As Britain faces a cost-of-living crisis, rising inflation and an impending recession, the property industry argues that addressing the housing crisis is one way to strengthen our economy. In this article, we take a look at what the changes announced in the mini-Budget mean for investors and homeowners.

Among Kwasi Kwarteng’s widespread tax cuts, the scrapping of bankers’ bonuses and the reversal of the National Insurance rise were several important updates for the property sector.

Key announcements:

  • Infrastructure projects to be prioritised to accelerate housing supply through designated ‘investment zones’ that will aim to unlock housing through minimising planning applications and tax incentives.
  • An increase in the disposal of surplus government land to build new homes.
  • New, permanent stamp duty thresholds. These plans include increasing the threshold from £125,000 to £250,000, and for first-time buyers, lifting from £300,000 to £425,000.
  • A cap on energy bills, saving the average household £1,000 a year.

What this means for prospective homeowners and buyers

An approaching cold winter is likely to see more households struggle with increased energy bills, despite the energy price cap. This, coupled with food inflation, will put vast pressure on mortgage-paying homeowners, as well as tenants paying rent, who will have to make critical decisions about how to spend their money.

Tackling rising energy prices was a key part of the Chancellor’s mini-Budget. Aiming to reduce some of the pressure from soaring bills, the energy price guarantee will see a typical household’s energy bill capped at £2,500 a year from October. This is on top of the £400 energy bill discount that each household will receive over winter.

In addition, the stamp duty cut will see the level at which homebuyers are to pay stamp duty double from £125,000 to £250,000.

First time buyers will start paying stamp duty if their first home costs £425,000, up from £300,000 previously.

This cut will undoubtedly support many first-time buyers and buyers on lower incomes, making for easier access on to the property ladder. However, this has been challenged by the housebuilding industry, as the reforms may well lead to sharp additional prices in mortgage costs for buyers, which could impact the market. Already, high street banks have begun to withdraw mortgage deals over fears that the falling British pound will push interest rates higher.

And with the average house price now above the current stamp duty threshold for first-time buyers, despite the cut, affordability remains a prime concern for those looking to get on the property ladder.

Industry reaction

The Chancellor’s statement has received criticism from the housing sector, who argue that it does too little to help low earners struggling with the cost-of-living crisis and the wider affordability issue across the board.

Also announced as part of the mini-Budget was “a list of infrastructure projects will be prioritised for acceleration” across various sectors. These include increasing housing supply, enabling forthcoming reforms and increasing the disposal of surplus government land to build new homes.

The Treasury highlighted that “further reform is needed” to “accelerate housing delivery”. The plans are in place to “boost growth across the UK helping more people afford to live near good jobs”, working with devolved administrations and local partners to introduce “investment zones”, that will aim to unlock housing and commercial development.

The 38 ‘investment zones’ across the country will see local businesses receive tax cuts and relaxed planning restrictions to encourage housing and commercial development. Working with local councils, the Treasury plans to create thriving communities through the development of offices, restaurants, housing and shopping centres, encouraging investment and creating new jobs.

The Government will work with devolved administrations in Scotland, Wales and Northern Ireland to deliver similar ‘investment zones’.

Many industry figures have welcomed the streamlined planning process and more opportunity for investment, but acknowledged that lack of supply is the most pressing issue for the property market.

Dean Williamson, Director at LW Developments, said: “With the housing market intrinsically linked to the health of the economy, the Government needs to address the issue of the housing supply by making home building a priority. To balance increasing demand, the only way to support the housing market in the long term is to stimulate supply.

“The current process includes additional, and often unnecessary, regulation that needs to be dealt with, even after planning permission is obtained, this will help to reduce pressures on an already struggling sector.”

Further, housing sector professionals have called for reform across the whole country, rather than just in the designated ‘investment zones’.

With a growth crisis impacting the property market, a reformed planning system is needed across the entire country to prevent a postcode lottery on personal taxation schemes, so that more homes can be built for the people that need them.

For more information and advice, get in touch today.

Dean Williamson

Dean Williamson MRICS