On Wednesday, the Chancellor is due to deliver the second highly anticipated Autumn Budget of her tenure. And with borrowing costs elevated, growth stubbornly weak and speculation swirling over significant tax reforms, much of the industry is bracing for impact.
To gauge the mood ahead of the statement, Mortgage Soup spoke to experts from across the sector about measures they fear could destabilise the market, and the policies they hope Reeves will adopt to restore confidence and stimulate activity in the months ahead.
FIX THE PROPERTY TRANSACTION SLUMP
Given significant buyer hesitancy in recent months – fuelled by high inflation, high interest rates and budget speculation – many are calling for steps to be taken to make moving home more appealing, with particular emphasis on help for first-time buyers.
Matt Harrison, customer success director at Finova Broker, said: “To inject some much-needed movement into the market, the Chancellor must ease upfront costs for home movers, whether that’s delivering another temporary stamp duty cut for first-time buyers or providing the option to spread mortgage payments over a longer period.
“The sector has seen enough hesitation; the government must encourage home moving and take swift steps to make the process more attractive.”
REDUCE STAMP DUTY RATES
This sentiment was echoed by Richard Sexton, commercial director of proptech surveyor portal Houzecheck who added: “Rachel Reeves could do us all a favour by reducing stamp duty rates for first-time buyers and all residential purchases below £500,000.
“Lowering a transaction tax like this would decrease upfront costs for buyers and stimulate demand, especially among younger first-time buyers. Evidence from past cuts shows sales volumes increasing within months.”
“If she was feeling really radical, she could also consider subsidising mortgage interest relief for first-time buyers,” Sexton went on to say. “This sort of direct relief would lower effective borrowing costs and mirror successful schemes elsewhere; as affordability improved, transactions would increase.”
MEASURED APPROACH
Nick Hale, CEO of Movera urges caution however, emphasising the need for a measured approach to avoid bottlenecks.
“What we need are more first-time buyer incentives to help encourage a fresh cohort on to the property ladder. But not temporary solutions that lead to booms and slumps and cause bottlenecks for every party in the transaction process,” Hale said.
“A considered approach that includes long term measures – like providing the option to spread Stamp Duty payments over time – would deliver a clear and steady sense of direction to the sector for the next few years.”
“Whatever direction the Chancellor takes with this budget, it is crucial that she considers the effect on the property market,” he added. “Introducing a new ‘mansion tax’ or increasing Stamp Duty or Capital Gains Tax could all have a knock-on effect on overall transaction volumes.”
DIGITAL SOLUTIONS AND AI
Last month the government announced an open consultation on the property transaction process, seeking to combat what is currently a ‘long, complicated and frustrating’ process for many buyers and sellers.
Harrison emphasised the issues the sector could face if steps were taken to increases transaction volumes without investment to improve this process quickly.
“Any changes to taxation – be it a new property tax, a stamp duty holiday, or a new incentive for first-time buyers – must go hand in hand with significant investment to radically overhaul the property transaction process.
“It is critical that no company, however big or small, is left behind.”
“Many brokers and lenders are already struggling with legacy systems and skyrocketing borrower demand. It is critical that no company, however big or small, is left behind.
“The government must back digital adoption and ensure a quick rollout to companies of all sizes. Not only would this speed up transactions, but it would also help firms to manage abrupt shifts in supply and demand, improving efficiency and enabling a more tailored approach to each customer’s individual needs.”
NEED TO DO MORE
Hale agreed that the government needs to do more. “At Movera we’re driving innovation in the property transaction process and investing where we can to improve that process for our clients and customers.
“While the government is moving in the right direction with its open consultation on the topic, if the budget triggers a home-buying frenzy, the wider sector will need more immediate investment and support to help brokers and conveyancers pull every element of the transaction process into the 21st Century.”
NATIONAL AI SKILLS ACADEMY
Going further, Sexton highlighted the role of AI to improvements in this area, and the need for skills investment.
“As a proptech, we’d also like to see some focus on AI skills, perhaps via a national AI skills academy with budget allocated for training tech professionals; while we’re one of the largest independently-owned valuation chains in England & Wales, we still need more people with machine learning skills to help speed up delivery of our reports and improve their quality even further.
“Partnerships with universities and tech innovators would ensure practical modules and graduate placements – and help accelerate AI adoption in the property transactions.”
MARKET TOP END
While many focused in on steps that would benefit first-time buyers and increase property transactions, others highlighted the negative effect that speculated policies could have on the other end of the housing spectrum – those with more expensive properties or property portfolios.
Leon Diamond, CEO at LiveMore Mortgages, highlights the plight of older homeowners. “Rachel Reeves may have said we all have to contribute to protect Britain’s ailing finances but it’s clear that those perceived as the wealthiest will face the biggest burden.
“Her plans for a mansion tax will disproportionately affect older homeowners with larger properties, many of whom are asset-rich but cash-poor. Their home may have appreciated in value, but many older homeowners are on fixed incomes and can ill afford a new levy.
“At LiveMore, we know that a growing number of older people are reliant on their property wealth for retirement planning and need to release funds to support their lifestyle. We urge the Government not to introduce any tax measures that could affect their ability to release funds when they need it most and affect some of the most vulnerable in society.”
LANDLORD DANGER
Meanwhile, Damien Druce, COO at Black & White Bridging pointed out the dangers of targeting landlords. “About the best that can be said of this shambles of a Budget is that Ms. Reeves’ U-turn on income tax took the heat off landlords who were set to foot the bill to restock the Treasury’s ailing coffers if income tax was increased.
“Not only would this have damaged the appeal of investing in rental property at a time when the country’s rental stock is shrinking despite growing demand but also force landlords to raise rents. Ultimately, that would mean tenants would be picking up the tab.
“Landlords are already leaving the sector in droves. Our own data recently revealed that 93,000 buy-to-let landlords will have left the rental market by the end of this year.
“But the private rental sector is vital to the country’s housing landscape, driving development and redevelopment of property across the country. Targeting this sector will only cause more landlords to sell up, more people to struggle finding affordable rental accommodation, and more ageing properties to sit uninhabited and in desperate need of investment and redevelopment.”
BALANCING ACT
As the sector waits for Wednesday’s announcement, it is clear Reeves faces a delicate balancing act.
First-time buyers need support, the transaction process needs modernising, and the rental market needs stability.
The challenge for the Chancellor will be a finding a way to inject momentum into a sluggish market without alienating any of its essential groups. Whether the Budget delivers that balance, only time will tell.
