The recent Autumn Budget has brought a wave of reactions from various sectors, particularly the housing market. We caught up with Head of New Homes, Ella Pearson, to look back at some key aspects of the budget that are poised to impact new homes and the broader housing market significantly.
Increased Investment in Affordable Homes
One of the most notable announcements is the Chancellor’s commitment to significantly increase investment in affordable homes. This move is particularly beneficial for small to medium-sized new-build developers, who often have fewer affordable homes on their sites, which to date, haven't necessarily been seen as an attractive option by affordable providers due to the limited unit numbers. The increased funding is expected to reduce the financial risks for housing providers, thereby encouraging them to invest more in affordable housing projects.
Ella said: “The increased investment in affordable homes promised by the Chancellor, which was significantly more than what was initially expected, is positive news for small to medium-sized new-build developers which typically have fewer affordable homes on site. The hope is that this will increase the appetite of housing providers as their risk is reduced and whilst it is a positive step, the sector will need to ensure that the funds are used effectively.”
This initiative is anticipated to bring more affordable homes to the market, providing more opportunities for individuals and families to step onto the property ladder. The ripple effect of this investment could lead to a more balanced housing market, where affordability is not just a dream but a tangible reality for many.
Support for First-Time Buyers
The Government’s pledge to engage with the industry around the Mortgage Guarantee Scheme and make it permanently available is another significant highlight. This scheme supports loan-to-value lending of 95 per cent, which is crucial for first-time buyers who often struggle to save for a large deposit.
Ella added: “First-time buyers will also be pleased with the Government’s pledge to engage with the industry around the Mortgage Guarantee Scheme and make it permanently available to support loan-to-value lending of 95 per cent. If these plans are followed through, it should stimulate the market further.
“By making the Mortgage Guarantee Scheme a permanent fixture, the Government aims to provide long-term support for first-time buyers, ensuring that the dream of homeownership remains within reach for many. This move is expected to stimulate the housing market by increasing demand and encouraging more people to consider buying their first home.”
Impact on Buy-to-Let and Holiday Homes
However, the budget is not without its drawbacks. Ella added: “The hike in Capital Gains Tax on second homes is expected to lead to fewer buy-to-let transactions, diminishing the demand for holiday homes. This budget measure might reduce the availability of rental properties, potentially driving up rental prices. Additionally, the decreased interest in holiday homes could affect the tourism sector, especially in areas that depend heavily on holiday rentals.
“The Autumn Budget has offered a mixed outlook for the housing market. On the positive side, increased investment in affordable housing and support for first-time buyers are promising steps towards improving housing affordability. Changes in the Bank of England interest rates are also expected to encourage more first-time buyers and families to enter the property market.
“However, the rise in Capital Gains Tax on second homes could have unintended consequences for the rental and holiday home markets. As these measures take effect, it will be essential to closely monitor their impact to ensure that the benefits outweigh the drawbacks and that the housing market remains robust and accessible for everyone.
