2024 Budget: Key Impacts on the UK Housing Market
The Chancellor, Rachel Reeves, delivered a substantial budget today with key financial changes impacting individuals, businesses, and especially the housing market. This blog provides a breakdown of the budget announcements that directly affect homeowners, property investors, estate agencies, and developers.
Here’s what you need to know and how these changes could influence the housing market in Gravesend and beyond.
Stamp Duty Surcharge on Second Homes
The stamp duty surcharge for second homes will increase from 2% to 5% as of tomorrow. This measure primarily targets buy-to-let investors and holiday home buyers, likely cooling some of the demand for second properties as additional costs weigh in.
Implication: This may reduce competition in areas like Gravesend where second homes and rental properties are prevalent. It could also help first-time buyers as demand for second homes may decrease slightly, potentially easing some of the pressure on housing availability and affordability.
Capital Gains Tax Unchanged for Residential Property
The capital gains tax rates on residential property remain at 18% and 24%. For landlords and investors, maintaining these rates means consistency in planning property sales. However, with inflation rising and property values changing, investors should stay aware of shifting yields and tax thresholds.
Implication: This stability in capital gains tax rates allows investors to maintain their strategies, especially with the continuation of policies on property taxation. It could encourage some investors to hold or expand portfolios despite rising costs in other areas.
Inheritance Tax Threshold Freeze and Inherited Pensions
The Chancellor extended the inheritance tax threshold freeze to 2030, maintaining the current tax-free inheritance limit of £325,000 (up to £500,000 if a residence is included and passed to direct descendants). Additionally, inherited pensions will now be subject to inheritance tax from April 2027.
Implication: This freeze keeps inheritance tax burdens consistent but may cause long-term planning challenges for families with significant property assets. With inherited pensions now being taxed, financial advisors may see increased demand from clients looking to optimize inheritance and estate planning strategies.
Reduced Right to Buy Discounts
The Chancellor has slashed the ‘Right to Buy’ discount for council home buyers. This reduction may impact those looking to purchase council homes, which traditionally offered more affordable routes to homeownership.
Implication: Lower Right to Buy discounts might reduce purchasing enthusiasm among council tenants, leading some to reconsider ownership until discounts return or improve. Estate agents and councils could see slower conversions of council properties into privately-owned homes, slightly easing the pressure on housing stock availability.
Increased Investment in New Homes
The government plans to invest over £5 billion to support the delivery of new homes, addressing the pressing issue of housing supply across the UK.
Implication: This injection is positive for the housing market, especially in growing areas like Gravesend. Developers and construction firms may find new opportunities through this funding, potentially bringing more homes to the market. For buyers, the increase in housing availability could help moderate property prices in the long term.
Boost in the Affordable Homes Programme
The budget also increases the Affordable Homes Programme to £3.1 billion and includes £3 billion in guarantees and support aimed at increasing housing supply and supporting smaller housebuilders.
Implication: For communities in need of affordable housing options, this commitment is promising. The support for smaller builders may introduce more competition among developers, fostering innovation and potentially accelerating project timelines.
Conclusion
While Rachel Reeves' budget addresses several key areas within the housing sector, many of these measures come with significant tax increases for employers and second-home buyers. Investors and businesses in the property market should prepare for increased costs, especially in payroll and acquisitions. For first-time homebuyers and renters, these changes could offer some relief as the government steps up its commitment to affordable housing, with greater support for smaller developers.
In Gravesend, where demand for housing remains strong, these budget adjustments are likely to have tangible effects. At M&M Estate Agents, we’ll be watching these changes closely, particularly how they affect local property values and demand dynamics.