RSM UK has called for property tax reform in the Autumn Budget, warning that stagnant house prices and rising development costs are putting further pressure on the viability of new housing schemes.
The latest UK House Price Index shows average prices increased by 1.4% in the year to July to £273,000, with the annual growth rate slowing for a third consecutive month.
On a seasonally adjusted basis, prices fell by 0.2% between June and July, while London recorded a 3.3% annual decline.
RSM says the Government should consider measures to stimulate demand, including reform of Stamp Duty Land Tax and the reintroduction of multiple dwelling relief.
DEVELOPMENT COSTS RISE
Stacy Eden (main picture, inset), national head of real estate at RSM UK, says increasing development costs are creating additional challenges for housebuilders at a time when house-price growth remains subdued.
RSM says the cost to housebuilders of delivering a home has increased by £76,000 since 2020, contributing to a growing number of schemes becoming unviable.
The firm also points to the introduction of the Building Safety Levy from 1 October as another potential cost pressure for new residential development in England.
Meanwhile, mortgage approvals for house purchases fell to 56,100 in July, below the average of 60,800 recorded over the previous six months.
‘USE THE BUDGET TO STIMULATE DEMAND’
Eden says: “July’s house price index highlights that house prices have at best flatlined on a national level, with continued disparities between the North and the South. London remains particularly impacted by the penal rates of Stamp Duty Land Tax (SDLT) and high mortgage rates, with the region seeing a 3.3% annual decline in average house prices.
“London’s rental market is also disproportionally affected, with landlords exiting the market due to ever increasing regulation around renter’s rights and leasehold reform, alongside concerns around building safety and high service charges.
“Economic pressures continue to weigh on the sector. Mortgage approvals are running below their long-term average, as increasing gilt rates drive concerns around the UK fiscal position. With the ONS today reporting an inflation rate of 3.1%, the Bank of England faces further pressure to increase interest rates, which could in turn have a further negative effect on mortgage approvals.”
“We’d like to see the government use the budget to stimulate demand.”
And he adds: “We urge the UK government to recognise the ever-increasing cost to housebuilders of building a home, which has risen by £76,000 since 2020.
“Combined with stagnant house prices, these are proving significant headwinds, which are causing an increasing number of developments to become unviable.
“We’d like to see the government use the budget to stimulate demand. A reform of SDLT would be a welcome measure, to help reduce penal rates at the top end of the market. This would allow first time buyers and other consumers to afford a house purchase without a significant tax cost getting in the way.
“With the Building Safety Levy (BSL) also coming into force on 1 October 2026, marking an additional tax on new residential buildings in England, there is a risk that the viability of new developments could be further challenged.
“The build to rent (BTR) sector plays a crucial role in new housing delivery, accounting for around 10% of new homes and selling approximately twice as fast as other buildings.
“We’d therefore like the government to also consider reintroducing multiple dwelling relief, following its abolition in 2024, to help provide a much-needed market boost and support the delivery of new homes.”
