Spring 2024 Budget: Impact on the Housing Market

Posted on March 8th, 2024.

The Spring Budget presented an opportunity for the Government to enhance its standing prior to the upcoming general election. However, many parts of the population, particularly younger and less affluent individuals, may find themselves disillusioned by the absence of initiatives aimed at alleviating the UK’s affordable housing shortage and addressing mortgage accessibility challenges.

Initial expectations included the potential unveiling of a new 99% mortgage program. Regrettably, this proposal has been abandoned. Such a scheme was envisioned to assist prospective first-time homeowners with limited deposits in entering the property market. Nonetheless, detractors underscored the heightened risk of negative equity exposure should housing prices decline.

Additionally, there were anticipations for adjustments to the penalty associated with early withdrawals from Lifetime ISAs, intended for aiding individuals in saving for their initial home purchase or retirement. There was also speculation about augmenting the ceiling on property values purchasable through these accounts. Despite these hopes, the Budget primarily featured tax revisions with modest implications for the housing sector.

One notable amendment pertains to capital gains tax. Currently, higher-rate taxpayers incur a 28% tax on profits from the sale of non-primary residential properties. Effective April, this rate will diminish to 24%, potentially incentivising property sales and bolstering housing supply. Conversely, affluent property proprietors stand to retain a greater portion of their sale proceeds.

Moreover, tax benefits previously enjoyed by owners of furnished holiday lets are set to be revoked from April onwards, rendering such ventures less appealing. This adjustment might lead to an uptick in long-term rental properties or an increase in homes available for local purchase.

Regarding stamp duty, the changes announced entails rescinding relief on multiple dwelling purchases, effective June. Consequently, individuals acquiring more than one residential property concurrently will no longer benefit from reduced stamp duty compared to separate transactions. The rationale behind this change is the purported lack of evidence suggesting that this relief stimulated investment in the private rental sector.

In summary, the Budget’s housing-related measures have drawn mixed reactions. While some adjustments may stimulate property transactions and rental availability, broader concerns persist regarding the adequacy of supply and mortgage accessibility. Calls for comprehensive planning system reforms, increased funding for social and affordable housing, and the facilitation of long-term fixed-rate mortgages underscore unaddressed systemic challenges within the housing market. Additionally, the decision not to make permanant the £625,000 threshold for first-time buyer relief beyond the temporary period means that over 25% of first time buyers will pay the full Stamp Duty as of March 2025.

For more on the housing market and specifically the rentals sector, be sure to keep an eye out on future articles. If you have any questions about the housing/rental maket, write to me, chris@ashmoreresidential.com