What changes should the Spring Statement bring about to support institutional investment in the property market?

As we approach the Spring Statement at the end of the month, I’d like to think that the Chancellor’s statement will bring with it the potential for growth and new beginnings along with a general sense of optimism that is symbolised by the advent of Spring. 

But on the other hand, such positive images are brought sharply into focus when we are reminded (as no doubt the Chancellor will in the run-up to 26 March) of the ever-expanding financial ‘black hole’ which may be exacerbated by the inevitability of increased defence spending. 

Fortunately for property investment, the government’s political ambition – and self-imposed, non-negotiable target – of delivering 1.5 homes this Parliament, requires that investment in residential property is encouraged.  

LRG represents a broad spectrum from across the lettings industry – from private landlords to large-scale corporate investors. From all perspectives, we see 2025 as a phase marked by stabilisation and opportunity. Rental inflation has slowed to an average of 3-4% for new lets, reflecting the effects of affordability constraints and renters’ budgets are beginning to limit how much rents can rise. Despite this moderation, high demand persists, especially in regions with limited rental stock, providing considerable opportunity for investment. The rise of the Build to Rent (BTR) market (recently valued at £79bn) and institutional investment has ushered in a new era for the rental sector, driven by a combination of political change, economic shifts, and a strong desire for sustainable development. Statistics from the British Property Federation (BPF) how that in Q4 2024, the total number of completed BTR units 120,000 units, a growth of 23% in completed stock over the past 12 months. 

But too much of this positive picture hangs on the Chancellor’s Statement on 26 March. On the day of the previous Budget, the industry heaved a collective sigh of relief when residential property rates of Capital Gains Tax remain unchanged. We can only hope that this will be maintained. 

Of greater concern in October was the immediate 2% increase (from 3% to 5%) in Stamp Duty on the purchase of a second home which will add a further £10,000 in Stamp Duty costs to the purchase of a £500,000 home, or £400,000 to a £20m portfolio purchase.  

Another concern was Bank of England’s warning that, as a result of the Budget, inflation will creep higher and interest rates will take longer to fall. After February’s base rate cut, which took place in the context of slow growth and stubborn inflation, this does indeed look the most likely scenario. 

So to enable property investors to bring forward the required number of new homes, further change is necessary. For example, the Spring Statement must provide incentives across the property market in relation to new Net Zero targets. Similarly the Chancellor will need to review Stamp Duty for target groups such as downsizers and first time buyers, and consider re-introducing additional financial incentives for first time buyers. 

Currently many new build schemes are stalled because of viability. While changes to planning policy are set to open up the opportunity for more development – public and private, for sale and for rent, brownfield and greenfield – getting these homes built will require the government to be flexible in the planning gain requirements which can now include 50% affordable housing, 10% biodiversity net gain and substantial Section 106 commitments, alongside increased material and labour costs.  

We had hoped that the October Budget would see a reversal of the abolition of Multiple Dwellings Relief. This must be a future priority. Currently the abolition of MDR is estimated to have cost the UK 25,000 homes - almost 7% of the government’s 370,000 housing target - while also costing 60,000 jobs. Were the decision to abolish MDR reversed, the BTR sector would have the means of delivering much needed additional units across a variety of tenures, including much-needed later living accommodation. 

The imminent Spring Statement is possibly the Chancellor’s greatest opportunity to brighten the prospects of every sector within the property market and to make genuine progress in addressing the housing crisis. A positive outlook which accepts the need for reduced taxes in specific circumstances could deliver exactly the growth that the government is so committed to.