The Budget and What It Means for the Housing Market
The Budget arrived half an hour ahead of schedule, which felt rather fitting after what has seemed like a long period of leaks, counter leaks, hints from ministers, reversals and constant speculation. We now have the detail, which means the property sector can finally begin to assess its position with some confidence.
For months the market has struggled to interpret rumoured changes and many buyers and sellers have decided to wait until the facts were known. This pause has weighed heavily on the late autumn market and has left both agents and sellers facing a slow winter period.
In many respects the specifics of the Budget matter less than the simple fact that they are now confirmed. Certainty can be valuable in itself and the sense of relief across the sector is noticeable.
Key Measures for Homeowners
The headline announcement concerns owners of high-value homes, who will face a new mansion tax. The measure introduces four price bands, beginning with a surcharge of 2,500 pounds for properties valued between 2 million and 2.5 million pounds. The top rate will apply to homes worth 5 million pounds or more, where the surcharge rises to 7,500 pounds.
Alongside this, the Office for Budget Responsibility has issued updated forecasts for the housing market. These include projections on mortgage rates, housing supply, price growth and overall transaction levels.
Mortgage Rates and Housing Supply
According to the OBR, the average interest rate on the existing stock of mortgages is expected to rise from about 3.7 percent in 2024 to around 5 percent in 2029. This is slightly higher than its previous estimate. With around 90 percent of mortgages now on fixed rates, these increases are filtering through more slowly than in previous cycles.
Net additions to the housing stock are forecast to fall from an average of 260,000 homes a year in the early 2020s to a low of 215,000 in 2026 to 2027. The OBR anticipates that this trend will reverse as planning reforms begin to take effect, with annual additions increasing to roughly 305,000 by 2029 to 2030. Cumulative additions across the period are expected to reach 1.49 million, slightly below previous expectations.
House Prices and Transactions
House prices are forecast to rise from an average of 260,000 pounds in 2024 to just under 305,000 pounds in 2030. Growth is expected to be just under 3 percent in 2025, followed by an average of 2.5 percent a year thereafter. The introduction of higher property income tax rates from April 2027 is expected to trim price growth by about 0.1 percent a year from 2028.
Transaction levels have been unsettled during 2025. Activity rose sharply in the first quarter before falling in the second, as buyers sought to complete ahead of the April stamp duty holiday deadline. Looking further ahead, residential transactions are projected to increase from just under 1.1 million in 2024 to roughly 1.3 million in 2029. This remains below the OBR’s previous forecast, which it attributes to higher stamp duty, rising mortgage rates and reduced mobility among an ageing population.
Investment Outlook
Residential investment is expected to grow by 1 percent in 2025 and strengthen to about 7 percent in 2027 and 2028, supported by looser monetary policy and planning reform. Growth is anticipated to moderate to about 2 percent by 2030.
A Market That Can Move Forward
Specialists will now spend months analysing the details. Yet the more important development is that the government appears to have acknowledged that markets respond better to stability than to continual shifts in policy. With the Budget confirmed, buyers and sellers can finally make decisions based on firm information rather than speculation.
It remains disappointing that the uncertainty of recent months has dampened what might otherwise have been a stronger end to the year, but at least the sector now has a clearer framework from which to plan.
