As the implications of the first Labour Budget in 14 years are being assessed, many in the property sector, myself included, are breathing a small, tentative sigh of relief.
There are two reasons for a sense of relief. Property, at least for those working in it, got something of a reprieve. Stamp Duty rates weren’t increased for homebuyers and Capital Gains Tax was not increased for property – a huge surprise.
I have my own theory on this – the rumours of an increase had already propertied thousands to sell up to beat the tax hike.
Government coffers swelled and there was no need to actually increase the tax in the end – the mere idea of it had done the trick.
Chancellor Rachel Reeves shared the Budget on Wednesday
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I was also pleased to see the urge to ‘help’ buyers was resisted. Although popular, schemes such as Stamp Duty Holidays and Help to Buy push prices up further, eroding any benefit for buyers and costing vast sums of money that swiftly pass from the taxpayer to property developers and home sellers.
So far so good. But those in the business are also worried. An additional three per cent added to Stamp Duty for second home buyers and investors makes sense in many ways.
By adding around £15,000 to the average property purchase, home buyers, as opposed to investors, will have a financial advantage – they can potentially offer more money to the seller.
The flip side is that many existing sales to investors are now being re-negotiated with sellers taking the hit. Longer term, we will see yet more reluctance to buy for letting.
Not necessarily a bad thing, but tenants will be faced with fewer choices, and of course, where supply falls and demand remains constant, rents increase.
Many in the sector are employers who will be faced with finding additional National Insurance contributions for their staff as well as, in some cases, a top-up for the new Living Wage.
We will have to wait to see if this actually leads to reduced employment opportunities and wage suppression, but my guess is that the state of the market is more important than relatively small hikes in tax.
If the market stays buoyant, the extra money will be found. If growth stalls, agents will make a few cutbacks where they can on things such as IT or advertising, but staff will be vulnerable.
I hope that the Bank of England does not abandon its predicted interest rate reductions – these are key to cementing confidence once again.
Rachel Reeves has taken a massive gamble with this Budget and we all stand to win if it pays off. I just try to forget that she is playing the game with our chips.
Property expert Jonathan Rolande is the founder of House Buy Fast and lead spokesman for the National Association of Property Buyers. For more information visit www.jonathanrolande.co.uk.
