One in five Britons in the process of or considering moving home have put their plans on ice amid concerns over upcoming property tax changes in the Budget.
Activity in the housing market is sluggish with speculation over the Budget having a marked impact on many buyers and sellers and “denting their confidence”, Colleen Babcock, Rightmove’s property expert, said.
Chancellor Rachel Reeves is widely expected to announce a radical shake-up of the property tax system next week.
Proposed changes rumoured to be on the cards include the introduction of a mansion tax, the replacement of stamp duty with a new national property tax and replacing council tax with a new local property tax.
As a result, many are holding off on moving to see what transpires.
Gareth Brock, 54, lives in Heswall with his wife, Nichy, 53, and they are currently pausing any moving plans. The couple have a 25-year-old daughter who lives and works in London.
Mr Brock, who works in the NHS as a consultant, first put his three-bedroom house on the market a couple of years ago.
The couple had planned to downsize to a smaller two or three-bedroom house for between £750,000 and £1m within up to 15 miles of their current home. The couple were both keen to see their mortgage repayments lowered while downsizing.
Amid so much uncertainty surrounding the Budget, Mr Brock has now taken his property off Rightmove and is only marketing it via an independent estate agent.
He said: “I got another NHS job in Cornwall on the basis that we would move. I took up the job on this basis. We ended up having to move back here as we couldn’t sell our home in Heswall.”
Mr Brock is concerned about what Reeves has in store for property and which rules will or will not come to fruition.
He said: “There are many unknowns as to what taxes could be changed, particularly for properties in higher price brackets. It’s unclear how the market will become more fluid again, as it really seems to have stagnated at the moment. We’re fortunate we can hold fire at the moment”.
Mr Brock thinks stamp duty thresholds should be reduced again to get the housing market moving. He hopes that if a mansion tax does get announced in the Budget, it will be beyond the price bracket of his home or any he is looking to buy.
Mr Brock expects to put his house back on the market fully in the spring or summer of next year.
It comes as house prices are falling with new seller asking prices falling by 1.8 per cent this month – down £6.591 on average to £364,833 – according to Rightmove.
Separate data from the Government shows average house prices in the UK decreased by 0.6 per cent between August and September, compared with a decrease of 0.1 per cent from the same period 12 months ago.
The reduction is partially as a result of subdued activity ahead of the Budget.
‘The Government needs to improve the UK’s hosing stock’
Dan Holland, 34, lives in Wirral, and, alongside his main job as a chartered aerospace engineer, runs a property business with his brother, Jim, 30, specialising in houses in multiple occupation (HMO).
The duo specialise in tackling unloved and neglected properties and carrying out comprehensive refurbishments on them, before turning them into HMO properties.
They usually spend between £100,000 and £150,000 buying each property, and spend roughly the same for the refurbishments. Most of their portfolio is in or around Liverpool.
Mr Holland said: “We are collaborating with a group of high-net-worth individuals from overseas. Internationally, there has been a noticeable reluctance and caution regarding UK property investment, largely attributable to uncertainty surrounding the Chancellor’s upcoming Budget.
“The current climate of uncertainty is definitely tempering the speed on new acquisitions we are making.”
He added: “The most damaging potential change would be the introduction of national insurance on rental income. The financial impact of this would be devastating.
“For a single HMO room renting at £700 a month, this would impose an immediate tax burden of at least £56. Across an entire HMO portfolio, an 8 per cent levy on gross income could potentially devour up to 28 per cent of current profits, making investment significantly less attractive and hindering the provision of quality housing”.
Mr Holland is also concerned about frozen tax thresholds and proposed council tax reforms.
He said: “Replacing the current council tax system with a levy based on a property’s commercial value would be a catastrophe for HMO developers.
“Our properties are valued commercially post-conversion, which is significantly higher than the residential purchase price. For example, a property bought for £100,000 to £150,000 could be commercially valued at £400,000. Applying a property value-based tax to this commercial valuation would render the investment model financially unworkable.”
Mr Holland wants Reeves to scrap additional stamp duty on properties, like in his portfolio, where housing stock is “upgraded”.
He said: “The government should robustly encourage the improvement of our current housing stock. No additional stamp duty should be applied to the purchase of investment properties with an EPC rating of less than C, provided there is a legally binding commitment and subsequent realisation to upgrade the property to a minimum C rating.”
Who is most worried about property tax changes?
Just over 60 per cent of potential buyers or sellers said they were aware of speculation about changes to property taxes in the Budget. Nearly 80 per cent of people in this category said they were worried about the proposed changes, according to Rightmove’s study of over 10,000 prospective movers.
The introduction of a mansion tax or other property taxes would, in all likelihood, have a greater impact on locations where property prices are typically higher than elsewhere in the UK, such as London and the south east of England.
Babcock said: “We’ve heard directly from home-movers about how it’s denting their confidence, with some preferring to wait until after the Budget to see how any policy announcements affect their plans.”
She added: “While most movers are carrying on as normal, it demonstrates how unhelpful the uncertainty over potentially costly changes can be. I think most are now fed up with the rumours and would like to see the final contents of the Budget to assess how they’re impacted.”
Liam Gretton, owner of Liam Gretton Bespoke Estate Agent on the Wirral Peninsula, said: “I’m seeing clients delay moving, particularly in the premium end of the market.
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“From our conversations, it’s a mix of the uncertainty around what Labour might announce in next week’s Budget and the natural slowdown as we approach Christmas and the New Year.
“At this time of year, people are already hesitant to make big decisions, and the added layer of potential tax changes is giving many sellers even more reason to pause until things feel clearer.”
He added: “Several clients have said they’re waiting to see if Labour introduces a new annual tax on high-value homes. Even the suggestion of it is enough to make people pause before listing.”
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