We now know that the Chancellor intends

• to raise £40bn in taxes – 60% from an increase in employers’ national insurance contributions (NICs) and, to borrow to invest in the NHS, housing and infrastructure, and
• to comply with two new fiscal rules – stability rule (day to day spending financed by revenues and borrowing only for investment) and investment rule (reducing net debt).

So what can the real estate industry expect? In housing, there will be additional funding for the Affordable Homes Programme (up to 5,000 new homes) bringing the commitment up to £3.4bn; cash injections of £128m to support new builds (38,000 homes); and reduced right-to-buy discounts where local authorities will benefit as they can keep 100% of the receipts. Planning delays have hampered construction – the Government is to invest £46m to support recruitment and training of graduates to increase the skill and capacity of local authority planning departments.

Turning to the housing supply side,

• the Government has set a target of 1.5m new homes over 5 years but, so far, has announced incentives which will only provide up to 43,000 new homes, leaving a massive gap to be filled by the private sector builders. They are faced with a substantial hike in  employers’  NICs, now at 15% (was 13.8%), applying to wages over £5,000 (previously £9,100); interest rate projections which show no major fall in the next 5 years (the yield on 10 year bonds rose to 4.6% the day after the Budget) and an increasing national living wage (up this year to  £12.21 per hour from £11.44).
• planning problems are to be addressed through a training programme for 300 graduates; while welcome, when will they be in place and how effective will they be? A simplified regime is to be introduced through the Planning and Infrastructure Bill but that will not be until next year.

Looking at housing demand,

• demand for properties for first time buyers could be dampened by the removal of first time buyers’ relief as the entry point for Stamp Duty Land Tax (SDLT) is reduced from £425,000 to £250,000, increasing the cost of buying a home, particularly in the southeast of England, at a time when mortgage rates are still high;
• fewer prospective buyers may raise the required deposit for a home if they are renting, and their incomes are depressed as the rise in employers’ NIC feeds back to employees through reduced pay rises (a post Budget admission by the Chancellor);
• non-social rents are likely to rise as more private landlords leave the sector following increased capital gains tax (up from 20% to 24% at the higher rate) plus an additional levy on SDLT (up from 3% to 5%). It’s not clear that the £3bn of additional support for SMEs and the Build to Rent sector will compensate for these exits;
• the desirability of property results from ‘location, location, location’. Post pandemic working patterns have changed and travel costs are rising – the daily bus fare cap up from £2 to £3 and the annual regulated rail fare cap by RPI plus 1% to 4.6%; these increases may affect the popularity of developments placing greater pressure on cities.

The Government is taking various initiatives – the National Planning Policy Framework consultation, the New Homes Accelerator and New Towns Taskforce to provide a basis to promote housebuilding. Significant funding will be required to convert ideas and policy into delivery of 1.5 million new homes during this Parliament.

The construction sector will benefit from the new fiscal rules which involve changing the measure of debt, freeing up £50bn of borrowing to invest in roads, railways and hospitals. Investment of £56m is to be made at Liverpool Central Docks and £1.4bn is committed to the delivery of the School Rebuilding Programme (50 rebuilds per year). Specific roads are targeted for investment – dualling the A47, the A57 plus a feasibility study for the A75. There will also be investment of £2.4bn in flood resilience – which will protect homes and infrastructure. There was confirmation of the Government’s commitment to East West Rail (Oxford/Milton Keynes/Cambridge), the TransPennine Route Upgrade (York/Manchester) and ensuring HS2 trains will run to Euston, coupled with housing and regeneration of the area. There will be checks on expenditure with the new Office for Value for Money and National Wealth Fund, building on what was the Infrastructure Bank.

The Chancellor is committed to growth but she has a major task – reforming the NHS, which could prove to be a cash drain. At the same time, major financial investment, by both the Government and the private sector, will be needed to deliver her plans for the housing and construction sectors, which may not be easy to achieve in the next 5 years.