Spring Budget: How Does This Impact the Property Market?

Many in the property industry were patiently waiting for Jeremy Hunt’s spring budget, with rumours of 99% loan-to-value government-backed mortgages, LISA changes and more help for first-time buyers on the cards.

However, many were disappointed with the underwhelming property initiatives, with the Chancellor introducing a reduction in capital gains tax from 28% to 24% in an effort to stimulate sales transactions and a pledge to build more homes.

Changes in property-related taxation, such as capital gains tax (CGT) rates can influence investment and homebuyer decisions as well as market activity quite significantly. Here, we look at what the spring budget means for the property market as a whole.

Impact on the Property Market

The Spring Budget’s capital gains tax reduction brings welcomed relief for sellers, with the OBR and the Treasury predicting that the 4% reduction will boost tax revenues. This gives an incentive for property owners to sell, thereby providing more stock for buyers in the long run and stimulating property transactions at a time where buyer sentiment is climbing.

This is a welcomed boost for the property market, and one that will help realign the disparity between supply and demand.

Lack of Support for First-Time Buyers

Many industry experts, including mortgage lender Nationwide, have remarked on the distinct lack of support for first time buyers within the budget. The rumoured 99% mortgage scheme and changes to LISAs being left off the budget sheet altogether in favour of tax cuts for sellers will have very little impact on first-time buyers who are struggling to save a deposit in light of the higher costs of living.

At a time where the biggest barrier for people looking to step onto the property ladder is mortgage and deposit affordability, allowing homebuyers to put forward a 1% deposit would have helped reinforce property transactions in light of increasing confidence in the homebuyer market.

Similarly, putting forward reforms to Lifetime ISAs would have given an added boost to the first-time buyer market by bringing a restricted scheme up-to-date and more in line with the current market.

An Optimistic Market

Despite this, the OBR predicts inflation will fall to below 2% within the next few months, prompting many property experts to believe The Bank of England will consider reducing interest rates which will inevitably have a knock-on effect on mortgage affordability. The market could very well see an influx of first-time buyers if this is the case and, with the added reduction in capital gains taxes for sellers stimulating supply, this should result in a healthy, more balanced UK property market which benefits both buyers and sellers. This alignment will encourage a stabilisation in property prices and more predictability which incentivises more transactions.