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How will the budget affect the property market?

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The UK budget announcement took place on the 15th of March 2023, setting out how the UK plans to stimulate the economy through new taxation and spending decisions. Some of the key takeaways and data released from this year’s budget announcement were:

  • Increased tax thresholds on pensions, and tax increases on alcohol and tobacco 
  • An extension of the Government’s energy bill support 
  • An extension of the criteria to qualify for free childcare for working parents 
  • A prediction that the UK will avoid a recession 
  • A prediction that Inflation will drop significantly to 2.9% by the end of 2023 
  • Corporation tax increased from 19% up to 25% in some cases 
  • Relaxed immigration rules in the construction sector

What about the property market?

The budget had very little to say about the property market with no major shakeups or schemes on the cards. There were no changes to stamp duty or anything else related to the market.

We believe this to be a positive outcome because it enables the property market to find its own level, rather than being artificially fuelled. The market has somewhat been influenced by different factors of late, not least the pandemic. So, we should now finally see where the market is really at.

Some of the predictions will have some influence on the market, especially that inflation could drop to 2.9% by the end of the year which would also see interest rates stabilise and possibly decrease.

A word on house prices

Data released by Rightmove indicates that house prices increased by 1.3% last month, which contradicts what we may expect regarding the current situation. As interest rates have increased exponentially, we expected house prices to decrease as competition for property lessened.

However, if you look into the specifics of the data, you’ll notice that the increase of 1.3% has been largely influenced by the upper end of the market, so it may not be a reliable data sto track average house price changes.

Is now a good time to buy?

We believe now is a good time to buy, and we’re not just saying this because we’re estate agents. The Office for Budget and Responsibility (OBR) predicts a 10% house price decrease from the peak of prices to the current trough. Based on research carried out within our estate agency, we believe these estimations to be accurate and the current situation is the extent of the trough.

We now expect prices to level out and start rising again fairly soon as interest rates come down. Interest rates tend to go up like a rocket and come down like a feather, so we will need to get used to the “new normal” rates in the meantime.

In summary, research and history indicate that property prices will bounce back steadily after the current trough, making now a good time to move up the property ladder or buy your first home.  

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