Spring Budget 2024: A Closer Look at Its Limited Impact on Homebuyers and the Housing Market:

The Spring Budget of 2024 offered little solace to hopeful homebuyers and mortgage borrowers, presenting a series of tax adjustments with minimal impact on the broader housing market.

Observations from the Budget:

• A reduction in capital gains tax rates for property sales was introduced, potentially motivating an increase in property listings.

• The existing tax benefits for holiday home rentals will be eliminated, potentially influencing the rental market landscape.

• Despite speculation, no initiatives, such as the anticipated 99% mortgage scheme or enhancements to the Lifetime ISA benefits, were introduced to ease the path to homeownership or mortgage affordability.

• The temporary elevated stamp duty threshold will not be made permanent, potentially impacting first-time buyers in the coming year.
  

This year's Spring Budget seemed like an opportune moment for the government to garner favour prior to the upcoming general election. However, the absence of significant measures to address the affordable housing shortage or to ease mortgage accessibility may leave many younger and less affluent voters disenchanted.

The omission of the rumoured 99% mortgage scheme particularly stands out. This scheme could have provided a crucial leg up for first-time buyers with minimal deposits, although it also carried the risk of leading homeowners into negative equity should property values decline. Additionally, there was hope for modifications to the Lifetime ISA penalties and an increase in the home value limits applicable for ISA savings, which did not come to fruition.

Tax Changes with Potential Market Impact:

The upcoming reduction in capital gains tax from 28% to 24% for higher-rate taxpayers selling non-primary residences may incentivise property sales, potentially enhancing market supply. This change, however, also benefits affluent property sellers by allowing them to retain a larger portion of their profits.

The abolition of tax advantages for furnished holiday lettings, effective from April, might shift the attractiveness of holiday rentals versus long-term rental investments, possibly increasing the availability of properties for long-term renters or local homebuyers.

A notable stamp duty amendment will see the elimination of relief for purchasing multiple dwellings simultaneously, aiming to discourage bulk property purchases that do not contribute to the private rental sector's growth.

Expert Insights:

Richard Donnell, Rightmove’s Executive Director of Research, suggests that while some tax adjustments may slightly influence the housing market, particularly in tourist-heavy regions, these changes will unlikely make a significant dent in the broader market dynamics. The budget overlooks crucial areas such as housing supply enhancement, mortgage market support, and the planning system overhaul needed to foster more home construction.

The missed opportunity to cement the elevated first-time buyer stamp duty threshold as a permanent fixture means an impending increase in stamp duty liabilities for a significant number of first-time purchasers starting next March. This decision underscores a broader need for strategic reforms to bolster housing availability and affordability, including promoting long-term fixed-rate mortgages, which could notably assist young buyers in high-cost regions.

Written by Veera Josey, 7th March 2024

Sources: Rightmove