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Labours Budget 2024: The Impact on The Property Sector
Labours first budget in 14 years was widely forecasted by most media outlets to bring us all an earth-shattering Armageddon scenario to the property sector and Landlords alike.
Many people were and are selling up and running for the hills – So what actually happened today?
The Chancellor, said the focus of today’s budget was to bring back economic stability, but what does that mean for us property folk?
Stamp Duty is increased from 3% to 5% overnight and will undoubtedly push some landlords out of the sector and in turn this means probably fewer rental properties will be available to tenants.
Demand still far outweighs the supply of rentable homes, and tackling this will be extremely difficult if landlords are disincentivised by government measures.
Landlords already battling legislation changes won’t be dancing in the streets tonight, but having said that, there were positives (of sorts) and things could have been a lot worse overall.
Capital gains tax has not increased for Landlords which is already at 24% for higher rate taxpayers. This was a big positive as most media outlets had reported pre-budget that it was likely to rise by a big margin – yet this has not come to pass thankfully.
My Thoughts…
Facebook property groups were full of doom and gloom pre-budget, and many are now thinking it’s not as bad as it could have been.
I think it’s a case of Labours budget giving with one hand and taking away with the other, is how I am feeling right now.
I think bigger issues with the PRS have not been considered or addressed in this budget. I also think home ownership for many has just become even more difficult from today given the Right to Buy discounts being slashed.
Whilst it’s so easy to get caught up in the negative doom mongering online, I honestly think it’s important to see how things play out and what the real-world effects of today’s budget are before we all run for the exit door. It’s certainly going to be an interesting few months ahead.
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Anyway, that’s my initial overview of today’s budget and I think it’s probably worth sharing the thoughts of a few Industry experts commenting on today’s events.
Angharad Truman, ARLA Propertymark president, who said: “We continue to see a growing disparity in the number of private rented homes available against a backdrop of increasing demand from tenants. Therefore, it is disappointing to see that the UK Government did not address this fundamental issue in its Autumn Budget and instead has announced yet another blow for landlords by increasing capital gains tax.
“The private rented sector plays a crucial role in housing the nation with over 4.6 million homes in England alone, therefore it is imperative that the UK Government does not continue to push landlords out of the market.
“In order to ultimately keep people in much needed and affordable private rented homes, we continue to stress the importance of support for the private rented sector including incentives for landlords to invest rather than continuing to penalise them through regulatory bombardment and increasing costs.”
Nick Leeming, chairman of Jackson-Stops, said: “Today’s Budget misses a key opportunity for broader stamp duty reform—a sentiment shared by one in four people across the UK, and by a third of those aged 65 and over. A targeted downsizing incentive would have been a forward-thinking approach, encouraging older homeowners to move to smaller homes without incurring high tax burdens. This would help free up family-sized properties for growing households and create a more balanced housing market.
“With one in three people over 65 calling for change to this burdensome tax, it’s clear that today’s Budget could have gone further to address the broader needs of the housing market and to create a more fluid property chain.”
“We do however welcome the chancellor’s decision to leave CGT on residential property and buy-to-let properties unchanged. With supply already tight across the rental market, increasing CGT would have likely discouraged landlords from maintaining or expanding their portfolios, adding further upward pressure to rental prices and impacting affordability for renters.”
“We also welcome the government’s recognition of the critical role of the ‘bank of mum and dad’ in helping younger generations onto the housing ladder through the extension of the frozen inheritance tax threshold to 2030. With increased tax burdens potentially limiting the ability of families to support their children in homeownership, the government must continue to consider how it can best support prospective homeowners through meaningful housing strategy.”
Lucian Cook, head of residential research at Savills, said: “Any relief buy-to-let landlords and second homeowners may have felt from seeing their exposure to Capital Gains Tax unchanged will have been very short-lived given an increase in the SDLT surcharge.
“The risk is that it further constrains the supply of private rented accommodation, keeping upward pressure on rents. New buy-to-let investors will be very thin on the ground, and even existing larger, wealthier, landlords, will think very carefully about whether they continue investing.
“That means there will be a thinner seam of demand and fewer options for those looking to exit the sector.”
Ryan Etchells, chief commercial officer at Together, said: “The chancellor’s reduction in the discount allowing tenants to buy their council homes under the Right-to-Buy (RTB) scheme will mean they will have to pay, in most cases, tens of thousands of pounds more to be able to get on the housing ladder.
“The government says this will make the RTB scheme ‘fairer and more sustainable’ but the move seems incredibly unfair, when some people who may have lived in their council homes for years and had planned to make it their own will now be simply locked out of home-ownership for good.
“Together’s own research shows nearly a third want to see housing and planning reforms addressed in the first 12 months of Labour’s government, with 12% wanting more help for first-time buyers and 7% keen to see the creation of new property schemes to help assist people’s property ambitions by January 2025. Disappointingly, the ruling on RTB works directly against the public’s wishes.”
Nicky Stevenson, MD at Fine & Country, added: “Today’s budget gave a mixed outlook for the property market, with second-home owners feeling the full force of these tax rises.
“We had hoped to avoid increases in property-related taxes that could slow market growth. With the upcoming rise in capital gains tax, landlords of investment properties will now face critical decisions about whether to sell. Fortunately, this increase does not extend to residential properties, which provides some relief for homeowners.
“Labour’s announcement also brings another significant blow to homeowners with multiple properties, as the stamp duty charge for second homes is set to rise from 3% to 5% from tomorrow. This increase is bound to reshape decision-making for current and prospective sellers in this bracket.
“These tax changes could potentially lead to a slowdown in property sales as owners now have to weigh up the cost of selling against reduced returns.
“Meanwhile, Labour’s abolition of the non-dom tax regime will bring further changes to the property market. This move will end the longstanding tax benefit for UK residents with permanent homes outside of the country who currently avoid tax on their foreign income.
“The removal of this regime could reduce demand for high-end properties often favoured by foreign investors. Reduced interest from wealthy international buyers may lead to a softening in prices at the luxury end of the market.
“Today’s budget has spared first-time buyers, however, with the government explicitly focusing on wealthier, older demographics. This approach aims to shield younger buyers and those entering the property market from further financial hurdles, especially given the persistent pressures of high housing costs and elevated mortgage rates.”
Budget October 2024 Run-down:
National Insurance
There was bad news for employers, as Reeves announced that National Insurance contributions by employers will rise from 13.8% to 15%.
In addition, the threshold at which businesses start paying National Insurance on a workers’ earnings will be lowered from £9,100 to £5,000.
Capital gains
The rates on residential property will remain at 18% and 24%.
Inheritance Tax
Reeves said she will extend the inheritance tax threshold freeze for a further two years to 2030. That means the first £325,000 of any estate can be inherited tax-free, rising to £500,000 if the estate includes a residence passed to direct descendants, and £1m when a tax-free allowance is passed to a surviving spouse or civil partner, she said.
She added that she will bring inherited pensions into inheritance tax from April 2027.
Stamp duty
Reeves announced that the government will increase the stamp duty land surcharge for second homes by 2% to 5% from tomorrow.
Right to Buy discounts
The chancellor is slashing the ‘right to buy’ discount given to those purchasing their council home.
New homes
The chancellor says the government will invest more than £5bn to deliver their housing plan.
Affordable housing
She added this Budget will increase the Affordable Homes Programme to £3.1bn, provide £3bn worth of support and guarantees to increase the supply of homes and support small housebuilders.
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