There are winners and losers in the property industry as a whole.
RICS reports a mixed reception overall on the impact of the budget for its members and firms in the property industry. It will include winners and losers.
The investment in housing and unlocking development will be welcome news, changes that can generate “substantial opportunities for the profession”.
On the other hand, taxation changes will impact those firms in the industry, in particular the rising employer national insurance contributions (NICs) and the proposed changes to the National Living Wage.
Housing and construction stand to benefit, particularly the social housing sector, with a funding package promising a £500mn increase to the Affordable Homes Programme.
With hints at changes to Stamp Duty (SDLT) for first-time buyers and homeowners prior to the Budget failing to materialise, second-home owners and landlords did find themselves under the Chancellors spotlight: The Stamp Duty Land Tax Surcharge, the premium paid on the purchase of buy-to-let and second homes, is to increase from 3% to 5%.
With no changes to the buy-to-let taxation regime (Section 24) as perceived by many to be dis-incentivising landlords from investment, this latest squeeze, it is thought, will do nothing to help end the supply shortage of private rented sector (PRS) homes.
The monthly RICS Residential Market Surveys has consistently indicated that supply of private rented properties needs to increase if the continually rising rents are to be brought under control. Meanwhile, the latest RICS survey shows house prices are on the rise yet again.
Housing investment plans
In her budget announcement the Chancellor said that over £5bn in government investment will be brought to bear to deliver on its housing plans next year, with a further £3bn to be used for guarantees to small housebuilders.
The Affordable Homes Programme will benefit from an increase in funding to £3.1bn boost its target to deliver thousands of new homes. The social housing providers are to receive support to the tune of CPI+1% for the next five years.
The Warm Homes Plan aims to improve the energy efficiency of homes while tacking fuel poverty, so £3.4bn is to be provided to support the improvement of 350,000 homes over the next three years.
Commercial property investment, along with much of industry, was largely “put on hold” in the long run-up to the Budget, so what positivity there was building before has failed to catch hold.
“The commercial property market in the UK is still seeing an underwhelming market backdrop, as, anecdotally, respondents to the latest Royal Institution of Chartered Surveyors (RICS) UK Commercial Property Monitor Q3 2024 are seeing an element of waiting for the budget,” RICS says.
However, there remains some of the “positivity seen in the last quarter” with a small increase in occupier demand. 44% of respondents to the RICS commercial property survey cited seeing the early stages of an upturn, but there is yet to be any marked improvements in sentiment in the market.
Office demand and retail, the two sectors that have suffered most through the Covid period, are still relatively flat, but retail is seeing its “least negative sentiment since 2022.” There’s been a rise in vacant office and retail space and landlords are having to offer incentive packages to achieve new lettings.
RICSs sees rents rising in prime space in all sectors over the next 12 months, with prime sustainable office space remaining attractive to occupiers. However, the less sustainable properties – those in need of modernisation and improvements to meet the new environmental standards – may languish.
“Investment continues a flat trajectory across all sectors with the most positivity seen for industrial (+14%), while the picture for retail and offices is slightly negative,” says RICS.
RICS Senior Economist, Tarrant Parsons, has said:
“The UK commercial property market continues to exhibit a relatively underwhelming performance, as some respondents cite a wait and see approach ahead of the first budget statement from the new Government.
“Despite the market being on tenterhooks for any new announcements, there are reasons to be more optimistic. An improving lending environment is likely to provide support to commercial real estate investment activity going forward, and headline capital value and rental growth expectations are also modestly positive for the coming twelve months, in keeping with the idea that the market has shifted into the early stages of an upturn.”
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