Mini-budget, maximum impact

Housing market continues to defy economic headwinds
Nicky Stevenson, MD of Fine & Country UK

The past month proved to be historic for the country, for both politics and for the housing market. This is according to Nicky Stevenson, MD of Fine & Country UK, who adds that the government’s mini-budget has proved to controversial and there will be a period of uncertainty until the longer-term fiscal direction is clearer. 

“September 2022 was a month unlike any other, marking the end of the second Elizabethan age, and the appointment of Liz Truss the Queen’s final prime minister, and the first prime minister for King Charles III. The late Queen’s first prime minister, Harold Wilson, once quipped ‘a week is a long time in politics’, and Friday the 23rd to Friday the 30th of September proved just that,” Stevenson comments.  “Further to the announcement of much-needed financial support to households and businesses to tackle the energy crisis, the government’s mini-budget provoked a shockwave throughout the UK and global economy. Signalling a significant shift in economic policy, the tax-cutting budget provoked a rebuke from the International Monetary Fund, intervention by the Bank of England and uncertainty across the markets. Sterling fell to historic lows against global currencies, while mortgage lenders were forced to withdraw an unprecedented number of products due to the 150 base point rise in the cost of borrowing that ensued. The markets have reacted positively to the reversal of the 45p tax cut, but with no independent forecast from the Office for Budget Responsibility expected until the Chancellor reveals more detail and costings in November, it’s a wait-and-see game for many.”

Stevenson says that alongside the reduction in National Insurance contributions, a cut in income tax and the energy price cap, the mini-budget shelved, with immediate effect, Stamp Duty Land Tax for all property sales in England up to a value of £250,000, saving many purchasers up to £2,500. “In addition, first-time buyers will benefit from a 0% rate of Stamp Duty up to £425,000, the threshold purchase price raising from £500,000 to £625,000, giving a maximum saving of £6,250. In Wales, the level at which Land Transaction Tax is paid will rise to £225,000 from £180,000 on the 10th of October, saving buyers purchasing up to £345,000 a maximum of £1,575. However, those paying £345,000 or more are set to pay up to £550 more with the introduction of a new 6% fee on purchases between £225,000 and £400,000,” she adds.

According to the Land Registry, around 13% of property purchases in Wales will be affected by this rise. While the tax cuts were undoubtedly welcomed by many households, the reality of higher mortgage interest rates have placed these into financial perspective. 

“Despite concerns over the rising cost of living, data from HMRC reveals that August 2022 proved the strongest for sales since 2007, and the Bank of England reported a sharp increase in mortgage approvals. 74,000 mortgages were approved in August, the highest level since January 2022 and up 11% on the pre-pandemic average between 2015 and 2019,” notes Stevenson.  “With the price growth of newly-listed properties tracking back to longer-term seasonal norms in recent months and the volume of new supply to the market increasing, there were signs that market dynamics were beginning to shift more into balance. The recent economic shock to the market has undoubtedly caused an emergency brake to be applied, with lenders and movers alike awaiting clarity.” 

According to Stevenson, as with the mass market, prime market prices in September continue to show price growth versus a year ago. “In higher value market areas, such as London, the current economic context provides a window of opportunity, with purchases in many currencies currently making significant savings compared to the start of the year,” she concludes.