Last week’s Spring Statement comes months before the next election, and it’s clear that the Government is pinning its chances not on its record in Government but on tax cuts. The keynote measure, a 2p cut in the rate of National insurance from 10p to 8p, will mean the average employee is some £450 per year – or just under a tenner a week better off; surely not a game-changer for most individuals or indeed the economy. But this is more about election messaging and boxing in the opposition rather than anything else. 

SDLT – REMOVAL OF MULTIPLE DWELLINGS RELIEF (MDR)

Dig into the details, though, and the vibes around property investment, at least of a residential variety, are rather less positive. The Government has removed Stamp Duty Land Tax (SDLT) relief on the acquisition of multiple dwellings. MDR was introduced in 2011 to promote institutional investment in residential property, given complaints from the industry that the tax structure was inhibiting institutional investment. 

SDLT will, however, once again be liable at the rate applicable to the total amount of the sale rather than the average unit value. (SDLT is waived for the first £250,000; the next £675,000 at 5%; the next £575,000 at 10%; and then anything over £1.5m at 12%.)

Consider an investor buying 100 flats valued at £400,000 each (so £40m in total). Under MDR, the units would have been treated almost as if they were sold individually, so SDLT would have been liable at £7,500 per unit, meaning £750,000 in total, an effective rate of around 1.9%. Now it has been removed, the transaction will be treated as if it were a single £40m property being sold, increasing SDLT sixfold to over £4.7m (or 11.6% of the purchase price). 

This could seriously damage the embryonic market in “stabilised” build-to-rent (i.e. trading fully let schemes). Even though the main form of activity here at present – forward funding of development – is not directly impacted, investors will have to modify their exit value assumptions, perhaps also affecting viability, deal structures and possibly existing values.

So why do this, especially at a time when housebuilders are looking to sell unsold single-family products to investors? Why injure a market that has the potential to provide many new homes in a housing crisis? The official line is that it was ineffective and being abused, although this was not backed up by an independent investigation. The real explanation may be in one of the other measures announced, the reduction in the higher rate of Capital Gains Tax for Residential Property from 28% to 24%. This is clearly designed to incentivise long-term landlords – who have racked up significant capital gains but could now be struggling with interest costs – to sell.

IT’S ALL ABOUT OWNER-OCCUPATION (AND ELECTIONS)

The two measures taken together imply that the Government is trying to get more housing supply into the “for sale” sector to create more homeowners who, it believes, are more likely to vote Conservative. Also, as I’ve written elsewhere, politicians tend to assume there are few votes, if any, in promoting the private rented sector, as it is so easily painted as somehow taking homes away from deserving potential homeowners – in fact, there have been headlines to this effect over the past week or so.

This is all very unfortunate as with mortgage markets constrained, debt finance expensive, and plenty of dry powder out there looking to invest, it could, in the medium term, at least provide more homes than the conventional route. It’s not fatal, of course, but neither is it particularly helpful, especially outside London, where average values are much lower, and the effect of MDR is the largest. The industry is lobbying for a different approach, but it remains to be seen whether its voice is heard.

On the other hand, the Government did introduce tax rules for the new “Reserved Investor Fund”. Understanding the full implications of this will require more detail and in-depth analysis, but it is an attempt to induce some funds – including in property – to invest in onshore rather than offshore vehicles. This could benefit the property funds industry in London, but it seems on the surface unlikely to lead to any obvious market impacts in the short term.

OF FILMS, VACCINES AND GROWTH IN THE SOUTHEAST

Perhaps more important for the direct economy are the measures around two segments that are currently growing rapidly in Britain: film studios and life sciences. The former will get a relief of up to 40% on business rates until 2034. 

The proposals for the latter are more extensive. Hunt announced that AstraZeneca is set to invest £650m in its presence in Cambridge – and in a £450m vaccine plant in Liverpool – which the government claims is supported by its own Life Sciences strategy. Given that one of the major issues in the whole area is the lack of housing, the Chancellor also announced a £10m funding deal for the Cambridge Development Corporation. 

This all follows on from Michael Gove’s announcement of 150,000-home urban extensions for the city. But the details here remain sketchy, and local opposition is (as ever) considerable. Water supplies remain a major problem. This is, nevertheless, a place of huge strategic importance to the UK – are the proposals sufficient? (It’s not just Cambridge and Liverpool seeing place-based initiatives; there’s also £242m being allocated to support the regeneration of Canary Wharf, aimed at creating another life sciences hub and build 8,000 new homes). 

While the big headlines are mainly concentrated on the South East, there has been some attempt to continue with “Levelling Up”, including an additional £400m for the Long Term Plan for Towns (bringing another 20 into play), more details on the “Investment Zones” planned for the big conurbations outside London, and £100m for cultural projects. However, this is hardly where the emphasis has landed, a far cry from the days of Boris Johnson.

PLANNING REFORM (AGAIN)

Finally, the Government is also consulting on an “accelerated planning system” with a premium fee attached. Given the huge backlogs in the planning system, this will be welcomed by some. The question will be, as always, around resources. Councils have slashed planning departments over the past decade, redirecting shrinking resources to other departments and statutory functions. The proposals will surely only work if the additional fees are channelled into more headcount (clearly only viable in some parts of the country), but the question will be whether this can be ensured given that councils will be tempted to direct it towards more visible areas.

SUMMARY

In short, then, a budget that is largely about pre-election positioning: an attempt to create a distinctive message around tax cuts and perhaps a shift in focus away from the ageing “Red Wall” that dominated the strategising around the last election towards young aspiring homeowners and the South East. But as outlined above, at least a few of the announcements could have wider implications. 

Perhaps the most optimistic messaging for the industry as a whole is around the broader macro picture; the Office of Budgetary Responsibility has slightly ticked up its GDP forecast and radically brought down its inflation expectations, from 3.6% in 2024 and 1.8% in 2025 to 2.2% and 1.5% respectively. This adds to the evidence that the Bank of England may bring interest rates down earlier and more rapidly than was expected a few months ago.