What was in the Autumn Statement to support the property market?

The Chancellor of the Exchequer, Jeremy Hunt, gave his Autumn Statement on 22nd November 2023 explaining the forecasted economic growth for the future and announcing various initiatives to drive the economy forward.

Unfortunately, there was little focus on anything that would specifically boost the property market. In fact, according to Sarah Thompson, Managing Director at our sister company Mortgage Scout: “Today's Autumn Statement announcement has left homeowners, especially first-time buyers, underwhelmed. The only thing that the Government did offer with regards to mortgages was the extension of the mortgage guarantee scheme for 95% LTV mortgage products for another 18 months, which while providing banks and building societies with more confidence, offers limited practical impact for actual homebuyers.”

And perhaps the biggest disappointment was little support for what we really need – additional support for first time buyers. According to Kevin Shaw, our National Sales Managing Director: “Search for ‘first time buyers’ in the 120 pages of the Autumn Statement and nothing comes up. Likewise ‘Help to Buy’ (and variations on this theme). And ‘downsize’.  Each of these elements are vital to a successfully functioning property market and each is in need of fiscal or other financial support, yet each was ignored.

“Apart from announcements on planning and infrastructure and the re-announcement growth funding for Cambridge, London and Leeds, there was very little in the Autumn Statement for the property market.

“The sector had hoped for additional support for first time buyers in the form of an extended mortgage guarantee scheme, a new ISA and an increase on the £450,000 upper limit on house purchases funded by a Lifetime ISA. There were also suggestions that the Autumn Statement would bring cuts to Stamp Duty and to Inheritance Tax and Capital Gains Tax.

“My belief is that the Government should look at carrying out a more fundamental review of the levels of stamp duty (which is higher than the USA, Japan, Canada, Australia, Dubai and many other countries) -  especially in the higher price levels where, by preventing homeowners from moving up the ladder, it stymies downsizing. It is widely acknowledged that if older couples move out of large family homes, freeing them up for families, a significant problem in the housing market would be addressed.  But high stamp duty prevents this.”
 

However, that doesn’t mean that some of the announcements won’t help support buying and renting a home, and even property investment in the future. The first piece of good news from the budget is that finally, after a tricky 18 months, the Chancellor was able to report some positive developments within the economy.

Firstly, inflation has halved since the start of the year, as Rishi Sunak promised in January. The double-digit rise in general prices has now reduced to 4.6% - still higher than the long-term 2-3% annual rises, but clearly much easier for everyone to cope with. At the same time, it’s important to bear in mind that the general ‘cost of living’ is still much higher than a few years ago and is continuing to rise.

Secondly, our economy hasn’t fallen into recession as some had predicted and has actually grown slightly. But although the latest forecasts are still positive, according to the Office of Budget Responsibility (OBR), they are lower than was forecast back in March: now 0.7% for 2024 and 1.4% for 2025.

Finally, there is increased support to encourage business growth, from extending frozen business rates through to ensuring small companies get paid within 30 days. The Chancellor also said that he would make permanent a system called ‘full expensing’, where for every million pounds a company invests, they can deduct £250,000 from a tax perspective.

However, little of this is likely to have much impact on the property market and individuals over the next few years.

So, is there anything that people can look forward to in terms of help affording and investing in property following the Autumn Statement?

The key takeaways that relate to property are:

1. Boosting incomes for buyers and renters
2. Increasing the number of those in paid work
3. Boosting investment for specific businesses and areas across the country
    

Boosting incomes for buyers and renters
There are several key changes that will boost people’s income over the coming years and help them afford property costs, particularly in the rental sector.

One of the critical announcements is the shift in Local Housing Allowance, which has been frozen since 2019, meaning those on benefits in the private rented sector have had to find additional money to pay for their accommodation. Although the ‘freeze’ hasn’t been taken off, the Government has changed the level of LHA that is going to be paid, moving it to 30% percentile of local rents, which will increase household support by an average of £800 next year. In addition, benefits will increase by 6.7% in April 2024, so both these changes should help tenants to absorb the rises in rents seen over the last few years.

Other boosts to income go to pensioners, who will be given an uplift of 8.5% from April 2024. That will increase pension income to £221.20 a week, which could help boost incomes by £900 per annum.

And there is more good news for those that are employed, with the National Minimum Wage increasing from £10.42 to £11.44 an hour and National Insurance costs reducing from 12% to 10%. There are also changes for those that are self-employed, with Class 2 National Insurance being scrapped and, for those on high incomes, the cost of Class 4 National Insurance dropping from 9% to 8%. This will all help put additional money into people’s pockets, which will support those buying, owning and renting property.  

Increasing the number of those in paid work
Having more people in paid work can only be helpful to those renting privately and may potentially boost the number of first-time buyers.

The Government announced various initiatives to help support people back into work post-Covid, including additional funding for those with health conditions and those who have been unemployed for over a year. If this is successful, it could help a further 200,000 people back into long-term employment.  

And there is a ‘stick’ for those that aren’t currently seeking employment when they are able to work: they are likely to lose access to benefits and even things like free prescriptions.

Property-related changes around the country
From an investment perspective, there were some opportunities outlined in the Autumn Statement, but many of these had already been laid out in the last budget. The key boosts are:

• Support to make planning easier, which can help grow property prices and create more development locally. This came in the form of higher fees for large-scale infrastructure projects, but on the provision of quicker turnarounds -and if this isn’t delivered, the cost of the application will be returned.

In addition, extra money has been promised to reduce the backlog of planning in areas including London, Leeds and Cambridge, which again should provide some investment opportunities. Better infrastructure and development typically helps to raise prices and rents, as long as the local economy is boosted.

And a surprise announcement that we need to hear more about was a proposal of new permitted development rights to turn one home into two flats, which could offer some great investment opportunities for small developers.

• In return for homeowner or landlord support for transmission infrastructure, those with properties near new pylons and electricity substations will qualify for up to £1,000 year off energy bills over a decade – supporting households by up to £10,000.
   
• Finally, there was the announcement that there would be more investment zones in the Midlands and Manchester, potentially supported by £3bn of extra investment that could help create 65,000 additional jobs. On top of this, for areas that are likely to benefit from investment in the Film and TV sectors, AI, Life Sciences, Aerospace and Green Energy, there will be more funding or reduced taxes to help drive the economy further. That, in turn, should help increase demand for property and boost prices and rents.

Overall, although there was nothing much in the Autumn Statement for your everyday property buyer, the promise of higher incomes for many of those renting is welcome news. And for property investors, if you look hard enough, there could well be some good opportunities to invest and make money in the future.

To find out more about upcoming investment and potential opportunities in your own local area, simply contact your nearest branch and one of our property experts will be delighted to have a chat.