After the hottest summer on record since 1884, many wondered whether the heat had left the property market. Now, Chancellor Kwasi Kwarteng has delivered his mini-budget announcing changes to stamp duty, cuts on income tax – which is especially beneficial to those in the higher income bracket – as well as no limits on bankers' bonuses. The question is, “how quickly will the housing market adapt to the changes?”
Some might say the Government’s ‘Growth Plan’ leans towards making London and prime UK locations a more attractive place to earn, live and invest, and I would have to agree.
In the prime property market, the single rate of higher income tax at 40% (coming into place from April 2023), and unlimited bankers bonus’ will encourage prosperity in the Capital, giving buyers with higher incomes increased confidence to put down roots, build businesses and make investments here.
Prior to this announcement, my expectation was that the market would remain resilient, with buyers adjusting their budgets to factor in rising living costs. I have no doubt this will still remain a consideration as the cost of living crisis will impact everyone, but it may also help focus and drive decisions around relocation.
It is great news for first time buyers getting onto the property ladder, and hopefully the reduction in stamp duty will help soften the blow on increasing mortgage rates, and that the increase in first time buyers will kick start chains. However with lack of stock and pent up demand still very much an issue, cuts to stamp duty may prolong this problem.
While the Bank of England raised interest rates from 1.75% to 2.25% - the highest level for 14 years - and indicated that the UK may already be in a recession, for many who have traded in the property market over the last 50 years, rising interest rates aren’t something new. The cost of borrowing is still competitive, and having been ‘spoilt’ in recent years with such low rates, we are actually seeing a return to a sort of normality.
We wait to see what direction the Renters Reform Bill will take under the new Government’s direction – will it drive more landlords to sell their investment property? With landlords owning 19%* of the available property in the UK, we hope that a balance can be achieved to ensure that letting property is still seen as a wise investment, and that the changes in stamp duty are seen positively.
All in all, the love affair with property continues and is, in many opinions, a relatively stable personal pension pot alternative. Property remains a solid investment and I believe the appetite to return to the capital will continue to grow. But of course, making the right investment is key, which is why I always recommend speaking to one of our team, who will offer straightforward, sensible advice to suit your approach when it comes to your next move or investment.
Polly Ogden Duffy, Managing Director
* English Housing Survey - Headline Report, 2020-21