Post-Budget Reflections

It’s been a couple of weeks now since the budget news was shared, and that’s given us time to digest what impact it’s likely to have on the market. While the immediate reaction has been a mixed bag, the ripple effects are becoming clearer, so here is my take on what it means for investors, businesses, and the wider property market.

The Investor’s Landscape: A Short and Long-Term Perspective

The increase in stamp duty without prior notice is certainly a challenge that investors are now having to deal with. It’s meant a lot of investors have had to find additional funds to close deals, or we have found that the sellers have had the difficult choice of absorbing up to 2% of the property value overnight, to prevent transactions falling over. From a short-term perspective, this has ruffled a lot of feathers and left many in the market frustrated.

From a long-term perspective, the story shifts. The higher stamp duty makes prime assets in the likes of London and the South East even more expensive, particularly for investment purposes. This raises questions for foreign nationals and other investors: Is it still worth buying in the UK? Will these assets continue to appreciate at the rates we’ve seen in the past?

Interestingly, the government opted not to increase stamp duty on commercial properties. This opens up an opportunity for investors to pivot, exploring creative strategies such as commercial-to-residential conversions. Utilizing permitted development rights or pursuing full planning permissions could be a trend we’ll see gaining momentum in the near future.

Employment Challenges: The Impact of National Insurance Increases

For small businesses, the rise in national insurance contributions has created significant strain. Industries such as hospitality, personal services, and even businesses like our own are looking now at their cost base.

This isn’t just a matter of immediate survival; it raises broader questions about long-term resilience in these sectors. Businesses are increasingly turning to financial partners like us at NapeX Finance for guidance and support during these challenging times.

Looking Ahead

We can’t ignore the recent US election with Donald Trump narrowly coming out top. Speculation is there over his relationship with Vladimir Putin and how that might influence the war in Ukraine. The election has had an impact on the financial market as hopes for a base rate reduction by the Bank of England has slowed. It has lead to a slight increase in the swap market, where banks lend to one another which is now at around 4% compared to 3.5% a few weeks ago, and that 0.5% will eventually be reflected in loans across the market.

But encouragingly, this all seems to be a temporary shift and I believe the market is stabilizing. We still expect base rate reductions next year, although it’s important to remember that base rate cuts don’t always translate directly to rate reductions for long-term loans.

As we reach the end of 2024, its clear why many are eager to close the chapter on 2024 and look ahead to a fresh start in the new year. We are anticipating a positive market environment in January and February, and as always at NapeX Finance, we’re here to help our clients adapt to the shifting dynamics as they happen, providing them with our expert advice and tailored solutions.

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