What does the Autumn Budget mean for the property market?

The Autumn Budget had implications for those looking to buy or sell property or earn income from buy-to-let portfolios. In the residential market, an annual surcharge of at least £2,500 was applied to home worth more than £2m in England, from 2028. Meanwhile, in the rental market, landlords and property investors will be taxed 2% more on rental or dividend income from April 2027.

We’ve spoken to experts at Knight Frank, the Royal Institution of Chartered Surveyors and the National Residential Landlords Association, as well as our own specialists, to understand how the measures could impact the outlook for the property sector.

In our view, this year’s Budget is a highly regressive package of measures which does nothing to address the sector’s unprecedented supply and demand crisis.

Landlords are already grappling with a wide range of challenges, including increased regulation from the Renters’ Rights Act. For them, the Budget can be summarised as higher costs, slower market growth and tighter margins.

The Budget is also negative for tenants. Renters should expect to pay higher rent as costs are passed on – a view accepted by the Government and OBR. The Budget also confirmed local housing allowances are frozen for a second successive year – meaning the 1.7 million households in the private rented sector who receive the Local Housing Allowance are likely to endure further difficulties in 2026.

The rental market needs a pro-growth strategy which encourages investment in high-quality rental accommodation.

Ahead of the Chancellor’s speech, RICS polling* had highlighted that tax changes could encourage landlords to reconsider investment in the rental sector. A total of 62% said they would be more likely to raise rents if National Insurance was applied.

While this measure was not introduced, the additional 2% tax on property income could exacerbate the current imbalance between supply and demand in the private rental market. However, with savings and dividend tax rates also rising, the relative attraction of real estate for landlords is unlikely to materially shift.

That said, for property owners who were already considering scaling back, the latest Budget may accelerate their decisions. Nearly one in four of the landlords we surveyed have already sold or reduced their portfolios in the last two years, and a third expect to downsize in the next two.

Looking at housing supply, there was little in the Budget to support the government’s challenging target to build 1.5 million homes over the lifetime of this parliament. Projections for residential investment (a proxy for housebuilding) have now been revised down for the next three years, compared with the March forecast. 

The High Value Council Tax Surcharge, or ‘Mansion Tax’, throws a spanner in the works of the housing market.

The surcharge – paid to central not local government – hopes to raise £400 million by 2031. But between now and April 2028, buyers and sellers face uncertainty, especially around price thresholds.

The government will consult on tax reliefs, exemptions and deferrals early next year, but even once valuations are completed, they could be challenged. This will just prolong the limbo. The OBR has factored in lower stamp duty receipts as a result of extra friction in the housing market.

The other risk is that over time more properties could get dragged into the net of the mansion tax. The proportion of terraced houses, flats and semi-detached homes will grow, particularly in the London. At the moment, there are 150,000 properties worth more than £2 million in England and Wales, but we estimate this number will rise to 190,000 by 2028. The term ‘mansion tax’ will increasingly feel like a misnomer.

For context, it is also worth remembering that the UK already pays the highest percentage of property taxes among developed OECD countries. We have seen with Budgets in the past (notably with the ‘pasty tax’ in 2012) that plans can unravel. This time it could be a tax on high-value homes that doesn’t survive contact with reality. 

Although the Autumn Budget was mildly inflationary, Investec economists currently believe that the Bank of England will cut interest rates in December, with the Bank Rate settling at around 3% by the end of 2026. 

With increased taxation potentially exerting a downward pressure on affordability and yields, clients need lenders who can look at their finances holistically and create personalised solutions. Discussions may centre on options which allow more flexible cash management, such as revolving credit facilities, for example. Should the time on market increase for clients who are looking to sell residential or commercial property, we are also likely to explore how to refinance assets and unlock equity.

For investors, or landlords, the two percent increase in tax rates for property-based income is likely to renew conversations about the tax characteristics of different ownership structures, including limited companies or Special Purpose Vehicles.

It may also be appropriate to explore diversifying investment within real estate or other asset classes, to manage policy-driven or regulatory risk. 

* RICS/Opinium Polling of 500 PRS landlords 11-14 November 2025

Important information:

This article is for general information purposes only and should not be used or relied upon as professional advice. It is advisable to contact a professional adviser if you need financial advice. The opinions featured are not to be considered the opinions of Investec.