How the Budget Will Affect UK House Prices Post-Brexit

House buyers are currently holding back due to uncertainty over what will happen to prices post-Brexit.

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Currently, house prices are rising at their lowest annual rate in five years, while in London prices are falling. However, it is thought that house prices will plunge by as much as a third if the UK leaves the EU on 29 March 2019 without a deal.

The market has, therefore, slowed down as fewer potential buyers want to risk getting trapped in negative equity in the years to come. This fear, plus higher taxes for landlords, mean that the market is slowing.

How will the Autumn Budget Announcements Impact on House Prices?

Stamp Duty will be abolished for all first-time buyers of shared ownership homes that are on the market for up to £500,000. The policy is being applied retrospectively so those who bought a shared ownership property in 2017 within that price bracket will also benefit.

First-time buyers currently don’t pay stamp duty on properties worth up to £300,000 so relief would only be on anything above this bracket.

The Help to Buy Scheme is a loan from the government that helps first-time buyers who want to buy a new-build home, but can’t afford the necessary deposit. It is being extended from 2021 to 2023.

Overseas Investors

A new tax will be introduced for foreign buyers who purchase properties in the UK. This tax was trialled in early October and means that a surcharge of 1-3% will be imposed on any UK property bought by an overseas investor. This is on top of the current stamp duty charges that are added to these types of property sales. The reasoning behind this is that it may stop foreign buyers from investing in UK properties, especially in the increasingly expensive London boroughs. In turn this is thought to reduce competition amongst buyers and properties in lower price brackets. Currently around 13% of new-build properties in London belong to overseas buyers.

More Homes

Councils are set to receive an extra £500m through the Housing Infrastructure Fund to encourage them to build around 650,000 more homes. The aim is to ease pressure on supply, however sceptics are keen to point out that the delivery of these properties could take a number of years to come to fruition and may, therefore, not have the intended impact.

Rising prices are due to a shortage of properties. The government wants to build 300,000 homes a year. A new consultation into planning reform was announced by Chancellor Philip Hammond enabling for homes to be built higher above commercial premises. The reform also means that it will be easier to demolish commercial buildings to replace them with homes.

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Capital Gains

The Budget also announced a rise in tax for people who rent out their homes e.g. if they get a job abroad, but want to rent out their property whilst they’re away. Family homes are exempt from this tax. Property owners only become liable for paying the tax from the time they move away from the property. There is currently a tax relief for the last 18 months of them owning the property, even though they weren’t actually living there. This will be reduced to nine months when the new proposal comes into effect.

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