Chancellor Rachel Reeves has unveiled transformative housing policies in the Autumn Budget 2024, significantly raising the stamp duty on second homes and introducing changes aimed at benefiting first-time buyers.
Key Changes for Second Homes and Investment Properties
The Budget raises the stamp duty surcharge on second homes and investment properties from 3% to 5%, taking effect immediately. The goal is to reduce speculative purchases and free up more homes for primary residence buyers. “In our manifesto, we committed to reforming stamp duty land tax to raise revenue while supporting those buying their first home,” Reeves explained, noting that this increase is projected to support over 130,000 first-time buyer transactions in the next five years.
However, the mortgage industry has voiced concerns. Ross Turrell, Commercial Director of CHL Mortgages, expressed caution, advising a balanced perspective: “The buy-to-let market has continuously adapted to regulatory and economic changes over the years. While this policy may feel challenging, the market’s resilience has been tested time and time again.” Turrell encourages industry professionals to emphasise collaboration and borrower education, equipping landlords to navigate these changes confidently.
Richard Donnell, Head of Research at Zoopla, also weighed in on the 2% surcharge, predicting a decrease in demand from investors and second-home buyers. He noted a recent trend of increased property listings in high-demand areas, attributing the rise to earlier council measures that doubled the council tax on second homes. “The changes will likely sustain this selling trend, especially in areas like London, where high property values already challenge affordability for local buyers,” said Donnell.
New Rules for First-Time Buyers
The Budget includes substantial support for first-time buyers, despite no further expansion of the reduced stamp duty threshold. Starting April 2025, stamp duty costs for first-time buyers in London and the South East will increase by an average of £5,600 and £1,390, respectively. Properties in London exceeding £600,000 will see an additional cost of up to £15,000. Donnell anticipates that buyers may offset these rising costs by negotiating down property prices, potentially stabilising or even cooling market prices in high-cost areas.
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New Rules for First-Time Buyers
The decision to increase the stamp duty on second homes has also drawn criticism from the rental sector. ARLA Propertymark President Angharad Truman highlighted a persistent shortage of private rental properties amid rising tenant demand, noting that higher stamp duties could drive some landlords out of the market. “The private rental sector is essential, housing over 4.6 million families in England alone. The government should support landlords rather than penalising them with mounting costs and regulations,” said Truman, urging for incentives to maintain and expand rental housing stock.
Right to Buy Discount Cut and Social Housing Initiatives
In another policy shift, Reeves announced a reduction in discounts for the Right to Buy scheme. This change allows local councils to retain proceeds from home sales, helping fund new social housing construction. The government will also invest £500 million to build 5,000 new social homes and plans to consult on social rent increases to provide long-term financial stability for providers. Reeves explained, “We are committed to increasing affordable housing by reinvesting in housing stock and putting policies in place to give more people a safe, secure, and affordable place to live.”
These moves aim to address the longstanding housing shortage; however, critics like Together’s Chief Commercial Officer Ryan Etchells argue that lowering the Right to Buy discount could make home ownership unattainable for many council tenants who had hoped to buy their homes. Housing charity Shelter has similarly warned that building new social housing without reforming Right to Buy is unsustainable, likening it to “running a bath without putting the plug in.”
Other Budget Highlights Impacting Households
The Autumn Budget extends beyond housing, impacting areas such as wages, transportation, and taxes:
- Minimum Wage Increase: Wages will rise in April for low-paid workers, although employers warn that increased wage costs and National Insurance contributions may affect hiring.
- Bus Fare Hike: The single bus fare cap will rise from £2 to £3 by 2025.
- Vaping and Tobacco Taxes: Starting October 2026, a flat-rate duty will apply to all vaping liquids, with tobacco taxes rising immediately.
- Education Costs: Private school fees will include a 20% VAT from January 2025.
- Benefits Increase: Benefits will rise by 1.7% in line with inflation, and state pensions will increase by 4.1% in April, keeping up with wage growth.
The Resolution Foundation, a think tank, points out that while the Budget promises long-term public investment, families may face immediate challenges with rising living costs and increased taxes. “The Budget offers stronger public services, but families are set for a further squeeze on living standards as wage growth slows,” says Mike Brewer, the Foundation’s interim Chief Executive.
Partner with Contractor Mortgage Solutions
In light of these significant changes, Contractor Mortgage Solutions remains dedicated to helping clients navigate the evolving housing landscape. Whether you are a first-time buyer or looking to invest, our expert team is here to guide you through your mortgage options and provide you with the tools you need to make informed decisions. With the right support, you can confidently embark on your journey to homeownership or investment. Let us help you turn your housing aspirations into reality.
What’s New!
Budget 2024 Shakes Up Housing Market: Double Stamp Duty on Second Homes & New Rules for First-Time Buyers
Oct 31, 2024