The chancellor will make her first budget speech on October 30 – four months after Labor came to power.
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Previewing Rachel Reeves’ budget, James Dickens, managing director of Wavensmere Homes, says that despite the welcome positivity about planning reform and boosting the housing market, businesses and property owners fear the worst.
“The feared significant increase in capital gains tax – to bring it more in line with income tax thresholds – is likely to be applied to the sale of shares and businesses, but fortunately not to second homes or buy-to-let.
“The number of homes for sale and previously available to rent reached a record high of 18% last month, in response to alarms about an increasingly aggressive tax environment imposed by Labor. Having far fewer rental properties – while demand is so high – could have created a new housing problem for both the government and the potential homeowners of tomorrow.”
Dickens adds that Angela Rayner’s ‘£1 billion social housing revolution’ could play into the hands of the increasingly powerful land-rich PLC housebuilders. While planning and pre-construction issues could continue to have a negative impact on the supply of new homes, with only 135,000 expected to be built this year.
New home goals
“Building 300,000 new homes per year is a dream! The Deputy Prime Minister should find ways to help housebuilders deliver on the Future Homes Standard and Biodiversity Net Gain legislation, to counter the cost burden being passed on to consumers.”
He added: “The only real help first-time buyers currently have to access the property ladder is the stamp duty exemption for homes worth up to £425,000, but this temporary threshold change will end in March 2025.
“The much-needed welcome news is that UK inflation fell to 1.7% last month. This should be followed at the November MPC meeting with a meaningful cut in the base interest rate to stimulate the economy and reduce mortgage servicing costs. A drop of a quarter of a point will not be enough to provide the market visibility and confidence needed across all sectors.”
OSB intermediary director Adrian Moloney says it is crucial to recognize the potential unintended consequences of tax decisions – especially in the areas of capital gains tax and national insurance for businesses and employees.
“It has been suggested that the capital gains tax rate on the sale of second homes and buy-to-let will remain unchanged, but we won’t know until October 30 whether this is based on fact or speculation.”
Clarity about the budget
He added: “We remain positive in our outlook as we know the housing market is extremely resilient. From what I hear from brokers, they are mainly concerned with the ‘business as usual’ side of the market. While there will be some who have postponed their decisions until there is more clarity around the budget, there are plenty of positive signs that the sector is once again adapting to market fluctuations.”
Will a more favorable budget stimulate activity? “Ultimately, time will tell,” says Moloney, “but signs are that the market is on track for a stronger end of the year and into 2025. As interest rates have become more competitive and lenders compete for the best deals, borrowers should benefit from greater choices. We will be closely monitoring the Chancellor’s announcements the day before Halloween.”
Review by LISA
Jim Islam, CEO of OneFamily, says LISA changes are urgently needed to revive the starter market. “Young adults are faced with high rents and rising property prices, so the government must give them a boost in the autumn budget.
“The lifetime ISA (LISA) is an excellent investment account that could be the solution. It helps young people grow their savings and get into the housing market, and they can earn a bonus of up to £1,000 a year.
“But if they have to dive into their nest in an emergency, account holders will be hit with a hefty 25% fine. They not only lose the bonus, but also a significant portion of their hard-earned savings. Our customers tell us that this prevents them from working at LISA.
“It would be fairer to reduce the fine to 20%, so that they only lose the bonus they have accrued.”
He added that the outdated LISA house price cap also needed to be reviewed. “It was established in 2017 and house prices have risen enormously in the last seven years. The price cap works against those who have no choice but to live in a location where homes are more expensive.
“By updating the LISA, it could become a vital tool in helping the next generation move out of rental housing and into the stability of their own homes.”