Following months of speculation over its contents and a major leak of the Office for Budget Responsibility’s (OBRs) forecast, Chancellor Rachel Reeves’ tumultuous second Autumn Budget set out a series of tax and welfare changes.
While it introduced significant new tax measures – most notably on high-value homes and rental income – there was little in the way of concrete policy aimed at supporting first-time buyers, housebuilders or the wider housing market.
The OBR reported that the average mortgage rate on the existing stock will rise from around 3.7% in 2024 to roughly 5% by 2029, with past rate increases still passing through as fixed terms expire.
Net additions to housing were forecast to dip to around 215,000 in 2026-27 before gradually recovering to about 305,000 a year by 2029-30.
House price growth was widely expected to remain modest, rising from around £260,000 in 2024 to just under £305,000 by 2030, while transactions were projected to climb from just under 1.1 million this year to around 1.3 million in 2029, still below previous expectations.
Within this fiscal context, the Chancellor’s Budget confirmed a council tax surcharge – or ‘mansion tax’ – on homes valued above £2m from 2028.
The policy, affecting less than 1% of households, marks one of the most significant changes to high-value property taxation in recent decades.
Market participants noted the potential for valuation sensitivity around the threshold, particularly in London and the South East.
Nick Leeming, chairman of Jackson-Stops, said: “The stick we’ve received instead in the form of a mansion tax, or a council tax surcharge for properties priced above £2m, is one of the most significant changes to the UK housing market for decades.”
He added a concern that “a single blanket threshold fails to recognise regional nuances.”
Aneisha Beveridge, head of research at Hamptons, noted: “It will create cliff edges, with homes just below the threshold gaining appeal, and the surcharge could weigh on values of prime properties near the threshold over the next few years as reassessments and uncertainty play out.”
Indeed, property investors now face additional changes, with the Budget also confirming a 2% rise in property income tax bands from April 2027.
This increased the basic, higher and additional rates to 22%, 42% and 47% respectively.
The OBR has highlighted that successive measures have steadily reduced landlord returns and may reduce rental supply over the longer term.
Hugo Davies, chief capital officer at LendInvest, said: “This is another tough Budget for landlords and property investors, with higher taxes on rental income, capital gains and pension contributions.
“It will squeeze returns for many smaller, individual landlords.”
Andrew Lloyd of Search Acumen warned: “”For landlords, some will be hit twice in today’s Budget if stung by a council tax surcharge and an increase in property income tax.
“Some will have no choice but to exit the market entirely, reducing supply of the already squeezed private rental sector.”
Similarly impacting the rental market, the Budget confirmed the removal of the two-child limit in Universal Credit (UC) from April 2026.
This measure, aimed at increasing support for around 560,000 families, also effects the housing element of UC, improving rent coverage for larger households.
Much to the surprise of many in the industry, Stamp Duty was left unchanged despite speculation about potential reform, maintaining the existing structure for transactions in England and Northern Ireland.
Several industry figures described the lack of action as a missed opportunity to boost mobility.
Damien Jefferies, founder of Jefferies London, said: “Stamp duty remains one of the most obstructive elements of the entire housing system, slowing transactions at every level and adding unnecessary friction to the process of moving home.
“By leaving it untouched, the Chancellor has failed to address one of the most significant barriers facing buyers and sellers in what is already a cautious market.”
In terms of commercial property, owners will see business rates changes from the Budget, including altered multipliers that reduce bills for retail, hospitality and leisure but increase them for higher-value premises, alongside transitional relief and limited extensions to local retention arrangements.
For business borrowers, broader measures also shaped sentiment.
George Holmes of Aurora Capital noted that “small businesses will be weighing up a mixed bag in this Budget,” citing frozen fuel duty and a freeze on the small business multiplier, but also higher wage and tax burdens.
According to Neil Rudge, chief banking officer for commercial at Shawbrook: “This Budget was a balancing act driven by fiscal tightening, and for many mid-sized firms it will feel like one step forward, two steps back.
“While the Chancellor speaks of growth, the core operational demands of mid-sized firms – like relief on energy bills, accessing new markets, and business rates – were not substantially addressed.
“This Budget ultimately feels like a missed opportunity to truly fuel the ambition and growth potential of the businesses that drive the economy.”
Overall, whle the Budget may have laid out a clearer policy direction for the property sector, its effects will depend on how buyers, sellers and investors adjust to the new tax landscape.
As Iain McKenzie of The Guild of Property Professionals noted: “What the market needs now is stability and a clear pathway that encourages buyers and sellers to move forward with confidence.”
