Spring Budget 2024: A ‘missed opportunity’ in the housing market

The Spring Budget this week was quite a spectacle: noisy and not short on political quips. With a General Election on the horizon, it was an opportunity to boost the Conservative Party’s prospects. So after weeks of speculation about what might be in the Spring Budget, what did Chancellor Jeremy Hunt actually announce?

As far as housing is concerned, tax changes seemed to be the order of the day. Multiple dwellings relief, furnished holiday lettings tax regime and the non-dom tax system were all scrapped. Elsewhere, the higher rate of property capital gains tax (CGT) was cut.

Will the budget force landlords away from the property market?

According to Lucian Cook, Savills’ head of residential research, the Spring Budget has bigger implications for private landlords and second homeowners than current and aspiring homeowners.

Jeremy Leaf, north London estate agent and a former RICS residential chairman, believes the CGT cut could encourage more buy-to-let investors who were thinking of selling to exit the market in case a Labour government raises CGT again in the future.

He says: ‘This could further reduce the availability of rental property and push up rents, making it more difficult for tenants and young people in particular.’

Mark Harris, chief executive of mortgage broker SPF Private Clients, doesn’t think the CGT change will prompt a ‘flurry of sales’ from landlords: ‘No, they are in it for long-term gain, capital appreciation combined with income yield.’

Cook also doesn’t believe a big landlord sell-off is around the corner. The CGT cut on residential property ‘may tip the balance for a few landlords who have questioned their ongoing investment in the sector’, while the abolition of multiple dwellings relief ‘is likely to temper investment’, he says.

Is it going to get easier for first-time buyers?

But could this give a helping hand to aspiring homeowners? ‘Without any specific measures to help first-time buyers, it may well accelerate the restructuring of the buy-to-let sector to bigger, less mortgage-dependent landlords, as much as opening up stock to those looking to get a foot on the housing ladder,’ says Cook.

If you thought that multiple dwellings relief is about landlords with flats in apartment blocks, then think again. Oliver Custance Baker, head of Strutt & Parker’s country house department, points out that large country homes often have a cottage, annexe or converted barn which – if accounted for as separate dwellings in a transaction or linked transactions – could also be impacted. You only have to look at the property pages of Country Life to see what Custance Baker means.

Charlie Wells, managing director of buying agency Prime Purchase, reckons the scrapping of multiple dwellings relief ‘involves a relatively limited number of deals’.

He adds: ‘The Chancellor has really missed an opportunity to increase transactions and boost not only the property market, but the wider economy. If he really wanted to get the economy moving and encourage activity, he should have offered incentives, such as a stamp duty holiday, to encourage people to buy and sell.'

Wells is not alone. Housing market reaction to the Spring Budget is peppered with the phrase ‘missed opportunity’.

A missed opportunity to help both tenants and landlords?

Over at Rightmove, lettings expert, Christian Balshen, doesn’t mince his words: ‘It has become clear in the last few years that penalising landlords does not work to promote a functioning private rented sector. This is another example of a missed opportunity to support the rental sector for the benefit of both tenants and landlords.’

And for Zoopla’s executive director, Richard Donnell, the Spring Budget was a missed opportunity to take action on boosting supply and mortgage availability in the housing market.

‘Another missed opportunity is the decision not to make the £625,000 threshold for first-time buyer relief permanent. This means 30% more first-time buyers will be liable to pay full stamp duty from March next year,' he says.

First-time buyers were largely overlooked in the Spring Budget. Those hopes of stamp duty changes aimed at aspiring homeowners were dashed. And despite much speculation, a new 99% mortgage scheme didn’t materialise.

In fact, there is not one mention of the word mortgage in the 98-page Spring Budget, Matt Smith, Rightmove's mortgage expert, points out.

Tom Bill, head of UK residential research at Knight Frank, explains: ‘Anyone planning to get on the property ladder would have shrugged their shoulders following this Budget. Demand-side incentives for first-time buyers, such as stamp duty breaks or help for those with smaller deposits, would have been welcome, particularly as mortgage rates and house prices are creeping back up.’

A short-term budget?

Nick Sanderson, CEO of retirement property company Audley Group, argues that the government should look at how the housing market functions as a whole.

‘Instead of continuing its blinkered focus on first-time buyers and young families, it has to look at increasing the supply of age-specific housing,’ explains Sanderson.

‘This would encourage older homeowners to move out of large family homes, freeing up supply and creating movement up and down the ladder. The benefits of this are numerous.’

Anna Clare Harper, CEO of sustainable investment adviser GreenResi, offers an alternative viewpoint: ‘The trouble with short-termist Budgets is that they fail to address the major problems of the day, which are long term and complex.’

She adds: ‘As a result, meeting the housing needs of the next generation is increasingly in the hands of institutions: pension funds and banks who take a longer-term view and are not motivated by vote-winning.’