A Review of the UK’s Spring Budget 2025: Potential effects on the property market
- B Johnstone
- 2 days ago
- 3 min read
Updated: 12 hours ago
Chancellor Rachel Reeves delivered the UK's Spring Budget 2025 on March 26th, outlining the government's economic strategy and fiscal plans. The statement painted a picture of cautious optimism, projecting continued growth but also highlighting ongoing economic challenges. From a property perspective, the 2025 UK Spring Budget has introduced several measures impacting the property market, with varying effects across regions and buyer demographics. We’ve outlined some of the main challenges for you below:
Housing Supply and Infrastructure
Revised Housing Targets: The government's goal for new home construction has been adjusted from 1.5 million to 1.3 million for the current parliamentary term, indicating a potential slowdown in addressing housing shortages. This represents a substantial turnaround from the original bullish position taken; reality has perhaps shown that with the current stresses affecting construction, a reduced target may be more achievable. Whether this revised target will be reached remains to be seen.
Investment in Affordable Housing: An allocation of £2 billion aims to support the construction of up to 18,000 social and affordable homes, contributing to the overall housing supply.
Planning Reforms: Proposed changes include delegating planning decisions to professional officers, setting national development priorities, and promoting development on underused land are all proposals that have been put forward. These reforms are designed to expedite planning approvals and stimulate construction activity. Without these changes, even the revised target will be difficult to meet, as the current planning bottleneck is having a substantial impact on the ability of property developers to progress builds.
Market Activity and Regional Disparities
Regional Market Performance: Northern England's housing market is currently outperforming London's, with homes in cities like Manchester and Newcastle selling significantly faster. In contrast, high-cost areas in London are experiencing slower sales, partly due to higher stamp duties and mortgage rates. However, London still remains one of the WORLD’s most prevalent property hot spots.
Property Prices: While Rightmove reports a 1.3% annual increase in asking prices, data from Halifax indicates a 0.5% monthly decline, reflecting a cooling market. The Office for Budget Responsibility (OBR) forecasts a 0.8% decrease in average house prices by 2029, influenced by a predicted increased housing supply.
Mortgage Rates and Buyer Confidence
Interest Rate Cuts: Following three interest rate reductions since the general election, mortgage rates have slightly decreased, with five-year fixed rates averaging 4.72%, down from 4.84% a year earlier.
Buyer Sentiment: Despite lower mortgage rates, buyer confidence remains cautious due to economic uncertainties, including global trade tensions. This has led to increased housing supply, with buyers having more options and less urgency – this could potentially lead to more competitive pricing. However, Spring is typically a time when people consider moving house, so perhaps the next few months will see an increase in property sales and purchases.
Taxation and Policy Stability
Stamp Duty: No new changes to stamp duty were announced in the Spring Budget, maintaining the status quo set by the October 2024 budget. This is unfortunate especially for first-time buyers who had enjoyed the recent cut in stamp duty.
Rental Market: The budget did not address the chronic shortage of rental housing or reform the tax system to encourage investment in energy efficiency improvements. The freeze on housing benefit remains, continuing to affect renters' affordability.
Other points to note
Economic Forecast: The Office for Budget Responsibility (OBR) predicted continued growth for the UK economy, albeit at a slower pace than initially anticipated. Inflation remains a key concern, although projections suggested a gradual decline throughout the year.
Taxation: As well as the points mentioned above, the budget also included a range of measures impacting both individuals and businesses. Specific details on tax changes, including potential increases or decreases in income tax, corporation tax, or VAT, were not immediately available but will be detailed in official government publications.
Public Spending: The government announced plans for increased investment in key sectors, including healthcare, education, and infrastructure.
Growth Initiatives: The Chancellor emphasised the government's commitment to supporting economic growth through various initiatives. These initiatives could include incentives for businesses, investment in technology and innovation, and/or measures to improve skills and workforce development.
Outlook
Our review of the UK's Spring Budget 2025 presents a mixed picture for the UK property market. While initiatives to boost housing supply and streamline planning processes are positive steps, regional disparities and economic uncertainties continue to influence market dynamics. The Budget's focus on a long-term plan for the property market rather than any short-term fixes at present, would indicate a tougher stance on tax breaks or grant incentives.
Property Developers and investors are advised to stay informed and consider regional trends when making property decisions. And if you would like some help with your property business, then please get in touch using the link below:
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