Following on from the market fallout of his fiscal event at the end of September, the UK government has turned on its heels and released a new mini-budget under Chancellor Hunt. In a highly unusual move, nearly all the policies announced originally have been rolled back or amended in an effort to calm the markets.
So, having already reviewed what the previous mini-budget might have meant for the UK property market, let’s U-turn and see how the NEW mini-budget could influence property in the UK.
Energy bill support scheme scaled back
The headline news from the latest mini-budget is that the energy price guarantee will now only last for six months, rather than the original two years. The plan for six months support for business customers remains.
This will likely go down well with the markets, as it reduces the cost to the UK government and could help reduce inflation. It also offers valuable support which could avert vulnerable businesses collapsing. This will hopefully mean fewer insolvencies and resulting redundancies.
Although not directly linked to buy-to-let investment, anything which avoids unemployment and keeps businesses going should be welcomed by landlords. Naturally, having a pool of solvent tenants who can pay rents is vital for the sector.
The impact on interest rates in the UK
Interest rates are rising in the UK, which has had a direct impact on mortgage rates increasing. Of course, the previous mini-budget was so impactful that many lenders pulled mortgage products entirely.
The orthodox approach taken by Hunt means that we’re no longer in this territory. Indeed, today’s announcements could go some way to tempering the Bank of England’s interest rises over the coming month. This could mean that buy-to-let mortgage rates remain at a tolerable level for landlords.
Corporation tax will be increasing to 25%
It had previously been announced that corporation tax would be staying at 19%, but it is now set to rise to 25% in April 2023.
We’ve written about how buying property via a limited company can help reduce your tax burden. This is still the case, and it’s something investors should certainly still consider, although, from April 2023, the gains will be less than they are now.
Stamp Duty reduction is staying
The change to Stamp Duty bands will be staying. Home buyers will not pay SDLT on the first £250,000 of a property purchase. Levies for second home purchases and overseas buyers, of course, remain, but there’s a small saving to be had at the lower end of the market.
This could well help support house prices, which enjoyed rises to record levels during the Covid 19 stamp duty holiday in 2020.
High demand for housing remains alongside low supply
Neither version of Prime Minister Truss’s budgets have any impact on the continued imbalance between housing demand and housing supply in the UK. The clamour for housing won’t go away.
If investors hold property, the value of that in-demand asset is still likely to increase over time. This is why UK property is still a great way to see your capital grow.
Rental demand is still high
Again, the mini-budgets have done little to change the fact that demand for rental properties in the UK is still extremely high. The pool of tenants is vast, which means prospective landlords can be assured that they’ll be able to fill their properties with tenants willing to pay high rents to secure housing.
Rising interest rates and rising property prices mean that basic housing affordability is still tough for many. The rental market will continue to grow.
As we’ve written before, the latest ONS figures show that rents paid by tenants rose by 3.4% on average across the country in the 12 months up to August 2022. In some regions, annual growth of private rent was 4.5%. This means that landlords are able to charge a premium for the type of high quality, well-positioned properties Hoxton Property specialises in.
Conclusions
A more orthodox approach to fiscal policy has helped calm the markets in the short term, although the outlook is still uncertain. It’s important to look at the longer term picture, and in that sense little has changed regarding the safety and performance of UK property as an investment. 45 years of property price growth and a very strong rental market means that investing in UK property still offers reliable returns on your capital.
If you’d like a personalized discussion of how you could build your property portfolio, please get in touch with us today.
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