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    Autumn Statement Insights: Future of UK Property Market

    By The reallymoving Team Updated 27th Mar, 2024

    In his much-anticipated Autumn Statement, Chancellor Jeremy Hunt laid out his tax and spending plans in an attempt to reverse the impact of Liz Truss and Kwasi Kwarteng’s mini-Budget.

    With the UK officially in recession, according to the independent Office for Budget Responsibility (OBR), Jeremy Hunt – who was appointed Chancellor just over a month ago –  announced that GDP is forecast to shrink by 1.4% in 2023, before returning to growth in 2024.

    Hunt pointed to ‘unprecedented global headwinds’ and said he was delivering a ‘plan to tackle the cost-of-living crisis and rebuild our economy’, prioritising stability, growth, and protecting public services.

    He claimed his plans will lead to a shallower downturn and higher long-term growth. He also confirmed that the scale of the tax rises and spending cuts – which he called ‘consolidation’ – were a huge £55 billion, split fairly evenly between cuts and tax rises.

    But what did we learn about property specifically?

    Reversal of Stamp Duty cuts in 2025

    Hunt set out plans to reverse the Stamp Duty cuts outlined in Kwarteng’s mini-Budget, saying he will ‘sunset the measure’ from March 31 2025.

    Back in September, Kwarteng had upped the point at which Stamp Duty is paid on property purchases from £125,000 to £250,000, while the nil-rate threshold for first time buyers was increased from £300,000 to £425,000 on purchases worth up to £625,000.

    Following Hunt’s announcement, the Treasury tweeted: “Stamp Duty cuts announced in the Growth Plan will now be time-limited, ending on 31 March 2025. This is to help the jobs and firms that rely on the housing market through the current challenges, while strengthening the public finances in the longer term.”

    There is likely to be an increase in sales in the lead up to March 2025 as buyers look to make the most of Stamp Duty savings before they are removed, in a similar way to thelast minute rushes that preceded the winding down of the previous Stamp Duty holiday.

    OBR predicts 9% house price fall

    In its own economic outlook released in the aftermath of Hunt’s address, the OBR – which oversees the Government’s finances, growth plans and forecasts – said house prices are set to drop by 9% over the next two years.

    The body expects house prices to decline by 9% between the fourth quarter of 2022 and the third quarter of 2024, as a result of higher mortgage rates as well as the wider economic downturn.

    After this point, it forecast that prices will then recover slowly, remaining below their current level over the next five years.

    “As the economy recovers, house prices rise slightly faster than nominal incomes from 2025, at around 2.6% a year, and the house-price-to-earnings ratio settles at around 7%, somewhat lower than the ratio of 7.3% in our March forecast,” the OBR said in a statement.

    It added: “There is significant uncertainty over this forecast given the sensitivity of house prices to mortgage rates and the recent volatility in the bond yields that drive pricing in the mortgage market.”

    According to its economic forecast, it is anticipating house prices to be up 10.7% from 2021 by the end of this year, before dropping by 1.2% in 2023 and 5.7% in 2024. It then suggests prices will rise by 1.2% in 2025, 3% in 2026 and 3.5% in 2027.

    It’s important to note, however, that long-term property forecasts such as these are just forecasts and may not play out in reality – with lots of variables affecting how house prices fluctuate.

    Capital gains

    In the early part of his speech to the Commons, Hunt said that he would cut the tax-free allowance for capital gains in 2023-24 from £12,300 to £6,000 and then again to £3,000 in 2024-25. This would, as the Treasury put it, restore public finances and make the tax system fairer.

    This will hit landlords hardest, but also those with second homes and those looking to sell their properties as capital gains tax (CGT) is charged at a much higher rate for residential property sales.

    “Expect to see a decline in the number of disposals – people will hold off from selling their assets during unfavourable conditions. Or, if there is a delayed introduction for the new threshold, look out for a quick spike in sales as individuals and families try to beat the new implementation date,” Tim Walford Fitzgerald, tax partner at HM Fisher, said.

    Other measures

    Hunt’s Autumn Statement also set out the Government’s plan for a Round 2 of the Levelling Up Fund, which will invest at least £1.7 billion in local projects across the UK, as well as an extension to the energy price guarantee for 12 months from April.

    In addition, Inheritance Tax thresholds will be frozen for the next two years – leaving hundreds of thousands of home owners liable to paying this tax – while higher earners will start paying the top rate of tax (45%) when they earn £125,140, down from £150,000. This could bring more landlords into the highest-paying tax bracket.

    Meanwhile, Hunt also announced that the income tax personal allowance threshold will be frozen until 2028, which means millions of people will end up paying more in tax as their pay increases.

    How did the industry react?

    Richard Fearon, chief executive at Leeds Building Society, said: “There’s no doubt that the rapid increases in interest rates following the September mini-Budget were a hammer blow to mortgage borrowers. However, today’s Autumn Statement appears to have delivered what the financial markets were expecting, which should provide continued confidence in the Government’s fiscal plans. 

    “However, the announcements made today do not address the longer-term issues which face the housing market. Our research, published last week, showed that 81% of aspiring first time buyers say that the cost-of-living crisis has made it harder for them to save for a deposit and almost half of them now doubt they’ll ever get onto the housing ladder. In addition, six in ten of those planning to buy their first house in the next 5 years have now delayed their purchase, by 18 months on average.”

    Nathan Emerson, chief executive at trade body Propertymark, said: “Our member agents say the raised Stamp Duty threshold has had a positive effect on the confidence of their buyers and sellers, so we’re naturally disappointed it will be phased out by 2025. Stamp Duty is not only a barrier to entry to the property market, it restricts downsizers from releasing much needed family homes for second steppers. Bands that better represent house price growth and affordability are key to keeping the market moving.”

    And Jonathan Rolande, spokesman for the National Association of Property Buyers, said: “There was a disappointing lack of focus on the housing market in the statement today. By blanking the housing crisis, the Government has, once again, looked away from what is fast becoming one of the biggest socio-economic crises of our times.

    "For many, the prospect of owning a home is a pipe dream, and it feels as realistic today as winning the Lottery. Nothing announced today will help first time buyers get a foot on the ladder. And I doubt it will encourage older property owners into downsizing which would help many looking to move.”

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