The uncertainty that the upcoming Budget creates is certainly hurting the UK housing market. We have observed a decline in new properties entering the market and an increase in the number of properties being withdrawn from it.
We could see some sellers rush to the market to sell before new taxes are imposed, which in turn could lead to a short-term increase in supply followed by a potential slowdown. With the proposed changes to property taxation, selling or holding property may become less attractive.
One thing to consider is that if landlord taxation increases, this may lead to landlords either raising rents or selling their properties rather than renting them out. If this happens, it will further reduce the supply of rental properties.
A lower supply of rental properties will also push rents higher, especially in tighter local markets, making renting even less affordable for tenants.
The access to and affordability of mortgages will remain crucial. If interest rates rise or affordability tests become stricter, this will dampen demand for home purchases.
Potential changes to Stamp Duty will, of course, also affect buyers’ ability to obtain a mortgage to purchase a property, as higher upfront costs make home ownership less accessible.
The fear that taxes may soon be increased could suppress buyer confidence and slow down transactions.
There are plans to build more properties in the UK, but as this can take years to complete, it will have little short-term impact on the housing market.
Markets in London and other high-value areas may be more sensitive to tax changes, while more affordable areas may experience smaller effects.
You may have heard that the Government is considering changes to Stamp Duty and Council Tax, potentially introducing a new annual property levy on homes above a certain threshold. This could change the incentives around buying and selling property in the UK.
There has also been talk of National Insurance being added to rental income — yet another cost for landlords to bear. This could cause rents across the UK to rise further.
Homes valued at over £500,000 may also face a new seller’s tax, which is currently under discussion in Government. If introduced, it could increase affordability for buyers; however, the cost would then be passed on to sellers, potentially making moving home less affordable.
Another topic under discussion that could impact property turnover is a change to capital gains tax on primary residences.
The Budget may also include changes to inheritance tax and gift rules. This would affect how property ownership is passed between generations, which could in turn influence demand.
Development plans for new homes with housebuilders are also being affected by the uncertainty created by the upcoming Budget, which could slow future supply.
Some forecasts already predict a slowdown in house price growth as the uncertainty and potential tax changes weigh on buyer confidence.
Mortgage affordability is already very tight, which has created a slowdown in the market and a dip in house prices. Even a small increase in interest rates could have a further knock-on effect on the housing market.
If buyers are priced out of the UK property market, demand for rental properties will rise, putting additional pressure on an already strained rental market. With supply already limited, the upcoming Budget changes could worsen this issue.
Letting agents will also be affected as the Government looks to tighten regulations. This would mean agencies need to invest in training and compliance staff.
Landlords are also affected by the uncertainty surrounding the Budget. This may cause a slowdown in new rental properties coming to the market. With all the current and upcoming taxes imposed on landlords, they are less likely to invest further in the UK property market and more likely to sell their portfolios. This could increase the supply of properties for sale — a potential positive for the sales market but not for lettings.
Landlords may also demand more from their letting agents, particularly around compliance and tax planning.
The market will likely become more competitive for letting agents, which may lead some to reduce fees to win new business. Smaller agents may struggle to match these lower fees, creating further challenges.
Letting agents may also need to take a larger role in mediation and dispute resolution. Due to predicted court delays (especially affecting landlords), agents might be required to assist with mediation rather than pursuing lengthy legal processes, which can cause significant delays.