2024 Budget: Property Sector Responds to the Chancellor’s Announcement

The chancellor, Jeremy Hunt, has wrapped up his budget presentation for 2024.

The Office for Budget Responsibility’s (OBR) newest economic growth forecast remains largely the same as it was previously predicted in November’s Autumn Statement.

They expect the gross domestic product (GDP) will slightly increase to 0.8% this year. By 2027, the economy is expected to grow by 1.8%, which is slightly less than the 2% forecast in November. Growth is projected to reduce to 1.7% by 2028.

Over the last few years, the UK housing market has been affected by successive interest rate increases and the cost-of-living crunch. As a result, the property industry was keen to see what new initiatives the Budget would bring to help rejuvenate the sector.

In his announcement, the chancellor has reduced capital gains tax from 28% to 24% with the aim of increasing revenue and property sales.

He went on to say that the government will do away with the stamp duty relief for those purchasing more than one home.

Furthermore, the chancellor intends to eliminate tax benefits that currently favour second-home owners who rent their properties to vacationers over long-term tenants.

He plans to end the furnished holiday lettings tax scheme.

Additional key points:

  • A continued effort to reduce National Insurance with an additional 2p cut, following the past reduction made during the Autumn Statement.
  • A change to the non-domiciled tax regime, set to take effect in April 2025.
  • An increase in the salary threshold for receiving full child benefits from £50,000 to £60,000, and partial benefits to be extended to households earning up to £80,000.
  • An extension of the Household Support Fund to assist families through local council programs like food banks and warm spaces. The fund will now run for an additional six months beyond its original end date of March 31st.
  • A freeze on fuel duty for the next year along with the extension of the “temporary” 5p cut which was set to expire this month.
  • A VAT registration threshold increase from £85,000 to £90,000.
  • A new British ISA offering a £5,000 tax-free investment allowance focused on UK investments.
  • Extended repayment periods for emergency loans taken out by benefit recipients.
  • Elimination of the £90 fee to obtain a debt relief order.
  • Extension of the government’s cost of living support fund for an additional six months.

Feedback from the industry: 

Tom Bill, from Knight Frank, stated: “For those looking to buy their first home, this Budget likely won’t make much difference. Measures like stamp duty relief or assistance for those with smaller deposits would have been beneficial, especially since mortgage rates and property prices are on the rise. It might be later in the year when we see if the government will offer more support to buyers, who are essential for a recovering economy.”

Jeremy Leaf, an estate agent from North London, remarked: “This Budget should boost demand, although it’s questionable if the chancellor has done enough to ensure a rise in the supply of affordable housing, which is desperately needed.

“It’s unclear whether the changes to the rules on holiday lets and the reduction in capital gains tax will have a positive impact.

“The anticipated cut in national insurance contributions and an earlier-than-expected achievement of lower inflation should lead to falling mortgage costs and better buyer confidence, which will likely benefit the housing market.

“The lower capital gains tax might prompt more buy-to-let investors considering selling to exit the market sooner, anticipating a possible increase in CGT rates by a future government. This might lead to a decreased availability of rental properties and increased rents, especially impacting tenants and the younger demographic.”

Richard Donnell from Zoopla commented: “The budget misses yet another chance to address the need for more housing supply and better mortgage accessibility.

“We agree that more new homes are needed, and while supply has been growing, progress has stalled. Broad reforms in the planning system could boost supply. More funds for social and affordable housing, as well as investment in housing infrastructure, are essential.

“The government should urgently support the establishment of a long-term fixed-rate mortgage market. This could help young people, especially in the south, to overcome the deposit barrier and own a home.”

“Another oversight is not making the first-time buyer relief threshold of £625,000 permanent, resulting in 30% more first-time buyers paying full stamp duty from next March.”

Nicky Stevenson from Fine & Country commented: “Lowering the higher rate of Capital Gains Tax should bring some vitality into the market by encouraging property sales.

“Landlords who are unsure about selling might be swayed by this update.

“This could give first-time buyers, who are crucial for the market but have been affected by high interest rates, some hope.”

Sam Mitchell, CEO of Purplebricks, said: “The decision not to permanently address stamp duty represents a missed chance for the government to stabilize the market’s delicate recovery this year. Any action by Jeremy Hunt should have been immediate, as delays can cause market uncertainty that hampers decision-making. This indecision is particularly hard on first-time buyers attempting to enter the market.

“With the decision to not proceed with the 99% Mortgage Guarantee scheme and without proposing an alternative during this housing crisis, the government must find new ways to refocus their efforts.”

The critical problem in the housing crisis is the lack of available homes. Temporary measures to increase demand only push prices higher, not the number of sales. We need supply-side initiatives to genuinely help first-time buyers. The Chancellor’s plan to invest £242m for 8,000 new homes in the UK is a step forward, but we must do more to overcome the long-standing shortage since the large-scale sell-off of council homes in the 1980s. A major social housing construction initiative should take priority to cut down the long waits for social housing and relieve the private sector. Without such action, rents will keep rising, making it harder for renters to save for a deposit.

Jeremy Raj of Irwin Mitchell points out that despite the grim state of affordable housing, the government’s latest speech included little about housing and planning. It appears they are shying away from this issue in the upcoming General Election, favoring slogans over substance. Proposals that were floated before the budget have not materialized, with no significant new ideas on downsizing, property taxes, or improving the environmental performance of buildings. Minor changes like the abolition of multiple dwelling relief have been the focus, but conveyancers will be grateful to avoid another rush to accommodate a new Stamp Duty regime. However, their clients are still left wondering how to affordably house their families. It’s yet uncertain how the ending of non-dom status will affect the top-end property market.

Nick Sanderson of Audley Group warns that we must consider building suitable types of homes, not just focusing on first-time buyers. Age-specific housing should be included in all new developments to encourage older people to downsize, thereby freeing up larger homes and creating movement in the housing market.

Tom Adcock of Gravita comments on the negative impact of canceling the Furnished Holiday Let scheme. Owners of holiday lets will lose mortgage interest deductions and other tax reliefs, putting them in the same position as other property businesses.

Nicola Gooch of Irwin Mitchell says this budget was not expected to bring major changes to planning. Local planning authorities, the planning inspectorate, and courts require significant investment to improve, which the current economy and political climate don’t seem to support. The budget does not provide the needed help for local governments, which are essential for a functioning planning system.

Cormac Henderson of Spring observes that the Chancellor missed a chance to boost the entire housing market by not offering a Stamp Duty incentive for “last time buyers” who hesitate to downsize due to moving costs. This change could unlock about 3 million homes and trigger additional property sales, benefiting first-time buyers and families looking for homes.

In a quoted post, it’s mentioned that the Chancellor has done away with stamp duty relief and has reduced capital gains tax.