What the Spring Budget Statement Means for the Property Market
Chancellor Rachel Reeves has just made her Spring Statement in Parliament. Here we’ll look at what it might mean for the property market.
The Spring Statement, also known as the Spring Budget, isn’t meant to be a Budget. That happens in the autumn. The idea is for the Chancellor to make a statement about the progress of the economy based on the latest forecasts from the Office for Budget Responsibility or OBR.
However, given the so-called ‘£22 billion black hole’, the weak economy and the impact of Trump’s tariffs, things were expected to be a little different this year. The Chancellor was widely predicted to use the Statement to cut spending and raise taxes further.
So what actually happened?
Rachel Reeves confirmed within the first few minutes that there would be no further tax rises. She announced a range of cuts, carefully presenting them as savings, although promised major increases in defence spending.
Some wondered whether the increase in Employer’s National Insurance contributions, announced in the Autumn Budget, would stand.
Employers have warned that this tax increase and the hike in the National Living Wage might lead them to cut jobs.
However, the Chancellor didn’t mention NI. So the rise, due to take effect next week, stands.
Some also wondered whether Reeves would cancel the change in Stamp Duty due to happen next Monday in England. (A temporary Stamp Duty reduction, announced in September 2022 by the Rishi Sunak government, will end.) Some hoped there might be a new scheme to incentivise homebuyers.
In the event, this turned out to be wishful thinking, and neither happened.
First-time buyers, who enjoyed a larger reduction in Stamp Duty, will be affected more as rates increase to their previous level.
Economic growth
The Chancellor announced OBR economic growth forecasts suggesting GDP will grow less than 2% each year over the next few years. She said the OBR forecasts that household incomes will benefit by £500 a year as a result.
More interestingly, the Chancellor said the upcoming Planning and Infrastructure Bill, designed to spur housebuilding, will take housebuilding to a 40-year high. In the process, it will eventually add 0.6% to GDP and help pay for government spending. She also amended the housebuilding forecast from 1.5m new homes over five years down to 1.3m.
What might the impact be on the property market?
Modest GDP growth levels over the next few years won’t set the property market alight. However, re-announcement of the government’s ‘build baby build’ strategy could be more positive for the market.
Confirmation that Stamp Duty will revert to its 2022 levels next week wasn’t what homebuyers necessarily wanted to hear. But in the medium term, the market is likely to adjust. Buyers will re-jig their budgets, and those who want to buy will still be looking to buy.
Andrew Groocock, COO of Knight Frank, recently said: “The key question will be how many transactions hold together in April once the deadline has passed and how open buyers and sellers are to price renegotiations. There may be a bit of disruption but, in my experience, buyers are quick to adapt once changes have been made.”
Interest rates
Although outside the scope of the Spring Statement, progress in interest rate reductions will be key. After a series of reductions, the Bank of England decided to maintain the status quo at the MPC meeting earlier this month.
However, hours before the Spring Statement, there was a glimmer of good news – a 0.2% fall in inflation. Governor Andrew Bailey remained cautious, though, and pointed to global economic instability prompted by US tariffs. He said: “We still think that interest rates are on a gradually declining path.”
Experts predict there will be at least two base rate reductions (probably of 0.25% each) this year. Some optimists are suggesting there could be four. Either way, the cost of borrowing to buy a home is likely to get cheaper this year, and that should help the market whatever else happens.
At the end of the day, while the Spring Statement didn’t lead to any big announcements for the property market, it didn’t produce any unexpectedly bad news either.
So we think the market should remain steady. In particular, sellers who price their property accurately should enjoy plenty of buyer interest.
If you are considering selling your home, we can advise you on marketing and pricing. Call or message us today.
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