What did the Spring Statement mean for the property sector?
Rishi Sunak’s Spring Statement came and went with the usual media hype. And with so much attention on fuel price inflation, National Insurance (NI) rises and a future income tax cut, it was easy to miss what the impact might be on the property market.
With that in mind, we put the property sector under the microscope and examined what the Spring Statement may mean for architects, surveyors, construction businesses, property investors and syndicates.
Inflation and countermeasures
The economic update delivered the news we were all expecting on inflation. It may reach in excess of 8% later in the year, its highest in decades – not good for borrowers, and we are seeing the mortgage market already tightening.
Inflation is also hitting the price of materials hard, making design and build projects more challenging to complete on budget.
For landlords, the soaring inflation may be causing consternation as to whether their tenants will be able to meet their rental commitments. They may be cheered then, by the Chancellor’s raising of the NI threshold. It will put an extra £330 in the wallets of low earners, who may be most at risk of missing the rent.
Already announced was a council tax rebate of £150 in April for property bands A-D, and £200 off energy bills in October (to be repaid later over five years) which provides further relief to household budgets.
The economic update also contained good news on unemployment rates. They were revised downwards 1.1 percentage points to 3.9% for the first quarter of 2022. Moreover, it was reported that the headwinds of this year are only expected to have a very minor negative effect on this.
This takes further risk out of the market for landlords, architects and home-builders by reducing the chance of their tenants or customers losing their main source of income.
VAT cut for green improvements
In the Spring Statement it was announced that VAT on green improvements to properties would be cut from 5% to 0%. This includes things like insulation, heat pumps and solar panels.
This will be of particular interest to some in the industry, considering the current proposal that all newly-let properties should have a minimum EPC rating of C by 2025.
Now, it will be cheaper to comply with this requirement, as well as help future tenants stay on top of their household bills through more energy-efficient homes.
Good news: what the budget didn’t include
Sometimes a budget can be defined by what it does not say. And in this case, landlords, property investors and others in the property industry will be pleased to have seen that a rumoured rise to the stamp duty surcharge for additional homeowners – from 3% to 4% – did not go ahead.
The tax system has moved against landlords in recent years, so there will be a sigh of relief to see that this was not continued this spring.
Advice on the property sector
If you would like to discuss strategy for your property assets or business, please drop us a line or call us, and our experts will be happy to talk through your options and the tax implications of your current property portfolio please contact us here, or telephone us on 020 7330 0000.