Budget and stamp duty fallout. House prices to grow 23.4% by 2029. New Shadow Housing Secretary

Budget and stamp duty fallout

The stamp duty increase announced in the UK’s 2024 Autumn Budget has significant implications for the housing market, particularly for second-home buyers and landlords. Starting on October 31, 2024, the stamp duty surcharge on additional properties such as second homes and buy-to-let (BTL) properties will rise from 3% to 5%. This change aims to discourage investment in non-primary residences and free up more properties for first-time buyers. For example, a ￡500,000 second home now incurs an additional ￡37,500 in stamp duty compared to the previous rate

While the increase may reduce competition in the property market from investors, it could also have unintended consequences. Some experts warn that higher costs for landlords could lead to reduced investment in the rental market, worsening the already tight supply of rental homes. This could lead to higher rents as landlords may pass on these costs to tenants.

Moreover, the rise in stamp duty could slow down property transactions, especially in areas with high levels of second-home ownership. This could further strain the housing market, which is already facing affordability challenges. First-time buyers, who were already struggling with high property prices, could find it even harder to secure a home.

In the broader context, these changes reflect the government's focus on raising taxes on property investors to support first-time homebuyers and ease some of the housing pressures. However, the long-term effects remain to be seen, as they could disrupt both the housing and rental markets.

Savills predict house price growth of 23.4%

Savills' recent forecast indicates a significant recovery in the UK housing market, with average house prices expected to increase by ￡84,000 over the next five years, reflecting a 23.4% rise by 2029. This growth is supported by a return to 2% inflation and decreasing interest rates over the coming years, leading to improved buyer confidence and affordability.

Key Predictions:

• 2025: 4% price increase (￡14,500), average price reaching ￡372,500.
• By 2029: Average price of ￡442,000, marking a substantial uplift.

Market Conditions and Influences: The UK housing market is currently impacted by high living costs and mortgage rates, causing a dip in real house prices. However, easing mortgage rates and stabilised inflation are set to renew price growth. Challenges remain, such as fluctuating debt costs and tax changes that could disrupt the market.

Regional Trends: More affordable northern regions are expected to outpace growth in London and the South East, with the North West leading at a projected 29.4% growth over five years. Commuter areas near employment hubs, especially London, have seen renewed activity but will face growth limitations due to higher income-to-loan ratios.

Transaction Volumes and Buyer Segments: Transaction levels remain below pre-pandemic averages, influenced by cautious home movers. Recovery is anticipated to gain momentum post-2027, particularly among second and third-time buyers. First-time buyer numbers are expected to stay subdued without government aid, and rental market regulations may also affect buy-to-let investments.

Outlook for Housebuilders: Housebuilders should prepare for regional variations in growth and a potential surge in demand from 2027 as affordability improves and pent-up demand is realised. The market’s recovery will be uneven, highlighting opportunities in the North and challenges in southern regions where affordability pressures persist.

Kemi Badenoch appoints new Shadow Housing Secretary

Kemi Badenoch, as the new leader of the Conservative opposition, recently reshuffled her shadow cabinet, including the appointment of Kevin Hollinrake as Shadow Secretary of State for levelling up, housing and communities secretary. Hollinrake was a co-founder of the estate agency Hunters.

The politician has had a series of close calls with press reporting on potentially unnecessary expenses and votes. Hollinrake, voted against an amendment to the Landlord and Tenant Act 1985 in 2016 that obliged landlords to make their homes fit for human habitation. His job will be to scrutinise Labour’s approach to housing, especially as the Labour government navigates ambitious targets like building 1.5 million homes in this parliamentary term.

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