Last week’s delayed Autumn Budget, one that had been more anticipated than any other in recent memory, was met with disappointment from the property sector.

Tough moves: some residential experts warn that the ‘mansion tax’ could dampen high-end housing sales and have a ripple effect through property chains

While constant leaks meant the tax and cost increases came as no surprise, the lack of meaningful support for investment or development amplified industry frustration in the following days.

As the dust settles on chancellor Rachel Reeves’ latest plans, there is a feeling that the sector now faces higher burdens with little room for new opportunities.

The most politically charged Budget measure was the ‘mansion tax’: an annual surcharge on homes valued above £2m, rising from £2,500 for properties at the threshold to £7,500 on those valued above £5m, effective from 2028. The levy, which will fall disproportionately on homes in London and the South East and raise around £400m by 2031, has triggered warnings over liquidity problems when selling, administrative strain and valuation disputes.

Zara Bray, mortgage expert at financial adviser Quilter, says: “The levy relies on property value as a proxy for ability to pay, even though a rising valuation does not guarantee liquidity. Many households in properties above £2m have seen their home values increase sharply over time without a corresponding rise in income.”

Bray adds that treating the property alone as evidence of financial capacity risks placing “considerable pressure” on those with wealth tied up in housing rather than accessible funds.

Reduction in values

Values in prime areas have already adjusted in anticipation of the tax, which helped limit the shock at the top of the market. But some believe the measure could encourage people to delay improvements, postpone moves or hold on to properties that no longer suit their needs, to avoid the levy. “This kind of friction at the top of the market can ripple through chains, reducing mobility more widely,” says Bray.

She adds that while there has long been a case for reforming council tax, which is still based on 1991 valuations, the mansion tax has simply been bolted on to this outdated system, which “risks creating more complexity, rather than delivering a coherent, long-term solution”.

Most small, private landlords who wanted to exit have already exited
Jackie Bowie, Chatham Financial

Another key Budget change was a two-percentage-point rise in property income tax from April 2027, taking basic, higher and additional rates to 22%, 42% and 47% respectively. Millie Harper, head of UK living research at Cushman & Wakefield (C&W), says this is likely to push some landlords out of the market, further hitting supply in the rental sector, with likely knock-on effects on rents.

Jackie Bowie, managing director at risk management consultancy Chatham Financial, says this rise in tax on unearned income “feels anti-investment”, but adds: “I don’t see it having a large impact on property markets; most small, private landlords who wanted to exit have already exited. There may be some upward pressure on rents. The Renters’ Rights Act will have a bigger structural impact.”

The Budget did not mention widely rumoured stamp duty reform nor was there any meaningful new support for homebuilding, which Harper sees as “surprising, given the viability dam the UK currently faces”.

The Office for Budget Responsibility’s accompanying Budget report predicts that new housing completions will remain subdued until around 2029-30, which is likely to mean Labour will miss its 1.5 million new homes target in this parliament.

Workspace worry: flex office operators face higher business rates after their properties were reclassified

Although corporation tax was left unchanged at headline level, there were concerns about rising business costs. Walter Boettcher, head of research and economics at Colliers, says: “While the 25% corporation tax cap remains intact, future employer National

Insurance increases, the new rating super multipliers and revaluation loom large over the costs of doing business.”

Meanwhile, Reeves confirmed permanent cuts in the business rates multiplier for retail, hospitality and leisure (RHL) from a current rate of £0.555 to £0.480, effective from April 2026. She also confirmed a new surcharge of 2.8p above the national standard multiplier for properties with rateable values of £500,000.

There is widespread concern about these changes. David Parker, head of business rates at Savills, says: “While the reduction [for lower-valued properties] could be presented as good news, the annual multiplier remains high and most businesses will still end up paying more in rates due to rising rateable values and new supplements added to larger properties’ bills.”

Big business rates hit

The business rates rise for high-value properties is intended to target online retailers’ warehouses, but has sparked warnings that productivity-driving sectors such as life sciences, logistics and flexible workspace – the latter now reclassified as single large properties instead of multiple smaller units for business rates purposes – face the biggest hit.

Natasha Guerra, founder of flexible workspace provider Runway East, says: “We will have no choice but to pass this cost on, making flexible workspaces more expensive for SMEs at the very time when getting people back into high-quality offices is critical to drive productivity.”

However, despite such unwelcome Budget measures for the property sector, the financial markets have largely shrugged off the changes, reflecting a steady mood among investors.

Confidence doesn’t usually return overnight, but we’ve seen instant recovery signs
Claire Reynolds, Strutt & Parker

With greater clarity on tax and policy, the property sector can plan with more confidence, according to commentators. Claire Reynolds, national head of sales at Strutt & Parker, says: “The speculation around the Budget made the property market feel as though it was holding its breath. Buyers have stayed cautious, sellers have been waiting for signals and transactions have trickled rather than flowed.”

Reynolds believes the Budget shifted the mood “almost instantly” and adds: “Confidence doesn’t usually return overnight, but this feels different; we’ve seen instant recovery signs.”

In the 24 hours before the Budget, the pound fell against the euro, while leaked information caused 10- and 30-year gilt rates to slip in the first hour of bond trading. According to Chatham’s Bowie, the markets oscillated as they tried to anticipate what was coming, “but in the end, the Budget didn’t have the big-bang negative impact people had feared”.

Daryl Perry, head of UK research and insight at C&W, says: “The chancellor will have likely been watching the bond markets as much, if not more closely, than the electorate. Gilts were already rising a week in advance of the Budget in response to the soundings that the chancellor had changed her mind on an increase in income tax.”

Bowie adds: “The concern was that abandoning income tax rises leaves a larger fiscal hole and raises borrowing risk. Most real estate borrowers have now accepted interest rates in the 4% to 5% range.

“Deals can still work, as lending margins have compressed. For those borrowing off the swap curve, the next key date is the Bank of England’s 18 December meeting. That will drive the swap curve.”

Some see certain Budget measures as inflationary in the medium term: Bowie cites the rise in the National Minimum Wage and National Living Wage. “Sticky wage inflation has been a key driver of stubborn UK inflation and even the new electric vehicle road-use charge could be marginally inflationary,” she says.

But she adds: “I don’t think the Budget changes investor behaviour materially. The bigger issue remains valuations; sellers are unwilling to take the price buyers will pay. Investors weren’t waiting for the Budget but
for price discovery and, in some sectors, for valuations to reset. Interest rate expectations are now broadly built into pricing.”