Over the next days all of us will be digesting the outcome of the budget and what it means to us individually. The housing market, which has stalled in recent weeks, has likewise been waiting for the Chancellors speech so it can move forward.
Realistically, the main driver for the housing market at the moment now lies with interest rates and if the Bank of England feel the time is right to reduce them. No doubt, over the next few days they will be analysing the effect of the budget closely before their announcement on 7th November.
Considering some of the measures announced in the budget, lower rates will be a welcome shot in the arm for the housing market as for many months there has been talk to rate reductions but the Bank of England have been reluctant to act due to the “stop, start” political situation with the General Election and budget. The 0.25% rate reduction in August has not been significant enough to increase confidence and encourage first time buyers to the market in large numbers. The next couple of interest rate announcements will be critical as to how the market shapes up in 2025.
The number of properties for sale is still high, stock levels are definitely hindering sales as sellers are competing with so many other properties. This has meant that locally house prices have not changed much at all throughout the year.
The biggest change in the budget for the housing market was the immediate increase of the additional home Stamp Duty Surcharge from 3% to 5%. The cost of buying a £200,000 second home will now attract a £10,000 Stamp Duty tax payment. This could impact the appetite for landlords to buy houses to let, something the Private Rented Sector needs as over the years available housing stock for renters has reduced and rents have risen as a consequence. A shortage of quality homes in the Private Rented Sector will add additional pressure to an already difficult sector.
The temporary concession in Stamp Duty thresholds is due to end in spring 2025, until then, no Stamp Duty is payable on purchases up to £250,000 and £425,000 for first time buyers. Both of these concessions are due to be reduced by £125,000 at the end of March so between now and then is the opportunity to buy a home and save thousands in tax.
A busier end of year and new year period is predicted if the cost of borrowing is reduced with buyers still able to benefit from the Stamp Duty concessions.