Aside from a scaled-back mansion tax, the chancellor did little to ruffle or boost the residential sector

As anti-climaxes go, Rachel Reeves’ second Budget ranks up there with the Y2K virus. For months, Treasury officials had leaked like the Titanic and even the Office for Budget Responsibility managed to scoop the chancellor. In the event, it was reassuringly dull for the housing sector.

Housebuilders had seen a reasonably healthy pick-up in sales in Q1 (reversing a slowdown ahead of Labour’s first Budget in October 2024, only four months after its election win). But in the seven months since Easter, housing activity and the wider economy fell into a Treasury-induced coma, anaesthetised by a litany of doom-laden economic ‘management’ statements from officials and media reports of forthcoming tax hikes, many related to property.

These included: wholesale reform and eventual removal of stamp duty, to be replaced by heftier charges including a ‘mansion tax’ on homes worth as little as £500,000; capital gains tax on the sale of primary residences rather than traditional homes; the linking of council tax bands; National Insurance (NI) to be applied to private buy-to-let landlords; and, on a more positive note, the revival of the Conservatives’ Help to Buy support scheme for first-time buyers of new-build homes.

Official data indicates house prices, at least in theory, continued to edge up. However, both purchases and sales intentions increasingly dried up, according to data from RICS. Just about every housebuilder’s trading statement in the autumn referred nervously to the “B-word".

But, as I suggested in my 3 September column, most of the speculation was mere kite-flying. The wackier theories bore the hallmarks of wishful think tanks, which journalists dutifully ran past Whitehall press officers. Unless these were explicitly ruled out, the resulting stories tended to fit the template: “Treasury officials are seriously considering [fill in taxation measure of your choice]...”

In the event, the prospect of a wholesale overhaul of stamp duty, “revealed” by The Guardian in August, failed to materialise, nor did changes to capital gains tax.

The introduction of a mansion tax seemed to be the only suggestion with legs. That is fortunate, but at a more modest threshold than first feared: instead of a mooted £2,500 or £2m ‘mansion’ (less than a modest townhouse in People’s Republic of Labour, Britain), it will hit the highest rate for homes over £5m, will only raise £400m, so what’s the point?

“In any case, the real super-prime market was far more affected a year earlier by Reeves’ taxation of non-doms – many of whom voted with their feet (or, rather, private jets).

NI was not imposed on buy-to-let landlords, but there will be an extra 2% on rental proceeds through their income tax. This will only accelerate their long-running exodus from the sector, which should put further upwards pressure on rents but will further clear the path for build to rent.”

No Help to Buy

And there was no Help to Buy 2.0, as breathlessly predicted by many analysts, who didn’t ask: why have Barratt, Redrow, Persimmon and other politically attuned housebuilders launched their own self-funded variants of the 95% ‘equity loan’? “The Treasury hates it,” one lobbyist conceded.

Housebuilders did, however, get a bit of a leg-up from Reeves, with £48m pledged to hire 350 planners, and they were spared a feared hike in their landfill taxes. They’ve also previously benefited from an ambitious package of support for affordable housing.

Looking at the broader economic impact, the chancellor had already performed a handbrake turn on the mooted 2% hike to the basic rate of income tax; the freezing of income tax allowances (which started with the Tories, let’s be clear) will only reduce the pace of additional earnings growth.

Arguably, the key benefit for UK plc was that it was a less inflationary Budget and gilt yields eased off on the day, with growing expectations of Bank of England rate cuts this month and into the new year.

It was clearly a Budget for the backbenchers and only moderately negative for the rest of us. It wasn’t apocalyptic. Pent-up demand from housebuyers who have sat on their hands for over half of this year may pile back into the market after the Christmas break. Whether a potentially strong first quarter will persist through 2026 depends on Reeves muzzling her officials. That’s if she’s still in the job.