So what happened… There’s a lot of doom and gloom around at the moment and the budget was there to give stability which should...

So what happened…

There’s a lot of doom and gloom around at the moment and the budget was there to give stability which should bring down the interest rate peak, which let’s face it is the biggest thing affecting the housing market.

So what about interest rates?

Interest rates are at 3% and the economy is contracting which in normal times, without inflation, would mean the Bank of England would be cutting rates to increase growth. Obviously, inflation is playing a large part in this argument but it’s the job of the BOE to bring inflation down to 2% – they expect this to happen naturally with rates at 3%. So I think with inflation hitting 11%+ we’re now at the peak and as inflation gradually decreases over the next year we’ll see the conversation turn towards the state of the economy and what can be done to improve it. I think 4% might be the top of the current cycle, probably in late spring 2023 or early summer.

And inflation…

Although it might not feel like it, but as property investors, inflation is our friend. In the North-East we saw zero rental and house price inflation, from 2007 to 2019, that’s 12 years of no growth. From 2020 we’ve seen house prices and rents climb by 20%+, although it’s painful that’s not a bad return on your investment. So inflation is definitely your friend we just all have to cling on tight and ride this as best as possible.

The budget…

It wasn’t all gruel as the papers have made out, there weren’t many tax rises but we’ll all end up paying more tax by all the bands for income tax etc. being frozen for several years. There were a couple of things which did affect landlords:

  1. Capital gains tax – The tax you pay when you sell a property, at the moment the first £12,300 of any gain is tax-free, from April next year this will be cut to £6,000 and then £3,000 from April 2024. So we’ll all have to pay more tax on sales at either 18% or 28% depending on your income. The one thing I would say is you only pay tax on profits, there are far worse positions to be in!
  2. Stamp Duty – Stamp duty was cut by the former prime minister, the less we say about her the better, so no stamp duty is currently paid up to the value of £250,000. This will end on 31 March 2025, so I’m assuming this will revert to paying no stamp duty up to £125,000.
  3. Minimum Wage – This is rising to £10.42 from £9.50 an increase of almost 10%. This will affect a lot of tenants in the North East and with a such significant increase, I suspect it will help tenants to afford the increased rents we’re currently seeing.
  4. Universal Credit – One of the main things which stopped rents from going up in the North East over the last 10 years was the suppression of housing benefits / the housing element of universal credit. During that period housing benefit was reduced to a lower average rent and benefits associated with housing haven’t been uplifted with inflation. I believe this has changed in the current budget, with them being uplifted by inflation or 10.1%. This will definitely alleviate some of the problems with tenants being able to afford higher rents and will be more inflationary.

Lack of Rental Supply…

Nothing in the budget dealt with the elephant in the room which is the lack of rental properties and landlords exiting without being sufficiently replaced. In November 2020 there were 370,000 properties available to rent in the UK, in 2022 this was down to 171,000 or a decrease of 54%. This is what is driving a lot of the rental inflation in the UK. Ultimately, the government needs to fix this problem by either building more social housing or reversing the tax changes regarding mortgage interest or stamp duty on investment properties. Neither appears to be on the horizon but what this will mean is rents will continue to rise and the lack of supply will become more of an issue and a solution will need to be found.


I don’t think there was anything drastically negative in the budget with hopefully interest rates peaking soon and rents continuing to increase as a result of the high inflation. I firmly believe we will weather this storm and in 5 years’ time we will be thankful for this high inflation as our property and rental values will be significantly higher.

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