UK Budget 2025: What It Means for Real Estate Development

jon77967
Nov 26, 2025
3 min read

The Autumn Budget 2025 has landed, and the property sector is buzzing with reactions. From tax hikes to infrastructure promises, the measures announced by Chancellor Rachel Reeves are set to reshape the landscape for developers, investors, and homeowners alike. Here’s what the industry is saying.

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1. Key Budget Measures Affecting Real Estate

• Mansion Tax: Annual council tax surcharge on homes over £2m, starting April 2028.

• Landlord Tax Increase: Additional 2% on property income tax from April 2027.

• Capital Allowances: New 40% First-Year Allowance from January 2026; Writing Down Allowances cut to 14%.

• Infrastructure Funding: Commitments to Northern Powerhouse Rail, Lower Thames Crossing, and new towns.

Expert Quote:

“The high-value council tax surcharge will disproportionately affect London and the South East, where most £2m+ properties are concentrated. Developers focused on luxury schemes may need to rethink pricing strategies.” — Scott Cabot, CBRE

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2. Residential Market Reaction

• Landlords Under Pressure: Higher taxes likely to push rents up and reduce supply.

• Prime Market Cooling: Mansion Tax expected to dampen demand for £2m+ homes.

• Older Homeowners Hit: Rising tax burdens may increase reliance on equity release products.

Expert Quotes:

“Despite claims of tackling cost of living pressures, the Government is pursuing a policy that will drive up rents. Almost one million new homes to rent are needed by 2031, but this Budget will clobber tenants with higher costs.” — Ben Beadle, NRLA

“Hitting landlords with extra costs will shrink rental availability, particularly in London, where the buy-to-let model relies on mortgage funding.” — Dominic Agace, Winkworth

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3. Developer Sentiment

• Missed Opportunity for Housebuilding Support: No new equity loan schemes despite falling new home sales.

• Luxury Developers Reassess: High-end projects may slow as Mansion Tax bites.

• SME Builders Concerned: Budget lacks ambition to close housing delivery gap.

Expert Quote:

“It’s extremely disappointing that the Government missed an opportunity to support housebuilding through a new equity loan scheme. The downturn in new homes sales is the single biggest issue for SME housebuilders.” — Phil Hooper, Close Brothers Property Finance

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4. Investment & Commercial Real Estate

• Cautious Optimism: Infrastructure commitments and capital allowances boost confidence.

• Liquidity Outlook: Potential improvement in 2026 as interest rates ease.

Expert Quotes:

“We are increasingly confident that we will see two more rate cuts over the next six months, which will lift investor sentiment and help bring down debt costs.” — Simon Williams, BNP Paribas Real Estate

“Fiscal discipline and infrastructure investment send an important message that the UK is competing for global capital, not just waiting for it.” — Victoria Ormond, Knight Frank

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5. Construction Industry Perspective

• Infrastructure Wins, Housing Gaps: Major transport projects reaffirmed, but housing viability issues remain unresolved.

Expert Quotes:

“The chancellor has provided reassurance that infrastructure remains a powerful lever for growth. But without planning reform and faster delivery, confidence will remain fragile.” — Alex Vaughan, Costain

“An increase in labour costs is a massive blow to the construction sector. You cannot simultaneously increase employment costs whilst calling for economic growth.” — Philip Pepper, Shakespeare Martineau

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Key Takeaways

• Expect higher rents as landlord tax hikes squeeze margins.

• Luxury housing market will cool under the Mansion Tax.

• Housebuilding targets remain unmet, with no new buyer support schemes.

• Infrastructure investment offers opportunities for large-scale development and commercial projects.

• Build-to-Rent and mid-market housing will be the most resilient sectors.

• Capital allowances changes create incentives for commercial investment.

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References (Full URLs)

• NRLA reaction to Budget: https://www.nrla.org.uk

• Winkworth commentary: https://www.winkworth.co.uk