Measures to support the housing market were announced by the chancellor of the exchequer as rising interest rates and a slowing economy are expected to lead to activity and prices falling, though the autumn statement was seen as containing further blows to the buy-to-let market.
The Office for Budget Responsibility expects housing activity to slow over the next two years, with house prices forecast to fall by 9% and remain below their current level over the next five years.
As a result, Jeremy Hunt said stamp duty cuts announced by his predecessor Kwasi Kwarteng in September’s doomed mini-budget will remain in place until 31 March 2025.
The nil rate threshold of stamp duty land tax was hiked from £125,000 to £250,000 for all purchasers of residential property in England and Northern Ireland, as part of the September measures.
Increased the nil-rate threshold paid by first-time buyers from £300,000 to £425,000 and the maximum purchase price for which first-time buyers’ relief can be claimed was increased from £500,000 to £625,000.
“This will now be a temporary SDLT reduction,” the Autumn Statement said. “The SDLT cut will remain in place until 31 March 2025 to support the housing market and the hundreds of thousands of jobs and businesses which rely on it.
“The government will amend the Stamp Duty Land Tax (Reduction) bill to implement this measure.”
However, cutting capital gains allowances from £12,300 to £6,000 from next April, and then to £3,000 from April 2024, was seen as likely to accelerate the disposal of buy-to-let property.
“There could be a buy-to-let bonfire in the next 12 months,” said Riz Malik, director of R3 Mortgages.
He noted that if Hunt’s expectations of a shallower and reduced recession are correct, “interest rates could fall”, which could lift demand for tracker mortgages.
Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said: “For buy-to-let investors who own property as part of a limited company these changes could be a triple whammy, coming on top of rises in corporation tax.
“They will not only have to pay more tax on dividends on profits from rent but now that CGT has been aligned with interest rates and they sell up, they could be faced with a hefty bill in just one hit. This could discourage them from selling, causing parts of the housing market to potentially seize up.
“With house prices already facing a significant correction, if even more potential sellers try and avoid selling at what they perceive as a loss, fresh paralysis will add further uncertainty to a highly sensitive market.”
Hunt also said there would be public money made available from 2025 to help pay for better insulation and upgraded heating systems, along with a new goal to reduce energy consumption from buildings and industry by 15% over the next eight years.
“Reducing demand by this much means, in today’s prices, a £28bn saving from our national energy bill or £450 off the average household bill,” Hunt said.
As well as a £6.6bn existing investment in energy efficiency, Hunt said, a further £6bn would be invested from 2025 for insulation and upgrading heating systems.
Brian Murphy, head of lending at Mortgage Advice Bureau said this was a “heartening” boost for homeowners and may require “a joint effort between homeowners, lenders, councils and the government”.
“What will be interesting to note is how easy the Government makes it for homeowners to apply for Government support to improve the efficiency of their homes – previous green home initiatives have seen poor take-up or been abandoned completely”.