The markets were not disturbed by the Budget proposals; fiscal stability was maintained. But the Government’s plan for tackling key controversial issues – defence, welfare and the triple lock on pensions were missing. The 10 year plan was trailed but we will have to wait until the end of the year for that. While the headlines focused on ‘breathing space’ – small handouts (£100 off energy), reduced costs of ‘family favourites’ and no increase in the ‘mansion tax’, a mixed bag of changes will affect the property industry.
Housing
In his first speech as Prime Minister, Andy Burnham pledged ‘the biggest council housing programme since the post war era’, so it’s not surprising that this Budget has focused on the public sector housing. £1.5bn will be added to an existing 10 year programme to build social housing; local authorities can access cheaper loans; mayors are to have a greater role in decision making about housing; and, from 1 April 2027, there will be VAT relief for land purchased by social housing providers. A further £432m will be added to funding homes for rough sleepers.
Partnerships between government ministries (including the Ministry of Defence) are to free up land for housebuilding, as well as developments around strategic sites. This is a potential win-win which could improve housing delivery and contribute to economic growth. Furthermore, some barriers to development are to be resolved – building regulations will not change (except if there are safety issues); some rules (‘Crichel Down’) for dealing with compulsory purchased land will be amended; and, the protection of biodiversity of smaller sites (up to 1.5 hectares) will no longer be required.
In the private housing sector, the government will consider next steps for increasing house building in its 10 year plan. Meanwhile, first time buyers who cannot afford to fund a deposit on a home could benefit from the ‘Your First Home’ initiative. This is expected to help 70,000 people, by providing them with equity loans (20% interest free for 5 years, increasing gradually over the next 5 years) to buy new-build homes from developers participating in the scheme. Currently, applications are expected to be made from February 2027. The deposit limit is 2.5% to 15%; the earnings cap £110,000 per household outside London, £140,000 inside London; and, price cap £500,000 and £650,000 respectively. A similar scheme, Help to Buy, which ran from 2013 to 2023, benefitted 320,000 first time buyers.
Individuals will be able to save for a deposit on their first home, through the new First Time Buyer ISA, from April 2029. There will be no upper age restriction. The individual can invest up to £4,000 per annum, with a 25% government bonus. The bonus will be paid when the funds are withdrawn for a qualifying first home purchase of up to £450,000; this avoids a problem of a withdrawal charge, under the existing scheme, if a buyer fails a condition. The current lifetime scheme is to be amended from Budget Day to reduce the withdrawal charge from 25% to 20% for first time buyers who buy property above the £450,000 price cap.
Other Budget Day announcements were not so positive. The savings and property tax rate will rise by a further 2%, at all levels, for private landlords from 5 April 2027. The new rates will be 24% (basic rate), 44% (higher rate) and 49% (additional and trust rate). Such a change may lead to a reduction of private rented properties, plus a hike in private rents.
Infrastructure and devolution
Economic growth remains a key issue for the government to address. The OBR cited real GDP growth slowing from 1.25% in 2026 to 1% in 2027. A number of proposals emerged for increased efficiency in large projects central to infrastructure.
In the Fiscal Devolution Roadmap, published on Budget Day, decentralisation is offered as a route to drive change without central delays. This will be backed by removing short term funding and replacing this with a reformed funding system, including a share of locally retained business rates from 2027. Clearly there has to be oversight, given the likely sums involved. The government intends to effect this through a ‘strong prudential framework’, including affordable borrowing limits and proof of capability to repay debt, underpinned with government legal powers to investigate and remediate excessive financial risk. Guidance has been published by the government – ‘Developing place-based business cases’, which provides a methodology for project appraisal.
The government has committed to publishing an updated Infrastructure Pipeline for the benefit of investors, industry and supply chain, which will detail its planned investment of £750bn over 10 years, with an ‘expected workforce requirement of 650,000 people.’
There are also initiatives to improve the effectiveness of delivery of major projects. Findings, from the Fingleton Nuclear Regulatory Review, which considered civil and deterrent nuclear projects, are to be deployed across other infrastructure sectors, including rail. Certain budgets are to be reallocated – to fund carbon capture, usage and storage (CCUS), and hydrogen projects. The government will take £1bn from the Warm Homes Plan (WHP) but confirms its commitment to heat pumps and boiler upgrades, as well as protecting the WHP for low income and social housing.
Strategic data centres have been identified as key to facilitating the growth of AI and providing national resilience. The Data Centre Covenant, published on Budget Day, highlights how data centres can contribute for the benefit the UK – lower electricity bills (sharing energy costs); investment in local communities (contributing to a Local Benefit Plan); improved environment (minimising water use, sharing heat generated); employment (not just construction but training in A1); and greater security (providing critical national infrastructure). It’s not clear how this proposal is to be implemented, nor who will monitor whether it is effective.
To ensure that projects are delivered, the government has to do more than create a framework. There has to be sufficient resource and an acceptable business case to attract contactors to bid. The construction industry has squeezed margins given higher costs of employment (national insurance), transport (diesel increases) and materials (delays, transport costs). The living wage has increased by 3.9% to £13.21 an hour, which sets the floor for employment costs and will add to these costs. Fewer small businesses may wish to be property contractors, given the reduction of Business Asset Disposal Relief for entrepreneurial developers when they sell their shares. Capital Gains Tax will be applied on gains over £0.5m (previously £1m) from April 2027. The Budget did not address relief for some of these costs (particularly employment costs), incentives to train apprentices and improved tax relief for developing contaminated sites.
Investment
Sovereign wealth funds are not likely to be pleased at government plans to remove sovereign immunity from tax on rental income, chargeable gains and trading income from 1 January 2029. The consultation document issued on Budget Day includes a proposal for such investors to have unique access to Real Estate Investment Trusts for investments in UK real estate. However, as they could still pay tax, the UK may no longer be considered an attractive country for investment, leading to a detrimental impact on property values.
Tax paying investors in UK commercial real estate, and their tenants, are currently burdened by a lack of relief from business rates. An office building let to multiple occupiers is treated as one building. Consequently, small businesses cannot access small business rates relief and landlords are denied empty rates relief, when sections of the building cannot be let.
In summary, a Budget with some clear initiatives for social and affordable housing. Questions remain about the 10 year plan for private sector housing and the impact on the economy as defence, welfare and the triple lock are addressed.
*the views expressed are the author's and not ICAEW's