There was some hope that, given the widely publicised shortage of rental homes and requests to government to reverse the imposition of Section 24 – which means landlords end up paying tax on their turnover if they have a mortgage, as opposed to the net income they earn – there would be some announcements for the property market that would help drive more investment into the Private Rented Sector to generate much needed additional homes for tenants.
But, surprisingly, there wasn't anything that would directly impact on people’s ability to buy, sell, let or invest in homes, despite the turmoil created in the market since the mini budget back in September 2022. So is there anything - positive or negative - about the Chancellor’s Spring Budget that landlords and tenants need to be aware of?
The short answer is yes, however, the biggest upcoming changes that will impact the property market are all from the Autumn Statement of 2022. These include:
- On the positive side, the changes to individual wages, including benefits, pensions and the minimum wage, which will take effect from April 2023
- On the downside, the reduction in Capital Gains Tax, which isn’t great news for landlords wanting to sell a property – however, as long as properties were bought some time ago, these changes will be a small downside versus the upside of the price increases we’ve seen over the last few years in most areas of the UK.
The main good news for both landlords and tenants from this latest budget is the extension of the energy subsidy until the end of June. This gives a further discount off gas and electricity bills of around £160 per household over the coming months.
And there’s also good news for the estimated 4 million households on pre-payment meters who typically pay more than those on direct debit. Utility companies are now expected to charge rates similar rates across the board, rather than penalise those on low incomes.
The expectation is that utility prices will start falling by the summer and the Chancellor, Jeremy Hunt, forecasts that the double-digit inflation we’ve experienced over the last 12 months will fall back to under 3% by the end of the year.
So, from a household income perspective, things should start easing by the second half of 2023.
What other good news was in the budget?
The rest of the support package in this Spring Budget was very much about growing the economy and getting as many people into work as possible. And it’s perhaps with these changes that, although the budget will do little to help supply versus demand in the property market, it may help make affording a property to rent or buy a little bit easier.
The key takeaways that could boost people’s ability to get back to work, earn more money and keep or find a new roof over their heads included:
- The maintenance of a 5p cut for petrol and diesel duty for another 12 months, which could save families up to £100 a year. This is especially helpful for landlords who self manage and have to do their own viewings and property checks.
- Big changes to support for childcare:
- Extra free hours to enable those eligible to work for 18 hours a week, up from 15 hours
- Upfront childcare fees paid for those on Universal Credit and an increase in the allowance
- Additional support for parents with children in school to allow an 8am drop off and 6pm pick up
If this can help all parents that wish to work, whatever their child’s age, it could be a great boost to family incomes.
- For those wanting to work who are disabled or suffering with things like long-term sickness, mental health issues or back pain, there will be additional help and security to get back to work and a scrapping of the ‘work capability assessment’. In contrast, there may be further sanctions for those who could get back to work and choose not to.
And for people who already have fairly large pension pots, to help reduce the number of experienced over-50s retiring - especially doctors - the annual allowance to invest is being raised from £40,000 to £60,000. There will also be no limit on the amount that can put into a pension without extra charges, as the £1m cap is removed.
Finally, those who have a pension and would like to increase their savings will be able to put in £10,000 each year versus the current £4,000.
Infrastructure, regeneration and levelling up opportunities
While the changes above will help general affordability for most people over the coming year, the biggest opportunities for landlords and investors come from the announcements on infrastructure and regeneration. However, bear in mind that some of these may take decades to come to fruition or might not happen at all.
Perhaps the most immediate opportunities will be created through investment in existing plans. These include:
- Changing the classification of nuclear power to ‘sustainable energy’. The aim is for nuclear energy to provide 25% of our power in the future, with investment in projects such as Hinkley Point in Somerset, Sizewell in Suffolk and a further reactor at Bradwell in Essex. These huge projects should create new jobs and that means more new homes will be required, with those making the projects happen likely to need rental accommodation either short or long term.
- Hundreds of millions of pounds is being made available for 20 specific areas in England, to drive regeneration and levelling up. The following areas are being invited to develop a partnership: City of Kingston upon Hull, Sandwell, Mansfield, Middlesbrough, Blackburn with Darwen, Hastings, Torbay, Tendring, Stoke-on-Trent, Boston, Redcar and Cleveland, Wakefield, Oldham, Rother, Torridge, Walsall, Doncaster, South Tyneside, Rochdale, and Bassetlaw.
- A further £58 million will be invested in capital projects for the North West of England, including: “a new community hub in Stockport, the transformation of Bootle town centre, and the redevelopment of markets as well as transport connectivity improvements in Rossendale.”
- In city and metropolitan areas there will be £161 million for high-value capital regeneration projects including: “business premises and food science facilities in Tees Valley and unlocking investment in a research campus in the Liverpool City Region.”
All of this additional funding can offer opportunities to invest now and reap the benefits. Of course, that’s as long as the funding is actually invested and has the desired impact, which isn’t always guaranteed.
Finally, perhaps one of the biggest, but most long-term investment return opportunities, comes from the announcement that the government is seeking to generate a further 12 investment zones that can be dramatically changed - as happened with Canary Wharf and Liverpool Docks.
Combined authorities that are being asked to put forward their recommendations are:
- The proposed East Midlands
- Greater Manchester
- Liverpool City Region
- The proposed North East
- South Yorkshire
- Tees Valley
- West Midlands
- West Yorkshire
So, overall it was a disappointing budget for the property market. But this doesn’t change the fact that property investment has continued to deliver well, especially during the pandemic, and that we currently have a serious shortage of rental stock for many tenants across the UK. This shortage, combined with the boost to wages - despite the rising cost of living - has helped to drive up rental rates far more than we’ve seen for a long time.
You can read the full Executive Summary of the Spring Budget 2023 on the GOV.UK website. And if you’d like to discuss investment opportunities or anything about the rental market in your area, we’re here to help. Just get in touch with your local Your Move branch and our experts will be happy to answer any questions you might have.
Rent cap and eviction ban extended in Scotland
In October 2022, the Scottish Government introduced a rent cap and ban on enforcement of evictions, initially valid from 6th September 2022 until the end of March 2023 – with the option to extend for two further 6-month periods.
The rent cap was set at 0%, essentially freezing rents, with landlords only able to increase them under certain specific circumstances, including at the outset of a new tenancy.
At the end of January, it was announced that the rent cap would be extended until the end of September, however, it will be raised from 0% to 3% from 1st April. That enables landlords to increase rents (provided they hadn’t already done so in the previous 12 months) by up to 3% to help cover their own increased costs, but it’s still significantly below the rate of inflation, meaning landlords’ profits are continuing to decline in value.
In certain circumstances, landlords will still be able to apply for an additional rent increase based on specific prescribed property costs going up, but the maximum overall increase will be 6%.
Meanwhile, the enforcement of evictions will also continue to be banned. In practice, this means landlords can still serve eviction notices and apply to the Tribunal for an eviction order, but if the tenant doesn’t vacate, sheriff officers can’t enforce the eviction – except in certain cases, including anti-social or criminal activity.
The Your Move Content Marketing Team
