Chancellor Rachel Reeves has presented her Autumn Budget, marking the first Labour Budget in over a decade. The announcement comes at a time when the nation grapples with ongoing cost of living challenges, including persistently high mortgage rates and rising household energy bills. Recent studies indicate that the average mortgage payment for first-time buyers has surged by £350 compared to five years ago, while energy prices have risen by 10% this month under the latest price cap, despite being lower than their peak in 2022.
In light of these pressing issues, a recent survey of over 34,000 individuals revealed that 60% of renters are seeking increased support for first-time buyers. Furthermore, simplifying the home-buying process emerged as a top priority for existing homeowners.
Key Housing Announcements in the Autumn Budget
The Budget unveiled significant commitments to housing, including a £5 billion investment to realise Labour’s housing strategy, alongside a £500 million enhancement to the Affordable Homes Programme. Notable projects are set to take place across the country, such as the development of 2,000 new homes at Liverpool Central Docks, aimed at revitalising the waterfront.
Additionally, the government has earmarked £25 million for the construction of 3,000 energy-efficient homes nationwide, with a commitment that all these new homes will be affordable. In a move to support the housing market, the government also plans to engage with industry stakeholders to make the Mortgage Guarantee Scheme a permanent fixture, facilitating lending at a 95% loan-to-value ratio.
Stamp Duty Changes and Implications
One of the more contentious topics in the Budget was the absence of any mention regarding the extension of the current stamp duty relief for first-time buyers, which is set to expire in March 2025. Stamp duty, a tax levied on property purchases, varies depending on the property's value and whether it is a primary residence or an additional property.
From 31 October 2024, the stamp duty surcharge for purchasers of second homes, including buy-to-let properties, will increase by 2%, rising from 3% to 5%. Property expert Tim Bannister noted, “This increase means that, based on the average asking price for a home, a landlord could face an additional charge of over £7,000. While some landlords may pause to reconsider their investments in the short term, this charge may ultimately become a routine consideration in the long run.”
The previous Conservative government had adjusted stamp duty thresholds until March 2025, resulting in lower fees for home-movers and, in many cases, no stamp duty for first-time buyers. With no announcements regarding an extension of these elevated thresholds, they are set to revert at the end of March 2025. Bannister warns, “The threshold for home-movers will decrease from £250,000 to £125,000, potentially costing buyers up to £2,500 more in stamp duty. Meanwhile, the threshold for first-time buyers will likely drop from £425,000 to £300,000, meaning a first-time buyer purchasing at the average UK price of £370,759 will incur a stamp duty charge of £3,538 from March 2025, compared to nothing currently.”
This impending change may spur a rush of first-time buyers eager to complete transactions before the new charges take effect. Given that it currently takes an average of 152 days to complete a property transaction after an agreement is reached, those hoping to avoid increased costs will need to act swiftly.
Capital Gains Tax Remains Unchanged
Amidst speculation about potential changes to Capital Gains Tax (CGT), the Budget confirmed that the current rates on residential property will remain unchanged. Earlier this year, a surge in properties previously rented out hit the market as landlords reacted to anticipated tax increases and rising costs. However, the decision to keep CGT rates steady may alleviate some pressure on landlords, allowing them to retain their investments without the burden of increased taxation.
Current Trends in the Housing Market
Despite the broader economic challenges, the housing market has shown resilience during this typically busy autumn season. The number of sales agreed has risen by 29% compared to the same period last year, while enquiries to estate agents have increased by 17%. Additionally, buyers can expect a greater selection of properties, with the number of homes for sale up by 12%.
However, house price growth remains subdued, with an increase of only 0.3% this month, significantly lower than the seasonal average of 1.3%. This indicates that the market is still sensitive to pricing, and sellers will need to set realistic asking prices to attract buyers.
As the Labour government embarks on its new housing agenda, the focus will undoubtedly remain on addressing the pressing needs of first-time buyers and renters amidst a challenging economic landscape.
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