Budget fallout: sales slow, sentiment diverges

The government's mansion tax will knock around 2.5% off the price of homes worth at least £2 million, according to Treasury costings. That equates to a minimum hit of £50,000, though the impact is likely to be greater at values close to the thresholds at which the new surcharge will apply, the government said. 

The details were revealed via parliamentary questions to Treasury minister Dan Tomlinson this week. The impact of homeowners cutting prices to just below the various thresholds, plus the lower yield from SDLT and capital gains tax, means the new tax will actually cost the taxpayer money in both 2026-27 and 2027-28, before it begins to raise about £400 million a year, according to the Office for Budget Responsibility (OBR). That's less than 5% of what the government spent on interest payments in October. 

Subdued agents

Housing market activity weakened in the weeks around the Budget, according to a new RICS survey of estate agents. Three quarters of responses were gathered after the Chancellor's speech. 

The monthly gauge of new buyer enquiries fell to -32%, from -24% in October – anything below zero represents a contraction compared to the previous month. That's the weakest reading since late 2023. Agreed sales were virtually unchanged at -23%. Respondents are anticipating a subdued three months, though they expect a pick up in activity further out. 

The supply of properties coming to market continues to slow. The net balance of -19% for new instructions is largely in-line with last month. The measure of market appraisals is also falling. The RICS could find "no discernible" difference between the feedback gathered just before and just after the Budget.

The mood among surveyors runs counter to much of what we're seeing in other data sources, though those sources don't yet run up to the Budget and national datasets mask regional differences in activity. Mortgage approvals for house purchases have been trading in-line with 2019 levels since the summer, for example. HMRC transaction figures confirm that the market is trading in a narrow range month-to-month. 

Unlocking viability

Berkeley Group saw a slowdown in sales ahead of the Budget, but issued an upbeat six-month trading update this week. Private sales reservations were broadly in-line with the prior year until around September, when speculation began to weigh on activity. As a result, private reservations for the year through October fell 4% compared to the same period a year earlier.

Still, the group is on track to deliver pre-tax profits for FY26 and FY27 in-line with guidance:

"While near-term sentiment remains cautious, the long-term outlook is more positive; particularly in London, where undersupply is compounding and affordability is gradually improving with falling interest rates, improved mortgage availability, strong wage growth, and stable pricing," the company said. 

The company was positive on the government's efforts to unlock viability in the capital, particularly changes at the Building Safety Regulator, the Homes for London package and the 2026-2036 Affordable Homes Programme. Oliver Knight has more on the outlook for the London new homes market here. 

Most of the major lenders cut mortgage rates following the Budget – see Wednesday's note. All economists polled by Reuters think the Bank of England will cut rates this week, and two thirds think we'll see a follow-up cut to 3.50% by the end of March. The median forecast is for the rate to bottom out at 3.25% in the third quarter. 

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