Rise in Employers’ NI
The hike in Employers’ National Insurance is concerning, and might well lead to price increases for people-heavy businesses running on small margins, trying to make the P&L work. Even larger businesses have said that they will have to make significant cuts to their workforce to cover the increased costs. This is going to hit workers hard, which is unfortunate given the government’s pledge to protect working people. Housebuilders will be affected, at a time when staffing projects is extremely difficult and build costs remain high.
Stamp Duty increases on second homes
Higher Rates for Additional Dwellings (HRAD) in Stamp Duty Land Tax will increase from 3% to 5% for those purchasing second homes, buy-to-let properties, or properties acquired through a business. This tax increase is likely to discourage speculative investment in secondary properties. Given the volume of second home transactions, these increased costs might slow the market.
Investment in the planning system
The Chancellor announced that 300 new planning staff will be appointed to boost local planning authorities. This funding includes hiring 300 new planning staff to boost local planning authorities, with the aim of helping improve traction in what has become a very stagnated system. It is unclear whether we will see any rule changes to help in this regard, such as the current requirement to market an office building for two years before it can be declared obsolete and therefore developable.
Help for smaller housebuilders
An investment of £47m to unblock stalled developments is intended to facilitate the delivery of an estimated 28,000 homes, which could particularly benefit smaller housebuilders who may otherwise struggle with such regulatory and financial challenges. In addition, the £500m boost to the Affordable Homes Programme for example, is projected to create an additional 5,000 affordable homes, offering SME housebuilders more opportunities to participate in affordable housing projects. Further, it was encouraging to hear specific reference of help being offered to SME housebuilders, who can unlock smaller projects to revitalise towns and cities, and help for cities such as Cambridge to meet its potential as an area rife for property development amidst key life sciences campus developments, and the homes needed for the workers this attracts. But, small business will feel the squeeze on employers’ NICs increases which they will have to factor in to their overall costs and appetite to build. Build costs remain high and debt costs may not fall as sharply as hoped.
Boost for BTR
The government has introduced incentives to support the Build-to-Rent sector, including £3bn in housing guarantee schemes that provide lower-cost loans. This funding is expected to facilitate the development of thousands of rental units, making it easier for property investors focused on rental income to obtain financing.
Political stability is a plus
Regardless of the specifics of this Budget, a settled political landscape should provide a platform for economic stability. We are seeing sustained house price growth, so as we see interest rates lower and inflation dampened then new initiatives to benefit developers, should continue to stimulate market growth. As a debt provider we will be pleased to see more favourable market conditions unlocking strong assets in good locations for well-capitalised borrowers.
