Property industry reaction – Labour Budget 2024

The Chancellor Rachel Reeves has announced a range of measures in the Budget including a stamp duty rise which looks set to hurt landlords.

In Labour’s first budget in 14 years, the Chancellor said Labour would bring back “economic stability”.

Other measures include a rise in capital gains tax the lower rate of CGT will rise from 10% to 18%, and the higher rate from 20% to 24%.

But in some good news for landlords, the rates on residential property will remain at 18% and 24%.

Penalise landlords through regulatory bombardment and increasing costs

The head of the Institute of Fiscal Studies, Paul Johnson, slammed the increase in stamp duty and says the rise would end up hurting renters.

He said, on X, formerly Twitter: “In order to ultimately keep people in much needed and affordable private rented homes, we continue to stress the importance of support for the private rented sector including incentives for landlords to invest rather than continuing to penalise them through regulatory bombardment and increasing costs.”

“I have long said stamp duty is among our worst taxes. So what do we have? An increase for those buying second properties. You might think fine: a tax on rich people and landlords. But those looking to rent will pay part of the cost as fewer properties made available.”

Rents will only go up

Ben Beadle, chief executive of the National Residential Landlords Association, said: “Hiking stamp duty on homes to rent when 21 people are chasing every rental property makes no sense.

“Analysis by Capital Economics has found that increasing Stamp Duty on rental properties from three to five per cent will see a net loss of half a million homes to rent over 10 years. This will not help the huge number of tenants for whom homeownership is still a distant dream.

“The Chancellor has failed to heed the warnings of the Institute for Fiscal Studies that higher taxes on the rental market lead only to rents going up.

“What tenants needed was a Budget to boost the supply of new, high-quality rental housing. What we got is a recipe for less choice and higher rents.”

Another blow for landlords

Angharad Truman, ARLA Propertymark President comments on the increase to Stamp Duty for second homes said:  “We continue to see a growing disparity in the number of private rented homes available against a backdrop of increasing demand from tenants. Therefore, it is disappointing to see that the UK government did not address this fundamental issue in its Autumn Budget and instead has announced yet another blow for landlords by increasing Stamp Duty on second homes.

“The private rented sector plays a crucial role in housing the nation with over 4.6 million homes in England alone, therefore it is imperative that the UK Government does not continue to push landlords out of the market.

“In order to ultimately keep people in much needed and affordable private rented homes, we continue to stress the importance of support for the private rented sector including incentives for landlords to invest rather than continuing to penalise them through regulatory bombardment and increasing costs.”

Landlords bearing the brunt

Emma Cox, MD of Real Estate at Shawbrook, commented: “The Ggvernment should of course prioritise the needs of renters and buyers, but landlords will feel like they are once again bearing the brunt of punitive measures with a further increase in the stamp duty surcharge on additional homes coming into effect from tomorrow.

“The Private Rental Sector (PRS) has a key role to play in the UK housing market, and will be a crucial component to providing adequate stock. Demand still far outweighs the supply of quality homes, and tackling this will be extremely difficult if landlords are disincentivised by government measures.

“Our research shows that landlords have confidence in the market, with a third planning to add to their portfolios in the next 12 months, so the Government should be incentivising – not deterring.

“Providing sufficient stock and meeting Labour’s ambitious housebuilding plans is going to require a multi-pronged approach, and landlords are an important piece to the puzzle. The Government must consider how to support landlords if we are to see real progress in the market.”

Reduce demand from second home buyers and investors

Richard Donnell, head of research and Insight at property website Zoopla comments: “Changes to stamp duty land tax, together with higher property prices, has seen stamp duty raise over £11.5bn in 2023/23. It’s a tax that falls most heavily on buyers in southern England with London and the South East accounting for over 50% of annual tax receipts from stamp duty.

“The extra 2% cost on buying second homes and investment property will reduce demand from second home buyers and investors. Second home buyers are already responding to last year’s Budget which allowed councils to charge double council tax for second homes. This is resulting in a higher level of selling by second home owners. In areas with above average second homes we have seen four times more homes come to the market.

“This announcement also comes with changes announced previously which will see first time buyers pay more from next year. A return to previous stamp duty thresholds from April 2025 will result in an additional 20 per cent of first-time buyers being liable to pay stamp duty and a further 14 per cent will be required to pay a partial amount. The impact is felt across London and the South East in markets with average house prices over £425,000.

“This will increase costs for buyers by an average of £5,600 in London and £1,390 in the South East. In parts of London with home values over £600,000, FTB could pay an additional £15,000 in stamp duty. Buyers will want to take this off the price they pay for homes, keeping price rises in check.”

Keep landlords in the market

On capital gains tax, Mr Donnell said: “It’s positive to see that capital gains tax has not increased for landlords (already 24 per cent for higher rate taxpayers). The private rented sector has seen static supply since tax changes introduced in 2016 and there is a steady net selling by landlords in response to tax policy but also greater regulation of housing and higher mortgage rates. We need to keep as many landlords as possible in the market to provide choice for renters facing limited choice and to prevent rents rising faster than earnings, which hits those on low incomes the hardest.”

Need to stop good landlords from leaving

Jeremy Leaf, north London estate agent and a former RICS residential chairman, says: “The increase in stamp duty surcharge on additional homes by 2 per cent from tomorrow will have a trickle-down effect throughout the market by reducing supply. The change is likely to act as a deterrent to further buy-to-let investment from the many older investors who dominate the sector. As a result, supply will not increase sufficiently to keep rents in check and encourage deposit saving for future first-time buyers.

“We find stamp duty presently keeps owners in homes they don’t need or want, reduces choice and inflates cost for those wanting to buy or rent, to say nothing of the effect on  job and social mobility. Stamp duty could be replaced by a fairer distribution of council tax which is based on values over 30 years old, particularly for higher-end homes.

“On the other hand, by not increasing CGT on the sale of second homes, the Chancellor has at least reduced the risk of a significant disposal of buy-to-let and second homes. We need to stop good landlords leaving the PRS despite record rents and lowest buy-to-let mortgage rates for more than two years, especially as around 1.1 million, or 25% of PRS tenants, pay housing benefit to landlords effectively providing social housing that the government is unwilling or unable to  offer.

“Tenants want to pay their mortgage not their landlord’s, so keeping rents in check to help deposit-saving and improve buying prospects is crucial.”

Upward pressures on rents

Lucian Cook, head of residential research at Savills, comments:  “Any relief buy-to-let landlords and second homeowners may have felt from seeing their exposure to Capital Gains Tax unchanged will have been very short-lived given an increase in the SDLT surcharge.

“The risk is that it further constrains the supply of private rented accommodation, keeping upward pressure on rents. New buy-to-let investors will be very thin on the ground, and even existing larger, wealthier, landlords, will think very carefully about whether they continue investing.

“That means there will be a thinner seam of demand and fewer options for those looking to exit the sector.”

Negatives for property business

Founder and CEO of Atomic Consultancy, Lucy Noonan, said: “We waited for what could have been a chilling Halloween eve Budget from a Chancellor seemingly with her sights set on taxing aspiration.

“However, whilst Capital Gains Tax has been hiked, Business Asset Disposal Relief stays at just 10% albeit rising to 14% in April. This could have been a lot worse and may enthuse potential business sellers to seek a buyer now before the rate increases.

“The two other negatives for property businesses, an increase in stamp duty to 5% on second homes and an increase in the minimum wage meaning slightly higher pay costs perhaps, are surely outweighed by a property market that is about to get busier given likely further cuts in the Bank of England borrowing rate. There’s a reason to be positive here.”

Many homebuyers will be in for a fright

CEO of Yopa, Verona Frankish, said: “With no stamp duty relief extension granted today many homebuyers will be in for a fright should they look to purchase from March of next year.

“Whilst many first-time buyers will still benefit from a stamp duty-free purchase should they remain within the previous £300,000 threshold, many existing homebuyers won’t be so lucky.

“Those existing buyers purchasing over the value of £250,000 are set to be hit by the maximum increase in tax which will see an additional £2,500 added to the already high cost of home buying and ownership.”

Trick not treat for homebuyers

Director of Benham and Reeves, Marc von Grundherr, said: “It’s a case of trick not treat for homebuyers following today’s Budget, as they’ve once again been shown the cold shoulder, with the government refusing to extend current stamp duty relief thresholds.

“Whilst this won’t deter homebuyers from pursuing their aspirations of homeownership, it will add to the cost of purchasing for the vast majority, particularly those climbing further up the ladder.”

Nothing to spook the markets

Mark Harris, chief executive of mortgage broker SPF Private Clients, says: “Raising the stamp duty surcharge for landlords from tomorrow results in an additional entry cost that investors will have to absorb into their business models.

“These days we don’t see so many investors looking to make a quick profit by buying a property for say £250,000, spending £50,000 doing it up and selling it on at £400,000. Most people are in it for the long term and continue to want to hold property for the long term – an additional entry cost is irritating and might put off new entrants to the market.

“But those already in it with established models will continue to invest as it is a market they understand and know. The decision to keep CGT at the same levels for property sales is welcome and will hopefully stave off any panic selling.

“We were not expecting to see Help to Buy make a comeback but would have thought the government might have come up with something to stimulate the housing market and assist first-time buyers but perhaps they are more focused on the social sector.

“Hopefully, so much of this Budget was leaked in advance that there is nothing to spook the markets.”

Tens of thousands of pounds

Ryan Etchells, chief commercial officer at specialist mortgage lender Together, said: “The Chancellor’s reduction in the discount allowing tenants to buy their council homes under the Right-to-Buy (RTB) scheme will mean they will have to pay, in most cases, tens of thousands of pounds more to be able to get on the housing ladder.

“The Government says this will make the RTB scheme ‘fairer and more sustainable’ but the move seems incredibly unfair, when some people who may have lived in their council homes for years and had planned to make it their own will now be simply locked out of home-ownership for good.

“Together’s own research shows nearly a third want to see housing and planning reforms addressed in the first 12 months of Labour’s government, with 12% wanting more help for first-time buyers and 7% keen to see the creation of new property schemes to help assist people’s property ambitions by January 2025. Disappointingly, the ruling on RTB works directly against the public’s wishes.”

Cogs of construction will start to turn faster

Oli Sherlock, managing director of Insurance at Goodlord, said: “With so many lettings market reforms already announced in the Renters’ Rights Bill, it’s no surprise that today’s Budget focused on house building. House building (or the lack of it) is at the heart of the issues currently facing the rental market; we desperately need more homes. And whilst they won’t be built overnight, the government has today laid out tangible plans to get things moving.

“Having committed funding, announced an intention to hire more planning officers, and levelled-up key policy areas for Local Authorities, let’s hope the cogs of construction will start to turn that bit faster.”

Share This Article