Autumn Statement 2023: Was there any news for the property market?

The three things that could be considered ‘good news’ are:

1. Extension of the Mortgage Guarantee Scheme. This helps ensure the availability of 95% LTVs and it has been extended by 18 months, until the end of June 2025.
2. ‘Permitted development’ rights for turning houses into flats. There was a statement that houses could be turned into two flats via permitted development, which is potentially good news for investors – but we need more information on this.
3. People with properties near pylons or electrical substations could earn up to £10,000. This scheme is to encourage people to support upgrades in their area, which are needed partly inorder to expand the number of electric vehicle charging points. Those willing to put up with pylons or electrical substations near their property could earn up to £1,000 a year for up to 10 years.

Two other more small positives that were already in place before the budget are:

• The zero stamp duty band for those buying up to £250,000 will remain in place until the end of March 2025 - although this doesn’t apply to ‘additional’ properties, so won’t help investors.
• 75% of lenders have signed up to a new ‘mortgage charter’, which puts support measures in place for people who are struggling to pay their mortgage. These include:
  • Customers won’t be forced to have their homes repossessed within 12 months from their first missed payment.
  • Customers have the option to switch to an interest-only mortgage for six months or extend their mortgage term to reduce their monthly payments and switch back to their original term within the first six months. Neither of these will require new affordability checks or affect their credit score.

What announcements had the industry been hoping for?

It’s the rental market that really needed support from the Autumn Statement because of the severe shortage of properties.

Increased regulation, taxation, mortgage and energy costs have led to some landlords selling up and fewer investors entering the market. On top of that, some landlords who started investing in the late ‘90s and early 2000s have reached the end of their investment journey and have also exited the market.

The shortage of stock and rising demand has led to higher rents for tenants, with the ONS reporting year-on-year increases of:

• 6% in England
• 6.9% in Wales
• 6.2% in Scotland

That means, for one of the first times, rent growth is outstripping inflation.

So, there were hopes the Government might have announced a review of both the purchase tax on additional properties and mortgage interest relief, to boost existing landlords’ returns and encourage more investment in Buy to Let. However, there was no movement on either.

Indirect help via income boosts

There was some ‘indirect’ help for tenants in the form of additional monies, particularly for those on lower incomes:

• Local Housing Allowance (LHA) will now be ‘pegged’ at the lowest 30% of local rents, giving extra support of up to £800 a year for Local Housing Allowance (LHA) tenants renting in the private sector
• Benefits in England and Wales will go up by 6.7%
• The minimum wage will rise by more than a pound to £11.44 an hour for those aged 21 and over
• Pensioners will see an 8.5% increase in the state pension

And for self-employed people, Class 2 National Insurance contributions will be scrapped and the Class 4 rate will drop from 9% to 8%.

But while these are all welcome increases to income, the reality is that other financial pressures are still impacting affordability. For instance:

• The cost of mortgages and maintaining and renovating properties have gone up substantially over the last 18 months.
• The energy cap is going up in January, meaning energy costs will rise in the middle of winter.
• Income tax thresholds and the Personal Allowance remain frozen until 2027/8, meaning workers with pay rises will pay tax on a higher proportion of their income.

So, a lot of people may not get much benefit from these latest income ‘boosts’.

With little government support, how is the property market doing?

The good news is that, even without any new government incentives and the current economic challenges, the property market is performing pretty well in many areas.

According to the Halifax, average property prices have grown by 20% since the pandemic, which is great for property owners. Rents are increasing at rates we haven’t seen for years, and that’s good for landlords. Affordability is tougher, but that was always going to happen following an increase to the historically low interest rates we enjoyed until Quarter 4 2021. Nevertheless, with inflation now at 4.6% and the base rate predicted to start falling again next year, hopefully mortgage rates will follow.

And it looks like 2024 is expected to be a similar year to this year: not much price growth, possibly with small falls in some areas, and a lower number of transactions versus the 1.2mn sales average. But with the bank base rate predicted to fall to 4.5% (according to Zoopla), government help isn’t necessarily required from a buying/selling perspective, and the market should self-correct.

As always, those investing in property - especially Buy to Let - should focus on the long term because there will always be periodical short-term fluctuations. What’s most important is to take expert advice on the local market where you are investing, as ‘micro markets’ around the UK will continue to perform differently – regardless of what ‘averages’ are being reported.

So, to find out what’s really happening to prices and rents where you already have property or where you might be considering investing, get in touch with your nearest Your Move branch and have a chat to our lettings and sales experts.

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