Autumn Budget Statement 2023: UK Housing Market Effect
Chancellor Jeremy Hunt, announced on the 22nd November 2023, the Autumn Budget Statement, which sets out funding and commitments for the future of the UK.
In the announcement, he covered everything from a surge in wages and pensions to reforms to National Insurance, self employed taxes and extensive welfare changes. Most importantly however, he announced increases to housing supply and the digitalisation of the buying and selling process.
Join us in this article as we uncover the Autumn Budget Statement’s effect on the housing market and more.
What is the UK Autumn Budget 2023?
The Autumn Budget, or Autumn Statement 2023 will take place in either October or November, following the Spring Budget, 6 months before. The Autumn Statement is usually announced by the Chancellor, who will then answer questions from other MP’s on the subject of the announcement.
What is included in the UK Autumn Budget 2023?
The Autumn Budget Statement usually follows Prime Minister questions.
Briefly before the UK Autumn Budget is announced, the Office for Budget Responsibility (OBR) will deliver their economic and fiscal forecasts in which the Chancellor will respond to in the budget.
The Autumn Budget 2023 will focus on five areas; reducing debt, cutting taxes, backing British business, building sustainable energy and delivering world-class education, which could be done by creating:
A responsible approach to public spending to keep debt falling.
Tax cuts for working people and businesses.
Reforms in welfare to assist people into work.
Removal of barriers to business investment.
What was announced in the UK Autumn Budget 2023?
The conservatives aim to reward effort and work with an emphasis on the importance of energy and enterprise of individuals in building a dynamic economy. Their aim is to halve inflation, grow the economy and reduce debt.
So far CPI inflation has halved from over 11% to 4.6%, showing the economy has recovered quickly from the pandemic, growing more than expected.
The Office for Budget Responsibility (OBR) predicts a decrease in inflation to 2.8% by the end of 2024. Its economic growth forecasts for 2024 and 2025 have been significantly downgraded indicating a sharp decline from previous estimates.
The OBR estimates a boost in business investment by £14 billion and 78,000 more people employed. Policies are forecasted to increase the economy’s potential output by 0.3%.
For the housing market: In this years UK Autumn Budget 2023, the Chancellor announced:
Investment into housing supply
The government emphasises the importance of building homes in strategic locations to support economic growth.
Additional funding of £32 million is allocated for housing and planning to unlock thousands of homes.
Measures include tackling planning backlogs, new Permitted Development Rights and support for specific areas like Cambridge, Leeds and London.
Funding is provided for East West Rail, a West Yorkshire mass transit system, and a rapid transit bus network in Thamesmead.
Affordable homes and social housing
The government commits to building affordable homes, extending the Affordable Homes Guarantee Scheme by £3 billion.
The Public Works Loan Board policy margin is extended to support local authority investment in social housing.
Support for home movers
The government is committed to supporting home movers by improving the buying and selling process.
Initiatives include pilots for property tech products and digitising local council property data.
Mortgage Guarantee Scheme Extension
The Mortgage Guarantee Scheme was originally set to close to new accounts on December 31st 2023, but has been set to extend to an additional 18 months.
For other industries:
Financial incentives and funding:
Financial incentives for investment Zones and tax reliefs for Freeports will be extended from 5 to 10 years.
A new £150 million Investment Opportunity Fund will be established.
£4.5 billion will be allocated to support strategic manufacturing, including aerospace, life sciences and the green industry.
Artificial Intelligence investment:
The government plans to invest £500 million over the next two years in creating innovation centres to strengthen the UK’s position as an AI powerhouse.
Consultations will be initiated on reforms such as giving individuals one pension pot for life and allowing pension savers to require a new employer to contribute to their existing pension.
Electricity bill reduction:
Reforms are being announced to reduce delays in clean energy businesses accessing the electricity grid, potentially offering up to £10,000 off electricity bills for those near new transmission infrastructure.
Planning system reforms:
The planning system will be reformed to expedite planning applications, with local authorities recovering full costs for major business planning applications, subject to guaranteed faster timelines.
The UK economy is forecasted to grow by 0.6% in the current year and 0.7% next year. Forecasts for 2024 and 2025 have seen a significant cut.
Productive state focus:
Jeremy Hunt emphasises the need for a more productive state rather than a larger one, setting a target for the public sector to increase productivity by at least 0.5% per year.
Defence spending commitment:
The UK commits to meeting the NATO target of spending 2% GDP on defence.
Social spending commitment:
The autumn budget announced a reaffirmation of commitments to NHS, adult social care and schools funding with total departmental spending to be £85 billion higher in real terms by 2028-29 compared to 2019-20.
The OBR forecasts a decline in headline debt to 94% of GDP by the end of the five-year period.
Pension triple lock and welfare measures:
The government commits to the pension triple lock with an 8.5% rise, and benefits will increase by 6.7% based on the September inflation rate.
The introduction of a Back to Work Plan to help people find and stay in work.
Tobacco and alcohol duties:
Tobacco duty is increased, while alcohol duty is frozen until August next year.
Local housing allowance and rent support:
The local housing allowance rate will be increased to the 30th percentile of local market rents, providing support to 1.6 million households.
£50 million funding is announced over the next two years to increase the number of apprentices in engineering and other key growth sectors.
National insurance cut and minimum wage rise:
The main employee (Class 1) National Insurance rate will be cut from 12% to 10% starting in January, benefiting 27 million people.
Class 4 self-employed NICs are reduced, and Class 2 will be abolished.
The national living wage will rise from £10.42 to £11.44 per hour in April next year.
Business tax breaks:
Full expensing for businesses will be made permanent, allowing them to claim back 25p in corporation tax for every £1 invested in IT, machinery and equipment.
How will the Government attempt to tackle debt?
The government emphasises the importance of reducing debt and borrowing to control inflation, maintain affordable mortgage rates, and sustainably fund public services.
In the wake of the Autumn Budget Statement 2023, projections indicate a decline in borrowing for the current and subsequent years, showcasing an overall reduced forecast period compared to the OBR's March predictions.
The underlying debt as a percentage of GDP reflects a notable decrease, averaging a 2.1% reduction across the forecast period.
Remarkably, the government is demonstrating significant progress in aligning with its fiscal rules on debt and borrowing. This progress affords greater flexibility against both rules when compared to the spring assessments.
Anticipated trends indicate a steady reduction in underlying debt, with expectations of reaching 92.8% of GDP by the target year of 2028-29, starting a downward trajectory from the fiscal year 2027-28.
Which is able to happen due to the decision to reduce debt and ensure effective operation of public services, reaffirming commitments to allocate funds for the NHS, adult social care and schools.
Will the Autumn Statement Stamp Duty changes affect house prices?
The Autumn Statement announced by Chancellor Jeremy Hunt did not include any changes to Stamp Duty. As a result, there are no specific measures outlined in the statement that would directly impact Stamp Duty or have a direct effect on house prices.
The disappointment expressed by industry experts in the absence of Stamp Duty changes suggests that, at least for now, there are no immediate adjustments to the property tax.
Does Jeremy Hunt's Autumn Budget affect house prices?
The Autumn Budget Statement 2023 does seem to have some effect on house prices, as suggested by the OBR and economic indicators.
The Office for Budget Responsibility predicts that there will be a decline in house prices, with a projected 4.7% plunge in 2024. Which could suggest that the average UK home price could reach lows of £266,000 in the final quarter of 2024.
The expected house price decline indicates that, by the fourth quarter of 2024, overall house prices could be 7.6% lower compared to their peak in the first three months of 2022.
The OBR does anticipate a recovery in house prices, but this is not expected to reach their 2022 peak until 2027. This prediction suggests a delayed recovery timeframe with a period of market challenges.
The OBR highlights the sensitivity of house prices to changes in interest rates and household income growth. Low new buyer inquiries and a weak market further support the notion that the housing market is under strain.
Some other factors to take into account include:
The national living wage is set to rise significantly, leading to an average increase of £1800 a year for a full-time worker. Higher wages could potentially increase the purchasing power of individuals and drive demand in the housing market.
The state pension is expected to rise by 8.5% or £900 a year; this increase in pensions could positively impact the financial well-being of retirees, and affect their decisions relating to downsizing or relocating.
National insurance is set to be cut from 12% to 10%, providing savings for workers, including potential homebuyers. The increased disposable income could contribute to increased demand in the housing market.
Will the value of homes rise in 2024?
According to Zoopla, house prices are expected to fall by 2% over 2024 with rising incomes expected to steadily improve housing affordability – as confirmed by the Autumn Statement’s increase in minimum living wage.
In the Autumn Budget, the OBR's forecast suggests that UK average house prices will fall by 4.7% by the end of 2024.
What does the UK Autumn Statement mean for homeowners and buyers?
Although there was very little mention of Stamp Duty Land Tax changes, there was the announcement of wider increasing housing supply and mortgage scheme extensions.
Will the UK Autumn Statement make buying a house harder?
Due to the Mortgage Guarantee Scheme extension, prospective homebuyers who have smaller deposits, will experience a more feasible climb onto the property ladder.
The scheme supports 95% Loan-to-Value mortgages, meaning that buyers can secure a mortgage with only a 5% deposit. This is advantageous for individuals who may find it challenging to save a larger deposit like first time buyers and allow them to enter the property market sooner.
By extending the scheme, the government aims to contribute to stabilising the housing market by encouraging demand from first-time buyers. Which in turn may have positive ripple effects on the overall property market, potentially supporting property values.
However, the Mortgage Guarantee Scheme extension may also put an upward pressure on property prices, especially in areas with a limited housing supply, and make it harder for some people to purchase properties in areas of high demand and low housing stock.
Will the UK Autumn Statement make selling my house harder?
Well, it depends! An influx of newly built homes, especially in areas of high demand already will increase competition in the housing market. Sellers might find it challenging to attract buyers when there are numerous options available.
If the housing supply increases significantly, it may lead to market saturation, making it harder for sellers to stand out and sell their properties quickly.
While initiatives to support home movers are generally positive, the impact on the market could vary. Improving the buying and selling process could lead to increased market activity due to a streamlined process, but it could also mean more competition for sellers.
How to sell your house after the Autumn Statement?
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