How will recent economic changes impact the UK property market?

In a time where economic shifts might seem as constant as the seasons, recent changes have set the stage for major financial ripples, including some that will inevitably impact the UK property market. With the Bank of England reducing interest rates, the UK government unveiling a new budget, and the results of the US presidential election revealing Donald Trump as the next president, property investors, homeowners, and potential buyers are understandably wondering what impact this will have on them.

The UK Autumn Budget

On 30 August, Rachel Reeves unveiled the Autumn Budget, leaving many speculating over possible measures that might target wealthy individuals. While the predicted ‘attack’ on the wealthy was less aggressive than anticipated, the budget did include an increase in the higher rate of Stamp Duty on additional property purchases, up from 3% to 5%. This change will likely weigh on those with second homes or buy-to-let properties, presenting a further consideration for individuals with portfolios of multiple properties. For those investing in residential property, this increased Stamp Duty could act as a barrier, potentially reducing the appeal of additional property investments.

The forthcoming changes to ‘non-doms’ tax may also have an impact on the property market, particularly in areas such as central London.¹ From April 2024, the UK resident and non-domicile regime is set to be abolished and will be replaced by a new residence-based regime. These changes could impact a number of individuals with property in the UK and could potentially result in an increase in properties for sale in the market.

Interest Rates

Amid a changing mortgage market, the Bank of England’s decision to cut the base rate from 5% to 4.75% in November is a notable step. For borrowers, this news should bring a bit of relief, especially after a recent period of uncertainty.

The rate cut is intended to offer some stability to the current situation with the market reaction expected in the coming weeks. Whether we see any further reductions from the Bank of England in the coming months is still to be determined, as while the extra spending outlined in the Budget would initially boost growth, measures such as the introduction of VAT on private school fees would push prices up at a faster rate.²

The US Election

It’s often said that the ripple effects of US elections reach across oceans, and this one is no exception. With Donald Trump’s election to the US presidency, global markets have been waiting to see the wider reaction. Although his immediate focus may be on US domestic policies, Trump’s administration will likely influence international trade, the value of the US dollar, and potentially even interest rates across the globe.

If the US economy strengthens, a stronger dollar could make UK properties more attractive for US buyers. In contrast, it could also potentially lead some investors to pull money from the UK as they look at opportunities elsewhere. Changes in global trade and possible interest rate increases could also impact demand in the UK. However, UK property, especially in cities like London, often acts as a ‘safe haven’ for international investors, which could help keep demand steady, or potentially even boost it.

While time will tell on the impact on some of these changes, the UK property market remains extremely resilient. For homeowners and investors, our specialists are here to help you navigate these economic currents with confidence. From monitoring lending rates to keeping you updated on market shifts; we’ll help ensure you’re prepared for whatever comes next.

For more details on the outcome of the Autumn budget, visit our YouTube page where you can see a full breakdown with our wealth planning specialists.

¹ Savills Blog | What the Autumn Budget means for residential property
² UK interest rates cut to 4.75% but Bank hints fewer falls to come – BBC News