A MIXED AUTUMN BUDGET FORECAST FOR PROPERTY

25.10.18

This year’s Autumn Budget on 29 October is the last major fiscal statement before the UK’s exit from the European Union in March 2019. With a raft of conflicting media commentary surrounding the future of the UK’s property industry from supply and demand imbalances and new stamp duty tiers to the streamlining of property transactions, the announcement will be a much-welcomed insight into the government's plans. So what can we expect?

Brexit is likely to be the limelight stealer. However, given the Government has put ‘improving the housing sector’ as a key priority on their agenda, many are predicting that the property market will be effected in some way.

News outlets are analysing the possible changes buy-to-let landlords could experience. In a recent article on Landlord Today, Andrew Turner, chief executive of  Commercial Trust Limited, shared his predictions, including the possibility of tax breaks for longer tenancies.

Mandatory longer-term tenancies continue to be debated in Parliament. For a year, there’s been speculation that landlords could be incentivised to offer longer term tenancies through tax breaks, so it’s possible this will be announced.

Additionally, landlords and tenants could potentially receive a capital gains tax break when a property is sold to a sitting tenant of at least three years. Currently, landlords pay up to 28% on profits for capital gains tax.

The tax break is a proposal from the think tank Onward, which claims the policy would benefit nearly half a million households over five years with an average capital gain of £15,000 per property. The ultimate intent is to encourage tenants to make the transition from renting to homeowning.

Last year’s Budget abolished the stamp duty for all first-time buyers, with a banding stamp duty muted for discussion this year. There are expectations too, that stamp duty will rise for buy-to-let investors. This would, it’s argued, raise money for the Exchequer and help keep house prices down. The Prime Minister also announced reforms to stamp duty for overseas buyers and companies – a move designed to curb foreign investment and thereby increase the property opportunities available to UK residents. It’s a change however, that will do little to address the property shortage or the availability of affordable housing for first-time-buyers, and instead is likely to make UK property less appealing to overseas investors.

More positively, in an effort to do away with excessive ground rents – which often run to hundreds of pounds a year – the government has also proposed to scrap leasehold on new build properties. Meanwhile, further leasehold reform could see ground rents capped at a nominal fee of £10 on new leases, and greatly reduce the financial pressure on owners of leasehold estates.

Research by Market Financial Solutions recently revealed the property policy reforms people would most likely want to see. 55% of Britons strongly support the introduction of new laws to prevent gazumping, with this number rising to 64% among those who own one residential property. Public support for this reform clearly demonstrates how common it is for people to lose out on a property acquisition due to last-minute bids being made by rival buyers. Improving the market’s knowledge of alternative finance options is also necessary to support prospective homebuyers seeking real estate opportunities. We await with bated breath the results.

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