How will the UK’s new budget affect the home renovation and housing markets?

Due to a shocking OBR leak, and the updates today from Westminster, we want to give you our immediate thoughts on how the chancellor’s new budget and forecasts will affect the renovation and housing market.

At a glance:

Small changes to property tax aimed at transferring the buy-to-let stock to owner-occupied, increase in housing supply through deregulation, and optimistic forecasts on inflation will struggle to counter predict the increase in mortgage rates, lower disposable income, and rising costs faced by builders through NIC allowance cuts. Many of the cost drivers will have a lagged effect, so pulling the trigger as soon as possible, and protecting your investments has never been more important.

The Page is a service used by homeowners in London and the surrounding areas to renovate like you’re a pro. Have one of our London renovation experts by your side from initial planning through to your final work through.

1. The “Improve Don’t Move” Trend is About to Accelerate (good for builders)

The OBR has slashed its forecast for property transactions by 155,000 fewer per year by 2029 compared to previous estimates. Higher stamp duty, rising mortgage rates, and an ageing population are all contributing to a market where people stay put for longer.

What this means for renovations: When moving becomes less attractive, improving your home becomes the logical alternative. Expect the competition for good contractors to increase as more homeowners request extensions, loft conversions, and major refurbishments, rather than uprooting.

2. Landlords Are Exiting – And That’s Good News for Renovation Demand (good for homebuyers)

Property income tax rates are rising by 2 percentage points from April 2027, adding to years of measures squeezing landlord returns. The OBR explicitly states this “will likely reduce the supply of rental property over the longer run.”

What this means for renovations: As buy-to-let investors sell up, more properties shift to owner-occupiers. Homeowners who live in their property have a far higher propensity to renovate than landlords, who typically maintain to minimum standards. This shift should sustain strong renovation demand even if transaction volumes fall.

3. Your Disposable Income Is Being Quietly Squeezed (bad for homeowners)

Personal tax thresholds remain frozen until 2030-31, dragging 5.2 million more people into paying income tax and 4.8 million onto the higher rate through fiscal drag. The OBR forecasts real household disposable income growth of just ¼% per year – well below the historical average of 1%.

What this means for renovations: Renovation budgets will feel tighter. Projects may need to be phased, prioritised more carefully, or financed differently. If you’re planning a major project, locking in your budget assumptions now, rather than assuming future pay rises will cover cost overruns, is prudent.

4. Mortgage Rates Are Heading to 5% – Affecting More Than Just Buyers (bad for homeowners)

Average mortgage rates are forecast to rise from 3.7% in 2024 to around 5% by 2029. With 90% of mortgages on fixed rates, this pain arrives gradually as people remortgage.

What this means for renovations: This hits renovation plans two ways. First, remortgaging to release equity for improvements becomes more expensive. Second, higher monthly payments leave less spare cash for funding works from income. If you’re on a low fixed rate expiring soon and planning renovations, the maths on borrowing now, versus later, deserves careful thought.

5. Contractor Quotes Are Going Up – Here’s Why (bad for homeowners)

The October 2024 employer NICs increase (threshold slashed from £9,100 to £5,000) is already showing “sharper falls in employment among lower-paid sectors”, including construction. Firms are absorbing costs through reduced margins for now, but that’s not sustainable.

Additionally, writing down allowances for equipment are being cut from 18% to 14%, with no relief for second-hand equipment or work vehicles that many tradespeople rely on.

What this means for renovations: These costs will eventually flow through to quotes. The OBR assumes 76% of employer NICs increases get passed on to workers or prices. If you’ve been gathering quotes and delaying, don’t assume prices will stay flat.

6. Energy Efficiency (mixed picture)

The Budget includes additional funding for the Warm Homes Programme, but the Energy Company Obligation (ECO) scheme expires in March 2026 and won’t be renewed. Meanwhile, household energy bills are being temporarily reduced through part-funding of the renewables obligation.

What this means for renovations: The grant landscape for insulation, heat pumps, and energy improvements is shifting. Lower energy bills might reduce the urgency for efficiency upgrades, but the underlying economics of insulation and heat pumps remain compelling, given where energy prices are headed long-term. Check current grant availability before assuming future schemes will be more generous.

7. Inflation Has Peaked But Materials Aren’t Getting Cheaper (avoiding terrible, not good)

CPI inflation is forecast at 3.5% for 2025, before falling to 2.5% in 2026, and returning to the 2% target in 2027. The GDP deflator (measuring domestic prices) follows a similar path.

What this means for renovations: Material costs aren’t reversing; they’re just rising more slowly. That kitchen or bathroom won’t get cheaper by waiting. At best, the prices will stabilise. The case for getting on with planned works rather than indefinite deferral remains strong.

8. Planning Reforms Are Coming – But Mainly Help New Builds (case dependent)

The March 2025 planning reforms are expected to drive housing supply from 215,000 to 305,000 units per year by 2029-30.

What this means for renovations: While primarily aimed at new builds, any loosening of planning constraints could modestly benefit extensions and alterations in some areas. However, the OBR notes amendments adding to the fact that environmental safeguards pose “downside risks through limiting the release of land for development”. So don’t assume planning suddenly becomes friction-free.

9. The High-End Market Faces a New Headwind (small but could affect those on the threshold)

Properties valued over £2 million face a new annual council tax surcharge from April 2028, ranging from £2,500 to £7,500, depending on value band. The OBR expects this to be “fully passed through into property prices”.

What this means for renovations: If you own a high-value property, factor this ongoing cost into your plans. For most homeowners this is irrelevant, but if you’re considering improvements that would tip your property over the £2m threshold, the calculus has changed.

10. Timing Matters – The 2026-27 Window (good for renovators)

The OBR forecasts a trough in housing market activity around 2026-27 before planning reforms and falling interest rates stimulate recovery from 2027-28 onwards.

What this means for renovations: 2026-27 might actually be a good time to renovate. Contractor availability should be better during the market lull, potentially improving both availability and pricing. By 2027-28, when house building ramps up significantly, good tradespeople may be harder to secure for domestic work.

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The Bottom Line

The Budget paints a picture of squeezed household finances meeting sustained renovation demand. More owner-occupiers, fewer people moving, and the ongoing need to maintain and improve Britain’s ageing housing stock, all point to a busy renovation market.

But higher costs from taxes, materials, and contractor overheads mean projects need more careful budgeting than in the past. If you’re planning works, the case for moving sooner rather than later is stronger than it might appear.

The case continues to build the use of a service such as The Page because:

1. Vetted builders (background AND quality checks) safeguard your investment
2. We provide a concise scope of works and confidently choose the best contractor for your project
3. You are supported every step of the way, even past project completion, to ensure that you stay in control