Be positive: Budget may spur greater things for real estate

JMW Solicitors’ Thomas Pearson shares his upbeat view of the potential outcome of chancellor Rachel Reeves’ Autumn Budget.

I’ll get straight down to it: as we await the first Labour Budget in 14 years, it’s my belief that there’s little point in getting into the doom loop so many other commentators favour. We in the real estate industry have to work with whatever measures Reeves introduces, and make them work for all involved. And actually, I think there’s going to be plenty to be positive about.

More competitive pricing

It’s fair to say we’re all expecting tax changes, and it’s also fair to say that tax changes can slow down investment. But there is an upside. Such changes can be the catalyst for much-needed adjustments to the market. The canny investor will be able to capitalise on those adjustments: more competitive pricing, for example, is a likely outcome, and one that will be welcomed by those buyers looking for a great deal. A buyers’ market means plenty of activity, which in turn means…

Deals will still be made

In the past few days, it has been reported that the rate of Capital Gains Tax on the sale of second homes will not change, as the government does not want to impact the property market negatively by slowing property sales.

Admittedly, there’s less certainty around the buy-to-let market. The Landlord Trends report from consultancy Pegasus Insight found that if the government introduces significant changes to, or reduces allowances on, CGT, 39% of landlords said they would not invest further in the private rented sector, increasing to 48% of landlords with four or more buy-to-let mortgages.

And yet… even though it’s the strong belief in the markets that the rate of CGT on the sale of shares and other assets, currently set at up to 20%, will increase almost certainly by several percentage points, the Institute for Public Policy Research said that interviews it had carried out with a variety of millionaires suggested most would not be put off investing by a rise in CGT.

Any changes could take effect immediately or from 6 April 2025. If the latter, I expect to see a great deal of activity in the commercial real estate market throughout the next six months.

The potential for strong returns

Commercial real estate is always a highly resilient asset class, one with significant potential for strong returns. The savvy developer knows this, regardless of what measures are announced in the coming Budget.

Key locations in and around Manchester – such as Ancoats, Deansgate Square, Prestwich, Stockport – demonstrate that the North West is a region alive to the multiple opportunities inherent within infrastructure projects.

Yes, nationally there has been a certain amount of hedging of bets – the Stonehenge Road Tunnel, estimated cost £1.7bn, was cancelled this year – but there is still an appetite and a willingness to consider viable developments.

Consider the proposal made by Andy Burnham and Richard Parker, Mayors of Greater Manchester and the West Midlands, respectively, and backed by a private consortium, to create a new railway line connecting the two regions “at a fraction of the costs” of the scrapped Northern leg of HS2.

The plan relies heavily on investment from the private sector, but it is predicted to cost between 60% and 75% less than the proposed HS2 Northern leg, with savings delivered through UK and not European-standard cross-sections, building on the existing rail network with Lower design speeds and a ballasted track.

Now is the time for strategic investment

Interest rates are dropping and look likely to do so throughout 2025 – although there are hopes that another cut will be announced as soon as the next Bank of England Monetary Policy Committee meeting on 7 November. The fears that Reeves will be another Kwasi Kwarteng are likely unfounded, and the markets seem cautiously unwilling to be spooked by whatever the new chancellor has in store. We must also bear in mind that there’s an election imminent in the USA and so analysts are monitoring the policies of both Harris and Trump, as whoever wins may well play a part in shaping the economic relationship between the UK and America for the next four years.

Change is coming, but the North West is ready.

• Thomas Pearson is head of real estate commercial at JMW Solicitors