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2024 UK Budget: Key impacts on property development and investment in residential and commercial sectors

01/11/2024

The 2024 UK government budget introduces significant changes set to impact property development and investment. With adjustments to corporation tax, green development incentives, infrastructure investments, and housing affordability schemes, the landscape for residential and commercial property is shifting. In this article, Nimbus explores how these budgetary measures affect developers, investors, and the broader property market and how our data-driven solutions can help navigate these changes effectively.


Corporation tax changes: Implications for commercial property investment

One of the major updates in the 2024 budget is the increase in corporation tax allowances for small and medium-sized businesses alongside maintained corporation tax rates for larger companies. This change is likely to have mixed implications. While small developers and property companies may benefit from reduced effective tax, larger developers could feel the impact on profit margins, prompting a reassessment of investment strategies to focus on assets with more resilient income potential.

Tax relief on renewable investments: Additionally, tax relief for investments in renewable energy projects has been introduced, creating an incentive for commercial developers to pivot toward sustainable and energy-efficient buildings. With these incentives, developers may find sustainable projects to be more financially viable, potentially reshaping the commercial property market with a new emphasis on green developments. Nimbus’ EPC rating and distressed ownership site-finding filters offer essential support in identifying key opportunities in these areas.

EPC

 

 

Enhanced support for housing and first-time buyers

As expected, housing affordability remains a budget priority, with the introduction of a First Home Savings Scheme to aid first-time buyers. Matched government contributions are intended to boost demand in the residential sector, opening new opportunities for developers to focus on affordable housing.

Affordable housing initiatives: The budget also includes increased grants and interest-free loans for affordable housing projects, offering additional financial support. This may drive a notable shift in residential project priorities, with developers and investors turning towards affordable housing not only to meet demand but to take advantage of the available subsidies. This focus on affordability could lead to a steady increase in affordable housing supply over the coming years.

 

Planning reforms to expedite development approvals

Planning reforms in the 2024 budget focus on streamlining approval processes. A new digital planning platform pilot scheme aims to cut down on processing times for both residential and commercial projects. Developers can expect shorter timelines and reduced holding costs, particularly in urban regeneration efforts. However, it’s essential to consider potential updates to environmental impact assessments that may apply based on site location.

 

Green development incentives for sustainable property projects

With the UK’s 2050 net-zero goal in mind, the budget extends incentives for sustainable developments. Enhanced tax relief on eco-friendly building materials, grants for renewable energy, and subsidies for EV infrastructure are now available to developers and are expected to drive greener building practices.

Green building certifications: For the commercial sector, meeting high standards for sustainability like BREEAM may become more feasible and financially rewarding. Residential developers also have an opportunity to attract eco-conscious buyers by incorporating sustainable features in new builds, with the added benefit of compliance with stricter building standards introduced this year.

 

Budget impact on land prices and acquisition strategies

The 2024 budget is expected to have indirect effects on land values through measures that encourage urban density and reuse of under-utilised land. The government has now introduced tax incentives for brownfield and grey belt site development, which may make redevelopment of existing sites more attractive compared to greenfield sites.

With the increased focus on affordable and sustainable housing, there could be upward pressure on land prices, particularly in high-demand areas. Developers may benefit from focusing on urban redevelopment projects in designated zones, where financial incentives for sustainable projects and urban density are likely to keep land acquisition costs competitive. With Nimbus’ extensive pre-defined site-finding tools and strategies, developers can save time and identify these sites at scale.

Site finding-Nov-01-2024-10-38-07-6394-AM



Infrastructure investments and property value impacts

With £5 billion earmarked for transport, digital connectivity, and energy infrastructure, developers can anticipate rising property values in regions near new infrastructure projects. Properties near upcoming rail lines or digital hubs will likely become prime targets for both residential and commercial investments.

For developers, this could mean an opportunity to adjust land acquisition and project plans to align with these new infrastructure priorities, presenting timely opportunities for early investment in locations where future demand is anticipated to increase.

 

Navigating rising costs and seizing opportunities within Retail sectors

The 2024 UK budget introduces an increase in employers’ National Insurance (NI) contributions, which may place significant financial strain on commercial tenants, especially in the retail sector. This increase, coupled with ongoing economic challenges, is likely to elevate the risk of tenant distress among small and medium-sized retail businesses. As operational costs rise, many retailers may be forced to re-evaluate their lease agreements, potentially resulting in an uptick in vacant retail spaces.

However, this challenging landscape presents both risks and opportunities for property developers and investors. Nimbus’s innovative distressed tenant site-finding filter is tailored to assist users in identifying properties with struggling tenancies, allowing developers and investors to uncover value-added opportunities in retail sites. By leveraging this tool, stakeholders can proactively pinpoint and assess distressed retail properties, securing strategic sites and negotiating favourable terms with landlords or tenants looking to divest properties amid rising costs.

Distressed owners



Economic uncertainty and market caution for investors

Despite these supportive measures, the broader economic environment remains uncertain, with inflationary pressures and rising interest rates continuing to affect borrowing costs. For smaller developers and investors reliant on leveraged funding, higher borrowing costs may pose challenges, impacting the financial feasibility of projects.

Furthermore, new regulations around property ownership and increased stamp duty rates for overseas investors could influence investment decisions. Some investors may adopt a more cautious, selective approach, focusing on assets that offer stable returns and are less sensitive to economic fluctuations.

 

Rising demand for off-market opportunities

With property prices expected to increase, off-market opportunities offer a competitive advantage for developers seeking more affordable acquisitions.

Digital platforms like Nimbus have become essential tools, enabling developers to locate under-utilised or distressed properties efficiently. With tailored filters for off-market properties, Nimbus supports developers in building a pipeline of off-market opportunities, helping navigate a competitive landscape and secure strategically valuable sites.

 

Final Thoughts: Adapting to the 2024 Budget’s impact on property development

Overall, the 2024 budget announcement offers both opportunities and challenges for the property development and investment sectors. Enhanced support for housing affordability, expanded green incentives, and streamlined planning processes are likely to drive growth, while economic uncertainties and increased borrowing costs will require cautious navigation.

For developers and investors, staying ahead means adopting technology to track policy impacts, analyse sites, and assess project feasibility. Revolutionary platforms like Nimbus can support data-driven decision-making, save time when ensuring strategies align with the new budget’s provisions, and maximise returns in a competitive market.

Moving forward, adaptability, sustainability, and data-driven planning will be essential for success in the evolving post-budget property landscape.

Book a demo today to explore the powerful tools of Nimbus and discover opportunities to maximise your strategy in 2024 and beyond.

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For more insights on how the UK 2024 Budget announcements impact property, watch our expert-led webinar, now available on demand. Get practical advice and answers to key questions on navigating these changes.

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