Labour’s autumn budget has several factors that will impact the property market. Let’s look at what these are. I’ll start with stamp duty increases, of which there are many!
1. Stamp duty for existing home owners
Change: Currently the first £250,000 of a property purchase is free of stamp duty. From April 2025 this reduces to the first £125,000 of a property. From £125,001 to £250,000 buyers will pay 2%, then from £250,001 to £925,000 they pay 5%.
Potential impact: As we saw post COVID, lower stamp duty rates incentivise people to move home and the government typically makes more money overall from stamp duty than in a slower market. This is a short-sighted increase.
2. Stamp duty on additional properties
Change: If you’re buying a property in addition to your main home, you will now pay an additional 5% stamp duty (as of 31 October 2024). Previously this surcharge was 3%.
Potential impact: This will likely deter landlords from buying rental properties. There’s already a chronic shortage of rental properties, resulting in higher rents which in turn is compounding the cost-of-living crisis for lower earners. This is the latest attack on landlords, designed to increase tax revenue and, presumably, free up properties for first time buyers. What first time buyers really need is a government backed scheme to help renters get on the property market, especially where, for example, they’re paying more in rent than they would on a mortgage. So, this increase is a short-sighted move by the government.
3. Stamp duty surcharge for overseas buyers
Change: This has risen from 1% to 3%.
Potential impact: Some overseas buyers may rethink buying property in the UK. However, those who do buy here usually do so for a long-term investment in what is still considered a relatively safe country for property investments. Overseas buyers who are buying additional properties in the UK will be impacted twice – by the above surcharge plus this.
4. Stamp duty reduction for first time buyers
Change: Currently, first time buyers don’t pay stamp duty on properties up to £425,000, and then they pay 5% on any amount from £425,001 to £625,000. From April 2025 they will only be exempt from stamp duty on properties up to £300,000 and will pay 5% stamp duty on any amount from £300,001 to £500,000.
Potential impact: First time buyers will pay up to £11,250 more in stamp duty than prior to April 2025. This is not exactly helping first time buyers, especially given in some parts of the country £300,000 doesn’t buy much.
5. New build housing goals
Pledge: Labour aim to build 1.5 million new homes in the next five years, backed by a £5 billion investment in housebuilding. This includes the creation of new towns. Alongside this, they are targeting brownfield sites for development and easing up on green belt development restrictions.
Potential impact: We have a shortage of housing, so this should help meet demand. That said, no government since the 1970s has met their house building budget so let’s see how this goes!
6. Capital gains tax
No change. While some CGT rates have increased significantly, no changes have been made to rates on additional residential properties (e.g. second homes, buy-to-let) which remain at 18% for gains that fall within an individual’s unused basic rate tax band and 28% where chargeable gains exceed the unused part of an individual’s basic rate tax band.
7. Affordable housing
Change: There will be a £500 million investment in developing affordable housing.
Potential impact: This should make it easier for lower earners to get on the housing ladder, depending on where these homes are, how much they cost and if/what schemes go along with them.
8. Right to buy
This scheme allows council tenants to buy their council home at a discount of up to 70%.
Change: The maximum discount now available is up to £136,000. As before, there is eligibility criteria. New houses may be excluded from the scheme.
Local councils will keep 100% of the revenue from sales to invest in new housing.
Potential impact: This is a positive change. Previously, revenue was split between local and central government which, along with the discounted sold price, didn’t leave councils with enough money to replace the housing. To curtail the growing homeless crisis, councils must find a way to increase their housing stock.
9. Cladding
First and foremost, my heartfelt condolences go to all those affected by the Grenfell disaster. Their losses and trauma naturally far outweigh any other factors mentioned below.
Change: Labour have pledged £1 billion to remove dangerous cladding. Not before time.
Potential impact: Not before time. It’s over 7 years since Grenfell. The fact there is still dangerous cladding on homes is a disgrace. For years, homeowners in blocks with dangerous cladding were unable to sell, while in some cases paying for security to keep an eye on the buildings 24/7 in case of a fire. In recent years these apartments can be sold, but are problematic, which has caused financial hardship for owners. I’m pleased to see Labour pledge to resolve this issue. Let’s hope they do so, quickly.
10. Planning reform
This is due in the spring.