Autumn Budget – what did we find out about property?
The Chancellor’s latest major fiscal address to the House of Commons didn’t mention property as much as expected, but there were still a number of key elements of note that are likely to have a direct or indirect impact on the sector.
In the autumn Budget and Spending Review, which followed on from the March Budget earlier this year, Rishi Sunak revealed a number of spending pledges and commitments.
There was nothing on the scale of the stamp duty holiday this time out, or even any changes to property taxation or further investment in some of the government’s flagship housing schemes, but there were still a range of key announcements that will affect the market going forward.
Here, we set out what was said, what it could mean for the market and how the industry reacted to Sunak’s speech.
What was said about property?
In his most major housing announcement, the Chancellor declared that there will be a £5 billion fund to remove unsafe cladding from the highest risk residential buildings, funded through a Residential Property Developers Tax. This tax will be levied on developers with profits of over £25 million at a rate of 4%. Some 31 housebuilders made that level of profit annually in 2019.
Sunak also outlined that, as part of the government’s much-discussed levelling up agenda, there will be up to 180,000 affordable homes built on brownfield sites as part of a ‘multi-year housing settlement’ of nearly £24 billion. This marks the largest cash injection in a decade, according to the Chancellor.
Some £11.5 billion of this settlement will be set aside for constructing affordable homes, with the focus being on developing brownfield sites back into use rather than threatening the green belt.
“We are investing more in housing and homeownership with a multi-year settlement totalling nearly £24 billion,” Sunak told a packed-out Commons.
“The government will provide £11.5 billion to build up to the 180,000 new, affordable homes the country needs annually, 20% larger than the previous programme. We are investing an extra £1.8 billion, enough to bring 1,500 hectares of brownfield land into use, meet our commitment to invest £10 billion in new housing and unlock a million new homes.”
While radical reform to Capital Gains Tax, as had been predicted by some, wasn’t forthcoming, there was one small but significant change to CGT in the small print released after the Budget. The deadline for filing a tax return has now been doubled from 30 days to 60 days.
Despite this, the much speculated about major changes to property taxation didn’t make an appearance, with no mention of stamp duty or inheritance tax, and very little on CGT or council tax.
Although this is likely to come as a relief to those in the lettings sector, who have been most affected by changes to property taxes in recent years, those who have been calling for a more simplified tax system will no doubt be frustrated.
How did the industry react?
Timothy Douglas, Policy and Campaigns Manager at trade body Propertymark, said the Chancellor’s spending review provided left a lot to be desired.
“A rise in the national living wage is good in principle but with inflation expected to top 4% by the end of the year, higher household bills from the ongoing energy crisis, a cost-of-living squeeze, and the cut to Universal Credit, it is unlikely to provide the boost to incomes that’s needed,” he said.
“The £65 million funding for those in rental debt provides some support but the devil is in the detail. Almost four million low-income households are in arrears with their household bills, yet this money will be targeted at those who are most at risk of homelessness, excluding a significant number of others from help.”
He added: “A £1.8bn fund for brownfield homes and £11.5bn for 180,000 affordable homes is welcome, but the latter is not new money and only 32,000 of those homes will be social rented housing – a mere third of what is needed which is simply not enough when council waiting lists are predicted to almost double to 2.1 million by next year.”
Stuart Law, CEO of the Assetz group, said of the Budget: “We welcome the Chancellor’s package of housing-related investment announced in today’s Budget, particularly the provision of affordable housing and improved use of brownfield sites. However, given the focus on green grants and the need for housing to become more sustainable in future, the government must do more to support homeowners during this transition over the coming months and years.”
He added: “We also heard the Chancellor encourage the Bank of England to raise interest rates to control inflation indicating that whilst both of these cost the government, and hence the taxpayer, more in debt servicing costs, he regards the risk of inflation to be greater on balance. We would agree and expect inflation to run ‘hot’ for some years to come whilst interest rate rises are likely to be more muted in our view.”
Meanwhile, PayProp’s Neil Cobbold said: “The government has set out its stall many times with its levelling up agenda, and as Boris Johnson said in his recent conference speech housing will form a key part of this, so it’s no surprise that Rishi Sunak announced further investment in housing and housing-related activity. This, he said, will total £24 billion, including £11.5 billion towards affordable homes. While such a pledge is welcome, it will only become clearer over time if such promises are kept to and if the government really can level up the country.”
It was, overall, a lower key Budget from a property perspective than many had predicted, with no major announcements on tax and no big proposals – like the stamp duty holiday – as was the case in recent Budgets.
Nevertheless, there were still some important things to be aware of that are likely to have a bearing on the market over the coming months and years.
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