The UK Spring Budget for 2023 was unveiled on March 15th by Chancellor Jeremy Hunt, with the primary objective of revitalizing the economy and job creation. The budget featured a slight reduction in certain taxations, and several other modifications that affect various sectors of the economy.
However, the pertinent question is what does this budget signify for the UK housing market in the coming days? Leading estate agents in Manchester have investigated further to find out. Read on to discover what their findings reveal.
Impact on the Average Homeowner
Zoopla, a housing site, has carried out a thorough analysis of the budget’s impact on the average homeowner. According to Richard Donnell, the head of research at Zoopla, the budget has minimal direct influence on the market. The stamp duty remains unaltered, and the changes made to landlords are not substantial, with only a decrease in the level of tax-free gains before capital gains tax is levied.
The concentration on creating job opportunities and boosting the economy, however, has an impact on the housing market in the UK. The state of the market is closely linked to the economic scenario – prices and sales decline during a period of economic slowdown and high unemployment rates, while a robust economy and higher income results in a thriving housing market.
Post-tax disposable income has not witnessed any growth over the past two years due to an increased tax burden on households with mid to high incomes. The cost of living crisis has further strained budgets, with higher energy bills contributing to financial pressure. However, the announcement of a three-month extension on the energy price cap in the budget is likely to be received positively.
Mortgage Rate Predictions
According to industry experts, mortgage rates are anticipated to remain within the 4-5% range throughout the year. As a result, individuals who intend to buy their first home or relocate should not anticipate lower rates than this and must plan their finances accordingly. Property valuation Manchester, can help keep track of the true and current value of certain properties.
Developments for First-Time Homebuyers
Individuals who are in the market for their first home or looking to refinance their mortgage are feeling the brunt of increased pressure from higher mortgage rates. Although, it is a relief that a significant proportion of those with mortgages have opted for five-year fixed rate deals, when these deals expire, homeowners will have to bear the burden of increased monthly payments that may stretch their monthly budgets thin.
Unfortunately, first-time buyers currently have 20% less purchasing power in comparison to last year, although this does not necessarily mean that house prices will fall by the same amount. Instead, potential buyers may opt for smaller homes or consider relocating to more affordable areas in order to get more value for their money.
Despite the challenges, mortgage rates have dropped to 4.5% for new home buyers, which is a notable decrease from the 6% high witnessed towards the end of last year. Nonetheless, the current mortgage rates are still over double compared to what they were just a year ago. While the housing market may be able to withstand higher mortgage rates, it has been consistently argued that sub-5% mortgage rates would not cause significant price drops, and this prediction seems to be coming to fruition.
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What Can Renters Expect?
The greatest challenge in the housing market is affordability, especially for individuals who rent or have a limited amount of money to put towards a home. Rent prices are escalating rapidly, with an increase of 11%, surpassing earnings growth, which presently stands at 6.7%.
Due to the low supply of rental properties, renters of all ages are anxious about the shortage of available options and the magnitude of recent rent hikes. This is all due to the inadequate supply of rental properties and the absence of growth in the size of the private rented sector in the previous six years.
To Sum Up
Aside from focusing on employment and growth, it is critical for the government to continue to concentrate on increasing the supply of housing by constructing new homes of all tenures. By increasing the supply, we can relieve the affordability stress felt throughout the market.