As we wind down on 2024, PropertyWire editor Ryan Bembridge looks ahead at what to expect in 2025
A busy Q1 and quieter Q2
The start of the year should be a busy one, as the expiry of the higher stamp duty thresholds at the end of March will motivate buyers to get deals done.
Indeed, aspiring buyers are apparently prepared to look at properties over the Christmas period in a bid to get the ball rolling.
From April 2025 the minimum stamp duty threshold will revert from £250,000 to £125,000, while for first-time buyers it will drop from £425,000 to £300,000.
As with other temporary changes to the tax, like the ‘stamp duty holiday’ which expired in September 2022, the alteration will distort the market, which will see heightened transactions in Q1 followed by a lull in Q2.
Buy-to-let sector to shrink
Mortgage lenders’ trade body UK Finance has predicted new buy-to-let lending to drop by 7% next year, and it’s easy to see why.
In the October Budget landlords were hit by a fresh blow in the form of the higher stamp duty surcharge of 5%, up from 3%, which is likely to push investors into focusing on other asset classes rather than property.
The lack of new property investment could open the door to more corporate build-to-rent suppliers taking a greater share of the rental market, as major firms not usually associated with housebuilding, like Legal & General, are looking to capitalise on strong tenant demand with new developments.
Improved mortgage affordability
While the Bank of England opted to hold the base rate at 4.75% in December, three members of the Monetary Policy Committee voted for a 0.25% rate cut.
This was a surprise, given that it was announced that the inflation rate rose to 2.6% in the same week, and it suggests that many at the Bank feel it’s more important to stimulate the UK economy than keep inflation close to its long-term target of 2%.
If this philosophy continues, it’s likely the Bank of England could cut the base rate multiple times next year to bring the base rate to around 4%, which would be easier on the pockets for mortgage borrowers – persuading more to buy near the end of the 2025.
Section 21 to finally be abolished
According to the government’s timetable, the Renters Rights’ Bill will go through in the summer of 2025, resulting in the elimination of Section 21 ‘no fault’ evictions.
In September Matthew Pennycock, minister of state for housing and planning, told BBC Breakfast: “We hope [the bill] will make very quick progress through the House of Commons and that we have that new tenancy system in place within the first half or around summer next year.”
As is always the case with talk of Section 21, the question is whether the government will take steps to reform the court system to accompany the ban.
Currently landlords using Section 8 evictions are commonly losing out on six months of rent, due to the time it takes to get a court date, escalate cases to the high court, and appoint bailiffs.
The system is a mess, and the government needs to find a solution if it’s to keep landlords from exiting the market in disgust.
At this stage keeping Section 21 doesn’t seem politically viable, so the government has a difficult task on its hands when it comes to pleasing both tenants and landlords.
New towns and grey belt to be made a reality
More details should be unveiled on Labour’s bold ‘new towns’ policy, which should see the building of new settlements consisting of at least 10,000 homes each.
In July a taskforce was given 12 months to make a short-list of recommendations in terms of specific sites, and it’s best they stick to that timescale – as Labour is in dire need of some positivity.
The same can be said for Labour’s grey belt policy, which seems like a sensible way of easing the country’s housing supply issues.
The party’s recent definition of grey belt should persuade developers to hit the ground running on using the grey belt – building new supply the UK needs.
A make or break year for Labour
The new government has taken an overly sober tone so far, upping taxes in the Autumn Budget like employers’ National Insurance and giving little for voters to immediately cheer for.
With 61% of Britons (Ipsos) saying they’re dissatisfied with Labour leader Keir Starmer, the government needs something to turn to get voters on side.
New towns and grey belt reforms both seem like positive steps, but unless progress is made quickly Labour could be booted out of office by the time any of it bears fruit.
There’s also a need to pass the Renters’ Rights Bill without further alienating landlords.
If investors are driven out of the sector that could have dire consequences when it comes to available rental supply, and as a result the cost of renting.
The positive for Labour is it has until 2029 to show voters it has a vision for where the country is heading – so there is time to turn things around in 2025.
