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Property market reaction to the Autumn Statement

On 17 Novermber, Chancellor Jeremy Hunt delivered his Autumn Statement to parliament, announcing that millions of people will pay more tax as he cut the top-rate threshold and announced freezes on several other taxes.

The total amount of savings from the Autumn Statement has been costed at £55bn, through tax rises and cutting government spending. 

In real-term costs, Hunt has paved the way for years of pain, as UK households’ disposable incomes will fall by 7.1% over the next two years – the lowest levels since records began in 1956/7, taking incomes down to 2013 levels, according to the independent Office for Budget Responsibility.

The chancellor made several announcements that will have a direct impact on the property market, including a deadline on stamp duty cuts, changes to council tax and  capital gains tax, plus an end to the current energy price cap from April 2023.


No stamp duty up to £250,000 will remain until 2025

Iain McKenzie, CEO at The Guild of Property Professionals, says: “House prices are unlikely to drop dramatically as the unprecedented demand we have seen in recent years has endured. There may be some realignment in pricing to adjust for the rising cost of living, but the market will recover. During the global financial crisis, house prices dropped by around 19%, however, it has sustained and grown thereafter.

“Despite the increases in tax and budget cuts, the stamp duty cut will remain in place until 2025, which shows that the government sees the property market as driving growth and stability. These incentives are crucial to restoring confidence in house-buying, especially now that the Help to Buy scheme has ended. First-time buyers are being pushed out of the market, as they struggle to meet deposit requirements needed to satisfy lenders.”


No cuts to the HS2 budget

Brendan Sharkey, head of construction and real estate at MHA, says the property sector will be relieved that at least infrastructure spending has not fallen victim to spending cuts and that Jeremy Hunt has stuck to the existing commitments. 

Sharkey adds: “The big thing the construction sector hoped for from the Autumn Statement was for infrastructure spending to be protected from swinging cuts. As the Chancellor finished speaking many in the industry will have breathed a sigh of relief that there were no reductions to existing infrastructure spending.  

“The construction industry needs governments to be committed to the infrastructure decisions that have been made. They should not be subject to the vagaries of different governments or chancellors and Jeremy Hunt stuck to the existing plans. Well done Jeremy.”


Millions could pay higher council tax bills 

However, Jeremy Hunt did announce that councils will be given the power to increase council tax by 5%. Shortly after the announcement, Rightmove released data showing council tax payments, as a proportion of rent and mortgage payments, by local authority in England.

The data showed that people in Hartlepool pay council tax that is equivalent to 22% of their annual mortgage, versus just 1% of their annual mortgage payment for people in Westminster. The annual mortgage payment was based on an assumed mortgage of 25 years with an initial fixed 6.2% interest rate, and 90% loan to value. 

Looking at total council tax payments, Rutland pays the highest council tax in monetary terms, at £2,300 per year for Band D. This is nearly three times the amount paid by residents in Westminster (£866).


Capital gains tax threshold slashed 

The capital gains tax (CGT) threshold is being halved from £12,300 to £6,000, and in April 2024 it will be halved again to just £3,000.

Tom Bill, head of UK residential research at Knight Frank, says: “The cut to the capital gains tax exemption is a further disincentive for landlords but, like other announcements in the Autumn Statement, it could’ve been worse. 

“It will disproportionately affect landlords of lower-value properties but CGT rates have not been aligned with income tax, so a material drop in demand or a wave of selling is unlikely. Landlords have faced a series of tax hikes in recent years but private rented property accounts for 1 in 5 of English households. At a time when living costs are rising so quickly, policy should remain rooted in economics, encouraging landlords to remain in the sector and keeping downwards pressure on rents.”

Lastly, Ben Beadle, chief executive at the National Residential Landlords Association (NRLA) said: “The government has yet again failed to recognise the potential for housing to drive growth and deliver for the economy. The Chancellor should have focused on boosting supply by ending the Stamp Duty Levy on the purchase of new rental homes. 

“Research by Capital Economics suggests that scrapping this could lead to a £10bn boost to Treasury revenue. This would be as a result of increased income and corporation tax receipts. Instead, these swinging cuts to Capital Gains Tax allowances will dissuade investment for years to come.”

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