After months of speculation, Chancellor Jeremy Hunt has now made his budget announcement and the UK property market has begun to formulate its response.
What does the new Autumn Statement mean?
It’s fair to say the last few months have been fairly dramatic, so what does the new Autumn Statement mean exactly? September's mini-budget was delivered to promote economic growth as the Bank of England raised the base rate to 3% to get inflation under control.
This signalled to the housing industry that things would be changing, perhaps significantly, especially when it came to mortgage rates. Indeed, the average 2-year fixed interest rate hit 6% for the first time since 2008.
Unlike his predecessor, Jeremy Hunt has demonstrated his willingness to work with central banks, providing a targeted fiscal and monetary policy. He also accentuated the stability that has since been the order of the day. The UK government said that this Autumn Statement set out a clear and credible path to ensure economic stability by taking ‘unprecedented steps’ and ‘difficult decisions on tax and spending.
What does this mean for the housing market?
So, what does this mean for the housing market? The Chancellor promised to keep Stamp Duty cuts in place until the end of March of 2025, at which time the nil-rate threshold at which stamp duty is paid will drop from £250,000 to £125,000. This will result in first-time buyers trying to get on the housing ladder before this cut-off point, as they’ll pay a lot less stamp duty. Homeowners looking to purchase a second property will also be keen to move quickly so as to avoid paying more.
Hunt also acknowledged concerns regarding a slowing housing market and will create incentives to support the housing market by boosting transactions. Previously, industry experts have questioned the impact stamp duty cuts will have on the housing market, with Private Finance technical director Chris Sykes saying, ‘Long-term reform is needed and would have the least impact on pushing up house prices. A short-term holiday would likely push them up.’ Others continue to claim the stamp duty cut will make little difference.
In the meanwhile, we can see the growing demand for privately rented housing far outstrips the supply. Ben Beadle, Chief Executive of the National Residential Landlords Association, comments that the Government underestimated the potential for housing to drive growth and deliver for the economy.
What does this mean for future prosperity?
The question now is, what does this mean for future prosperity? The government believes the announcement will provide the necessary conditions to underpin economic growth, as, undoubtedly, the economy is already somewhat in recession.
According to the International Monetary Fund, it’s expected there will be an international recession affecting one-third of countries either this year or next. However, it’s worth noting that the UK economy is expected to be roughly back to pre-pandemic levels by August of this year. At the same time, the Chancellor forecasted the GDP will rise by 1.3% in 2024, 2.6% in 2025 and 2.7% in 2026. As a result, the housing market is not in a doom loop. JLL head of EMEA and UK Living Research, Nick Whitten said, ‘We do not see a housing crash occurring in the UK, more a correction.’
Sources: UK Government, FT Adviser, The Independent, Property Reporter, The Guardian.