Autumn Budget Predictions

Autumn Budget predictions for the property and construction sector

The Labour Government has already warned that its first fiscal budget will be painful. With an estimated £22 billion black hole to fill, it’s likely that taxes will increase and public spending will be cut. A number of announcements have already been made on the Government’s plans for the property and construction sector. It is therefore hoped that the Budget won’t include too many nasty surprises, although many fear the worst.

Private rental sector

The Government has already announced that it hopes a ban on no fault evictions will be in place by summer 2025. This measure comes with a number of other plans to strengthen the rights of tenants, including:

• Increased powers to challenge unreasonable rent increases
• Giving tenants the right to request pets
• Requirements for landlords to fix problems such as mould
• Ending bans on tenants on benefits
• Requiring landlords to publish an asking rent in advance to end bidding wars

In anticipation of these measures, many landlords are already selling properties. In London it has been reported that the number of buy to let properties for sale has reached a 10-year high. Capital Gains Tax (CGT) rates were reduced from 28% to 24% by the previous Government which means that landlords are currently being taxed at more favourable rates when they sell. Whilst an increase in CGT rates is expected to be announced in the Budget, it is hoped that this won’t come into force until the start of the new tax year to allow landlords time to assess their positions and to offload property if they want. Increasing CGT rates with immediate effect on Budget Day may cause landlords to hold on to properties as they won’t want to suffer a higher tax burden.

Housing

In July, Angela Rayner announced a mandatory housing target of 370,000 new homes per year to “Get Britain Building”. Whilst this is good news for developers and builders, estate agent membership group Propertymark has pointed out that this means building just over 1,150 new homes every single working day for the next 5 years to reach the 1.5m new homes target in this Parliament.

In order to achieve this ambitious target, it is hoped the Government will do something to tackle labour shortages and a growing skills gap in the construction industry. Offering incentives to businesses that offer construction sector apprenticeships would help get more young people into the industry, and making it easier and cheaper for construction companies to recruit from overseas would help to mitigate domestic labour shortages.

Public infrastructure

A number of high-profile infrastructure projects have already been paused or scrapped in an effort to get public spending under control. These projects are generally ones that significantly contribute to carbon emissions or have other adverse environmental impacts, and it appears the government wants to realign projects to long-term environmental sustainability, with a particular emphasis on producing clean energy.

Investing in green and sustainable projects is a great cause, but with limited public finances the key to achieving infrastructure targets will be through attracting private investment. It is hoped that the Government’s need to increase tax revenues will be balanced with recognising that the tax system needs to be competitive. Increasing companies’ tax burdens too much will drive away investment which will cause economic growth to stagnate.

_{Rebecca Wilkinson, partner and property & construction sector specialist at accountancy and advisory firm Menzies}