Leading up to the Budget, 59% of agents reported that activity levels had been significantly affected by the wide-ranging tax rumours. It is a well-tested reality, that uncertainty hinders property market activity.
Drops in pre-Budget activity levels were more prevalent at the top end of the market where the threat of a mansion tax – and other rumoured changes – were most keenly felt. The mansion tax, originally mooted as affecting properties over £1.5 million, was confirmed for properties of £2 million and over. The surcharge to be applied to council tax was also lower than expected (starting at £2,500 for the lowest band).
Our expectations are that this won’t be a significant change to the prime market, an unwelcome addition but not at a level that is likely to distort activity significantly. It might ultimately lead to some mild adjustments to price levels.
Landlords were again targeted with a 2-percentage point increase in the tax rate on property income – this follows a long line of tax and legislative changes affecting landlords.
There was more funding for planning reform, with accompanying forecasts of a quick pick-up in new housing starts as a result. It needs to be acknowledged that viability is as much of a challenge here and this quick pick-up is unlikely to materialise.
OBR forecasts for house prices suggest a steady increase in prices of an average 2.5% per annum over the forecast period out to 2030.
Now that buyers and sellers have more certainty over tax changes, we would expect some increase in activity and the market to return to the more normal market drivers. Source: Dataloft by PriceHubble poll of subscribers, Office for Budgetary Responsibility.