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Spring Budget 2023: What does it mean for the property market in England?

Posted 4/04/2023 by Reeds Rains
Photo of a living room with sofa and spring flowers

Overall, this was a disappointing budget for the property market, with no specific announcements that would directly affect people’s ability to buy, sell, let or invest in homes. It had been hoped that the Chancellor would use this Spring Budget to make proposals that would help drive more investment into the Private Rented Sector, where demand is currently far outstripping the supply of available accommodation for tenants in most areas of the UK.

There was also hope that Jeremy Hunt might have listened to requests for the government to reverse the imposition of Section 24, which has meant landlords who have a buy to let mortgage effectively end up paying tax on their turnover, rather than the net income they earn.  

But the reality is that the biggest upcoming changes affecting landlords and tenants, which will take effect from April 2023, are all from the Autumn Statement of 2022. These include the positive changes to individual wages, including benefits, pensions and the minimum wage, as well as the downside of the reduction in Capital Gains Tax, which isn’t great news for landlords wanting to sell a property. However, as long as properties were bought some time ago, the tax changes will be a small negative versus the positive price increases that have been seen in most areas of the UK over the last few years.

So, what good news was there in this budget that will have a positive knock-on effect on the property market?

Affordability for households

Following months of speculation about what would happen to energy bills in April, after the government subsidy was due to end, there was relief all round when Jeremy Hunt announced that it would be extended until the end of June. That means the average household will spend around £160 less on gas and electricity over the next few months. There’s also good news for those on pre-payment meters – currently estimated to be around 4 million households – who typically pay more over the year that those on direct debit. Utility companies are now expected to amend their charges so they no longer penalise pre-pay customers, who are generally those on the lowest incomes

The Chancellor confirmed that utility prices are expected to start falling by the summer and forecast that the double-digit inflation we’ve experienced over the last 12 months will drop back to below 3% by the end of this year.

The 5p cut for petrol and diesel duty has also been extended for another 12 months, which could save families up to £100 a year and is especially helpful for self-managing landlords who have to do their own viewings and property checks. 

Growing the workforce

Getting more people into work is integral to growing and maintaining a healthy economy and the Chancellor announced a range of support packages and incentives to do just that. The key announcements were:

  1. Increased support for childcare. There will be extra free hours to enable those eligible to work for 18 hours a week, up from 15 hours, and those on Universal Credit will have childcare fees paid up front, as well as getting an increase in the allowance. There will also be additional support for parents with children in school to allow an 8am drop off and 6pm pick up. This could be a great boost to family incomes for all those parents who wish to work, whatever their child’s age.
  2. Additional help and support for the disabled and sufferers of long-term illness who want to get back to work. For those who are disabled or suffering with things like long-term sickness, mental health issues or back pain, there will be help and security to get back to work and a scrapping of the ‘work capability assessment’. At the other end of the spectrum, there may be further sanctions for those who could get back to work and simply choose not to.

So, although the budget won’t do much to fix the problem of demand far outstripping supply in the property market, all these changes may boost affordability for both renters and buyers.

Finally, although this will have little impact on property, there will be an increase in the annual allowances for pensions and savings. To help reduce the number of experienced over-50s retiring - especially doctors - the annual allowance to invest is being raised from £40,000 to £60,000. There will also be no limit on the amount that can put into a pension without extra charges, as the £1m cap is removed. And those who have a pension and would like to increase their savings will be able to put in £10,000 each year – a big increase from the current £4,000.

Investment in infrastructure should create opportunities for landlords and other property investors

The biggest opportunities for landlords and investors are likely to come from the announcements on infrastructure and regeneration, although these are more long term. And, as always with these kinds of government proposals, some may take decades to come to fruition while others might not happen at all.

In the more immediate future, we should see some opportunities through investment in existing plans, which include:

  1. Changing the classification of nuclear power to ‘sustainable energy’, as the government works towards the aim of it providing 25% of our power in the future. Therefore, there will be investment in projects such as Hinkley Point in Somerset and Sizewell in Suffolk, plus a further reactor at Bradwell in Essex. These huge projects create new jobs and that means more new homes will be required – both short-term, to house those making the projects happen, and long term, for permanent employees – and much of this demand is likely to be for rental accommodation.     
  2. Hundreds of millions of pounds being made available for regeneration and levelling up in 20 specific areas in England, with the following areas being invited to develop a partnership: City of Kingston upon Hull, Sandwell, Mansfield, Middlesbrough, Blackburn with Darwen, Hastings, Torbay, Tendring, Stoke-on-Trent, Boston, Redcar and Cleveland, Wakefield, Oldham, Rother, Torridge, Walsall, Doncaster, South Tyneside, Rochdale, and Bassetlaw.
  3. £58 million being invested into capital projects for the North West of England, including: “a new community hub in Stockport, the transformation of Bootle town centre, and the redevelopment of markets as well as transport connectivity improvements in Rossendale.”
  4. £161 million for high-value capital regeneration projects in city and metropolitan areas, including: “business premises and food science facilities in Tees Valley and unlocking investment in a research campus in the Liverpool City Region.”

Provided, of course, that this additional funding is actually invested, it can offer opportunities for landlords and investors to buy now and reap the benefits - both ongoing through rental income and in the future, through capital growth.

Lastly, possibly one of the most significant long-term investment return opportunities comes from the Chancellor’s announcement that the government is seeking to generate a further 12 investment zones that can be dramatically changed, in a similar way to Canary Wharf and Liverpool Docks. The following combined authorities are being asked to put forward their recommendations: 

  • The proposed East Midlands
  • Greater Manchester
  • Liverpool City Region
  • The proposed North East
  • South Yorkshire
  • Tees Valley
  • West Midlands
  • West Yorkshire

So, although this budget didn’t deliver what many property professionals had been hoping for, the general long term outlook for landlords and investors remains good. Demand from tenants is strong, amid an ongoing shortage of rental stock across much of the UK, which has helped drive up rents more rapidly than we’ve seen for some time. Many landlords have continued to see excellent rental and capital growth returns - especially through the pandemic - and the announcement of government investment in a great number of areas in England should mean that a lot of landlords will be able to take advantage of the opportunities offered by the promise of regeneration.

You can read the full Executive Summary of the Spring Budget 2023 on the GOV.UK website and if you have any questions or would like to discuss property investment in your local area, just get in touch with your local Reeds Rains branch - our experts will be happy to help.

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