Editor's note: This brief was summarised by The Property AI Team from a report by Property Industry Eye. Read the original article for full details.
Autumn Statement: Landlords Face Fresh Tax Blow as Industry Warns of PRS Pressure
Chancellor John Healey has delivered an Autumn Statement dominated by tax increases and cost-of-living measures, with little direct support for the housing market. The announcements include a two-percentage-point increase in tax on rental income, prompting warnings that more landlords could leave the private rented sector and put further pressure on rents.
For first-time buyers, the Chancellor confirmed plans for a new scheme, Your First Home, and a first-time buyer ISA to help aspiring homeowners onto the property ladder. There were no major changes to building regulations, leaving housebuilders facing many of the same challenges over housing delivery.
Banks face an additional 3% tax surcharge, raising concerns about the impact on mortgage pricing and lending. Other measures include a £100 winter energy payment for 20 million households in Council Tax bands A to D, business rates relief for smaller firms and an extension of the 5p fuel duty cut. The Office for Budget Responsibility has downgraded its economic growth forecast for next year to 1%, adding to uncertainty over the property market outlook.
For estate agents, landlords, developers and mortgage lenders, attention now turns to the impact on housing supply, borrowing costs, rents and market confidence. Property Industry Eye said it is updating its article live as reaction comes in from across the property sector.
Industry reaction
Mark Eastwood, director of corporate sales at Together, warned that the additional tax on banks could eventually affect mortgage borrowers. He said the Chancellor's decision to increase the rate profit surcharge for banks "undoubtedly removes some of the sheen" from a sector described as the "jewel in the crown" of the country's economy.
He said the effects of the tax are likely to trickle down to everyday British people. Beyond a potential acceleration of plans to lay off workers or move operations out of the country, banks may look to offset the tax by lowering interest rate deals for savers and increasing mortgage rates. He added that mortgage borrowers are already contending with unpredictable swap rates and rising inflation, so additional upward pressure may cause first-time buyers to pause plans, and existing borrowers to cut back on spending to cope with increased rates.
Heather Powell, partner at Blick Rothenberg, warned that the increase in tax on rental income could accelerate the departure of private landlords from the market. She said the "+2% on rental income really is the final nail in the coffin for private investors in rental properties", citing tax rates of 24%, 44% and 49% and a deduction for interest that is restricted to the basic rate.
She said landlords will be looking to sell up and invest elsewhere, and that tenants looking for good homes to rent will find reduced supply and higher rents due to competition, and will be driven into the arms of corporate build-to-rent investors.
Source: Property Industry Eye