How the Autumn Budget Impacts the Housing Market

Chancellor Rachel Reeves recently unveiled the Autumn Budget, marking the first Labour-led budget in over a decade. Given today’s high living costs, the Budget has been the subject of much anticipation, especially concerning its implications for housing.

With mortgage rates still elevated, first-time buyers now face mortgage payments that are, on average, £350 higher than five years ago. And while energy costs are down from last year’s peak, the October price cap adjustment still saw a 10% rise in monthly bills.

Our recent survey underscores the primary concerns of renters and homeowners alike. For renters, the majority (60%) are calling for stronger first-time buyer support, while existing homeowners prioritise a streamlined home-buying process.

Major Housing-Related Changes in the Budget

Key points for the housing sector include a £5 billion government investment supporting Labour’s housing strategy, along with a £500 million boost to the Affordable Homes Programme. 

An additional £25 million will be directed to the construction of 3,000 energy-efficient homes, all aimed to be fully affordable. The government has also expressed commitment to discussions with industry stakeholders to ensure that the Mortgage Guarantee Scheme, supporting 95% loan-to-value mortgages, becomes a permanent fixture.

One key tax aspect, the Capital Gains Tax on residential property, remains unchanged in this Budget.

Stamp Duty: What’s Ahead?

The Budget did not include an extension for the current first-time buyer stamp duty relief, which remains set to end in March 2025.

Stamp duty, a tax levied on property purchases, varies based on property value and purpose. Notably, the surcharge on second home purchases, such as buy-to-let properties, will increase by 2% on 31 October 2024, rising from 3% to 5%.

For many landlords, this increase could mean substantial additional costs – over £7,000 on average – which might initially impact purchasing decisions. However, it’s expected that this will gradually become a standard consideration within rental market investments.

Moreover, the previous government’s stamp duty threshold adjustments, aimed at making homeownership more affordable, are also due to expire in March 2025. After this date, the home-mover threshold will drop from £250,000 to £125,000, potentially adding up to £2,500 in stamp duty for buyers purchasing above this threshold. The threshold for first-time buyers could also decrease from £425,000 to £300,000, meaning that a first-time buyer of an average-priced property may face £3,538 in stamp duty post-March 2025, rather than zero currently.

Given these upcoming changes, we may see a short-term surge in market activity as buyers try to close on property purchases before the increases take effect. Currently, property transactions take around 152 days to complete on average, so buyers hoping to avoid these additional costs should act quickly.

No Changes to Capital Gains Tax

Despite some speculation of an increase, Capital Gains Tax on residential property remains unchanged. Earlier rumours of a tax rise led some landlords to list rental properties for sale, potentially impacting the supply of rental homes, especially in light of growing costs in recent years.

Recent Market Activity

This autumn has brought heightened activity in the housing market, with more people motivated to move than during the quieter market of 2023. The number of sales agreed is up nearly 30% compared to this time last year, and enquiries about properties for sale have increased by 17%. Meanwhile, the number of homes on the market has risen by 12%, providing more choice for buyers.

However, while activity levels are strong, price growth remains modest, with house prices increasing by just 0.3% this month, compared to the seasonal average of 1.3%. This suggests that while buyers are actively searching, they are also sensitive to pricing, highlighting the importance of realistic listing prices to attract interest.

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