Property Investment

What Does the Autumn Statement Mean for Property Investors?

The Key Takeaways

With the British economy still in recovery following the pandemic and the subsequent cost-of-living crisis fuelled by the war between Russia and Ukraine, which sent inflation to a peak of over 11.1 per cent, the Government’s Autumn budget was predicted to be subdued… However, there were some hopes of support for the property sector, but did the Chancellor deliver?

We take a look at the measures introduced in last week’s Autumn Statement and what they mean for property investors.

Mortgage guarantee scheme extended 

Rumours of a stamp duty cut to kickstart the market did not come to fruition however, the existing Mortgage Guarantee Scheme, the initiative that encourages lenders to offer 95 per cent mortgages to first-time buyers and home movers with 5 per cent deposits while the Government agrees to compensate the lender if the borrower defaults on their mortgage payments, has been extended until the end of June 2025 – 18 months longer than previously agreed (it was supposed to end this December).

One house to two flats permitted development shakeup

The UK government is set to consult on a new Permitted Development Right (PDR) that will allow property investors to convert a single house into two flats without altering the external façade. This change is expected to be implemented in 2024, with the consultation beginning early in the New Year.

This development is potentially beneficial for property investors as it simplifies the process of subdividing properties for rental or sale purposes provided the exterior of the house remains unchanged.

More planning changes 

The UK government plans to tackle Local Planning Authority backlogs by offering premium services for faster major application decisions and refunds for missed deadlines. Additionally, a £5 million investment will promote Local Development Orders in England, accelerating planning permission for important commercial projects.

Households close to new electricity infrastructure to receive up to £1,000 per year off energy bills 

In a bid to accelerate the country’s clean energy development, the UK government is also implementing measures to reduce electricity grid access delays by 90 per cent. As part of these reforms, residents living near new transmission infrastructure like pylons and substations will be eligible for discounts of up to £10,000 on their electricity bills over a span of 10 years. But will these payments make up for the loss in value of affected properties? This remains to be seen.

Three new investment zones announced 

The government also confirmed three new investment zones in Greater Manchester, the West Midlands and the East Midlands. Additionally, the funding capacity for each investment zone has been increased from £80 million to £160 million by extending the duration of the programme and its tax reliefs from five to ten years.

Property tech 

The government has also announced its intention to implement a range of measures to improve the buying and selling process, including pilots to develop property tech products and digitise local council property data.

Local Housing Allowance increased 

Landlords who have concerns about the effects of rent rises on tenants who claim housing benefit will be interested to learn that the Government will increase the Local Housing Allowance (LHA) rate to the 30th percentile of local market rents from April 2024-April 2025 after which, it will be frozen again. The LHA is the rate used to work out what financial support tenants claim when renting from a private landlord. The current allowance has been frozen since 2020 while rents have been increasing, so this news will come as a welcome boost for the 1.6 million claimants across the country by providing an average of £800 per annum support.

National Insurance changes 

Effective from 6 April 2024, the UK government is implementing tax reductions for the self-employed. This includes lowering the main rate of Class 4 National Insurance Contributions (NICs) from 9 per cent to 8 per cent. Additionally, the government will abolish Class 2 self-employed NICs, in a bid to streamline the tax system. These measures are expected to positively impact approximately 2 million self-employed people, with an average individual earning £28,200 projected to save around £350 in the 2024-25 fiscal year.

Full expensing made permanent 

Chancellor Jeremy Hunt has declared the permanent implementation of full expensing as part of his autumn statement. Under the initiative, businesses can claim a 100 per cent first-year allowance on most new plant and machinery investments, effectively enabling full tax relief on these expenditures in the year they occur. This includes a range of items like equipment, vehicles, computers and certain installations.

Property industry comment

In response to the Chancellor’s Autumn Statement, Nick Leeming, Chairman of Jackson-Stops, pointed out widespread property industry disappointment: “Expectations of possible announcements on support for first-time buyers, cuts to stamp duty for downsizers and Inheritance Tax reliefs were all notably absent.”

Paula Higgins, CEO of HomeOwners Alliance, added: “We will continue to call for a permanent end to stamp duty for those buying a home to live in. Stamp duty is a tax on ambition. Its presence clogs up the housing market and creates distortions and unintended consequences.”

Leeming concluded: “Irrespective of the Chancellor’s omissions today the housing market has continued to show resilience in house prices this year with falls far more subtle than many had expected, but further measures that stimulate growth and ensure this trend remains stable for the long-term will always be welcomed by the industry.”

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Alex Wright, Editor