What the Spring Budget means for property investors

The government has announced it’s Spring Budget at Westminster this afternoon.

It focuses on plans for growth, controlling inflation, increasing employment and reducing the impact of the cost of living crisis on households. 

What was in it and what does it mean for property investors? This blog post explains.

What is the Spring Budget?

The Spring Budget is a fiscal statement in which the chancellor, Jeremy Hunt, provides an update to parliament and the public on the state of the economy. He also announced plans for spending and taxation.

The statement is supplemented by a forecast from the Office for Budget Responsibility (OBR). This analyses the impact of government policies and gives predictions for the future health of the economy.

What was announced in the 2023 Spring Budget?

The headlines for the budget include:

• The lifetime allowance on tax-free pension contributions has been scrapped, worth £1.07m
• Free childcare of 30 hours per week for working parents in England is being expanded to cover one and two-year-olds, but it will only be fully implemented by September 2025
• Fuel duty has been frozen for another year and government help with energy bills is being extended for another three months
• Funding will be provided for up to 50,000 places on new voluntary employment scheme for disabled people, called Universal Support
• Defence spending is being boosted by £11bn over the next five years
• Corporation tax will be increased from 19% to 25%
• The economy is forecast to grow by 1.8% in 2024 and 2.5% in 2025, while inflation is expected to fall to 2.9% by the end of the year

What does the budget mean for property investors?

There is no direct support for property investors in the Spring Budget. However, elements of the announcement have an indirect effect.

The Office for Budget Responsibility has forecast that house prices could fall by 10% from the high of the last three months of 2022.

Property transactions could drop by 20% from the peak at the end of last year.

The OBR think that low consumer confidence, the squeeze on real incomes and the expectation of mortgage rate rises could contribute to a house price fall as buyer demand is affected.

However, with the statistics it is worth remembering the growth in house price values over the longer term.

UK house prices have risen by 20.4% (£48,620) over the last three years and 7.8% over the previous three years. The trends in the property market suggest that a house price drop will by short term.

The government has taken steps to improve disposable income amongst the population.

The OBR believe that the expansion of free childcare “has by far the largest impact on potential output in the Budget.”

It calculates that the government plan to expand 30 hours of free childcare per week for youngsters aged between nine months and two years will gradually add 60,000 people to the workforce. The OBR believe that by 2027-28, these people will be working around 16 hours per week.

The increase in household wealth created in this move, can generate greater demand for buying houses and rental properties.

The support in energy bills will also help to keep people out of fuel poverty, and ease some of the burden on social housing.

The predicted squeeze on incomes, coupled with the absence of certain housing policies could also mean the HMO boom continues.

Could there have been more support for households in the Spring Budget?

According to Nathan Emerson, CEO of Propertymark, the current trend indicates that mortgage rates will increase, leading to greater expense for households.

He said, “Much of the cost of living support has been aimed at subsidising energy bills and going forward we understand that support will be reduced in order to target these most in need.

“A review into all taxes and costs affecting private landlords would be a welcome step.”

Dr Tania King-Mohammad, a property, wealth and business strategist, as well as the founder of Freedom with Tania, suggests that the government must introduce measures to stimulate the economy by offering incentives for higher pay, reducing inflation and ultimately decreasing the country’s debt in order to facilitate more lending and provide mortgage products with better interest rates. “This will help more first-time buyers get on the property ladder,” she said.

Furthermore, she believes that there should be a reduction in taxation on private landlords who have been subjected to increased targeting in recent years. While she supports the implementation of activities that promote economic growth and improvement, she believes landlords should not be over-burdened with taxes.

Jonathan Rolande, from the National Association of Property Buyers said that the 2020 stamp duty holiday was expensive and created inflation prices. Instead, targeted SDLT charges like increasing rates for overseas and additional property buyers would level the playing field.

He said, “Anything similar to the stamp duty holiday of 2020 should be avoided as it proved to be hugely expensive. It helped buyers who didn’t need it and ultimately inflated prices. As a result it caused damage instead of helping people.”

What is your next step?

The 2023 Spring Budget provides opportunities for property investors. 

Touchstone Founder Paul Smith said: “Increasingly, the opportunities for an easy retirement are challenging, however property investment provides easy access to financial freedom.

“The government has announced the fight against inflation will be over by December 2023. When this happens, mortgage rates will fall boosting UK property prices. It is a massive boost to private pensions as we can all have unlimited pension pots tax free. There is also lucrative incentives for commercial property investors. The £1m per person per year completely tax free HMRC scheme means that you can claim tax free cash even faster by using your dream holiday home and the boost in tax free pension contributions to £60,000 per year per person giving investors more disposable income.

“The budget has created fantastic opportunities for investors in commercial property and serviced accommodation. Two standout examples are Pensions and Capital Allowances. The lifetime limit on Pension Contributions has been removed. This is incredible news for those that use private pensions, SIPP (Self Invested Personal Pension) and SSAS (Small Self-Administered Scheme). Previously there was a limit of just £1,073,100. Just a few good property deals could see this old limit being rapidly exceeded. Now well educated and supported property investors have no limit to the size of pension pot they can amass. I personally am a member of an SSAS, which is a trust and so exempt from inheritance tax. There is now no limit to the size of the financial legacy I can leave to my loved ones. 

“The other key benefit is acceleration of the rate at which investors in commercial property and serviced accommodation can draw down tax free income. Our clients know how to earn, using HMRC incentives, £1,000,000 per person per year tax free. This budget just made that easier and faster.”

Paul will explain more on the impact of the Spring Budget on the economy in this week’s free spring budget webinar on Thursday 16th March  at 8pm: https://shrtlnk.co/scRn9

To find out more information about the property investment courses we offer call us on 01302 897131 or email office@touchstoneeducation.co.uk.