spaces and food vouchers, will be extended beyond 31 March. It will continue for six months, Hunt says.
+ Fuel duty will remain at its current rate and be frozen for the next 12 months; “temporary” 5p cut on fuel duty which was due to end this month will be extended.
+ The threshold for VAT registration will go up from £85,000 to £90,000.
+ New British ISA: An extra £5,000 tax-free allowance for the public to invest exclusively in UK.
+ Longer repayment period for people on benefits taking out emergency budgeting loans from the government
+ £90 fee to obtain a debt relief order scrapped
+ Government fund for people struggling with cost of living pressures to continue for another six months
Industry reactions:
Tom Bill, head of UK residential research at Knight Frank, said: “Anyone planning to get on the property ladder would have shrugged their shoulders following this Budget. Demand-side incentives for first-time buyers such as stamp duty breaks or help for those with smaller deposits would have been welcome, particularly as mortgage rates and house prices are creeping back up. We may discover later this year if the government intends to offer more support to buyers, whose mobility around the UK is vital for an economy that is firing back up after Covid.”
Richard Donnell, Executive Director at Zoopla, commented: “The budget marks another missed opportunity to take action on boosting supply and mortgage availability in the housing market.
“The consensus is that the country needs more new homes. Supply has increased but this has stalled. There is a need for widespread reform of the planning system to encourage supply. More funding is needed for social and affordable homes, and housing infrastructure investment to unlock supply.
“The Government should also look to support the emergence of a long-term fixed rate mortgage market as a matter of urgency. This will help more young people with smaller deposits access home ownership – particularly in southern England where deposit size is the biggest barrier to getting on the housing ladder.”
“Another missed opportunity is the decision not to make the £625,000 threshold for first-time buyer relief permanent. This means 30% more first-time buyers will be liable to pay full stamp duty from March next year.”
Nicky Stevenson, managing director at Fine & Country, remarked: “Reducing the higher rate of Capital Gains Tax should inject some extra energy into the housing market by increasing the number of properties for sale.
“Teetering landlords unsure about whether to take the plunge and sell their property will be encouraged by this announcement.
“This should offer hope for first-time buyers who are the foundation of the property market, but have been hit particularly hard by high interest rates.”
Sam Mitchell, CEO of Purplebricks, commented: “The failure to permanently act on stamp duty is a missed opportunity for the government to stabilise the fragile recovery that we’ve seen in the housing market so far in 2024. Jeremy Hunt should’ve acted now or not at all. Rumours will continue to build of cuts or increased stamp duty holidays, as they did following the Autumn Statement, which could wrongly and unnecessarily delay buying and selling decisions. The lack of a concrete decision leaves the market at a standstill, which is particularly damaging for first-time buyers looking to enter the market.
“Following the government’s decision to not move forward with the 99% Mortgage Guarantee scheme without a proposed alternative – a terrible move in the middle of a housing crisis – the government should refocus their efforts on the most significant factor in the crisis: lack of housing stock. The serious issues in the housing market won’t be solved by rehashing temporary boosts to housing demand that only serve to move up prices, not transactions. It’s the supply side programmes that will really support a healthy first time buyer market.
“So the Chancellor’s announcement today of £242m in investment to support the building of 8,000 new homes in the UK is a positive step in the right direction. But more needs to be done to address the issue that has been compounding since the mass sell-off of council houses in the 1980s, without another initiative to offset the longer term impact for housing stock in the UK. Expanding social stock through a large-scale social housing building programme should be a priority, to reduce long social waitlists that are putting pressure on the private sector. Without this intervention, rent will continue to skyrocket, making it near impossible for renters to save for a deposit.”
Jeremy Raj, national head of residential property at Irwin Mitchell, said: “With housing starts in the doldrums and rents, mortgages and residential properties as unaffordable as ever, it was striking to note how little of today’s speech related to housing and planning. It’s hard not to conclude that the Government now feels that issues within the residential property market will not be a favoured battle ground for them in the coming General Election, other than sloganeering about the green belt and commonhold.
“Several kites were flown in the run-up to the budget, but the reality was a distinct lack of innovation or creative thinking in relation to issues such as downsizing, property taxes or improving the environmental quality of our housing stock. The abolition of multiple dwelling relief and CGT tinkering may have grabbed the attention, but hard-working conveyancers will be breathing a sigh of relief that the now almost-traditional scramble to work a new SDLT regime into all their current transactions has been largely avoided. Their clients however will still be wondering how to house themselves and their families in an acceptable and affordable way. It remains also to be seen how the replacement of non-dom status will play out in the high-end property market.”
Nick Sanderson, Audley Group CEO, commented: “The focus shouldn’t only be on building more homes for first time buyers. It’s about building the right types of homes.
“The government must look at how the property market functions as a whole. Instead of continuing its blinkered focus on first time buyers and young families, it has to look at increasing the supply of age-specific housing. This would encourage older homeowners to move out of large family homes, freeing up supply and creating movement up and down the ladder. The benefits of this are numerous.
“Any new development should include provision for age-specific housing.”
Tom Adcock, tax partner at Gravita, said: “Throwing out the Furnished Holiday Let scheme spells bad news for anybody who owns a holiday home/let. Traditionally, owners of these properties benefit from 100% deduction on the interest they incur on their mortgage interest as well as other tax reliefs such as the ability to claim capital allowances on furniture and white goods within their FHL. However, they will now be treated as any other property business.”
Nicola Gooch, planning partner at Irwin Mitchell, commented: “This was never expected to be a big budget for planning. The current economic picture doesn’t leave a great deal of room for the large-scale structural investment needed in local planning authorities, the planning inspectorate and the courts, to enable them to operate more effectively. The wider political picture would seem to encourage pre-election promises over long-term stabilisation of national infrastructure and public services.
“We were not disappointed. The future funding plans for local government remain highly constrained – meaning that additional funds for improving planning services are not going to be easy to find.
“Promises of an AI pilot to improve productivity amongst planning officers, increasing taxes on holiday lets, and additional levelling up funds will not change the fundamental underlying picture. Without functioning Local Government, we cannot have a functioning planning system; and local government needs more help than this Budget is offering.”
Cormac Henderson, co-founder and executive chairman at Spring, said: “The chancellor has missed a huge opportunity to stimulate the entire housing market by failing to implement a Stamp Duty break for ‘last time buyers’, many of which feel trapped and put off by the costs of moving – with potential downsizers accounting for circa 3 million properties in the UK.
“By incentivising downsizers who need to ‘rightsize’, this move would also bring benefits to the entire market as it is estimated that each top-of-chain home sale facilitates about 2.7 other sales, therefore creating a win-win solution at all levels. By freeing up the logjam at the top, everyone can benefit including first time buyers and families who will have more stock to choose from as people move up the ladder.”
Original article from Property Industry eye Marc Da Silva
