‘Maybe Next Year’: Why the Budget leaves UK Real Estate waiting

Rachel Reeves’ much anticipated budget was finally delivered on Wednesday 26^th November to the House of Commons (well, slightly before thanks to an OBR leak…) The rumours, conjecture and leaks were finally laid bare in a budget that’s lasting feature could be that it is now over. The Chancellor neither committed to growth nor truly helping working Brits with a cocktail of tax rises and spending commitments. With the tax burden on Britain due to be at its highest ever level by the end of the Parliament, the budget has done little to solve the fundamental issue Labour campaigned to solve, growth.

The impacts on Real Estate investment and Development in the UK will naturally be borne out in the coming months and years but below I’ve outlined where I think we could see impact in the coming periods – it is a mixed picture.

Gilts stable, interest rates down? The Budget was received positively by financial markets, with 10-year gilt yields firming and sterling strengthening, a notable contrast to the volatility seen after the Autumn 2024 Budget. By reassuring bond investors the Chancellor has helped stabilise government borrowing costs, reducing pressure from debt servicing and signalling a return of fiscal credibility. If this confidence holds, supported by increased fiscal headroom and an expected 25bps Base Rate cut in December sentiment could improve through 2026. For real estate investors, this presents a potential turning point in the market cycle, with lower gilt yields, stabilising borrowing costs and improving macro-confidence creating more favourable conditions for pricing, liquidity and capital deployment.‍

Business rates cuts? The government’s business rates reforms introduce permanently lower multipliers for small retail, hospitality and leisure properties but impose a new higher-rate multiplier on all commercial assets with a rateable value above £500,000, including offices, logistics warehouses and major retail units. Although framed as support for the high street, the shift removes the previously generous 40% RHL discount, meaning many small occupiers see less relief, while larger assets face materially higher bills from 2026–27, alongside a national 10% rise in the overall rates burden. For commercial real estate investors, these changes lift total occupancy costs for high-value buildings, reducing rental headroom, increasing void risk, and softening valuers’ assumptions on rental growth and yields. The impact could see appetite for UK Commercial Real Estate investment soften.

A changing PRS sector? The increase in property income tax rates is likely to accelerate the exit of highly leveraged or small private landlords, tightening rental supply even further; for well-capitalised investors, this creates an opportunity to consolidate the sector, acquire stock at softer pricing and benefit from stronger rental growth driven by sustained undersupply. Institutions, PRS operators and investors with efficient tax structures stand to gain the most, as they can deploy capital at scale, professionalise management, and capture the rental uplift created as smaller buy-to-let players leave the market.

Planning reform? The government sought to address planning but, for many commentators and investors, has fallen short of the required depth and breadth of planning reform. The government’s broader “law back” provisions and incremental policy tweaks stop short of addressing the structural issues that slow down delivery: overloaded planning authorities, slow decision-making, inconsistent policy interpretation and a system still lacking the clarity and certainty investors require to unlock capital. As a result, the Budget fails to provide a step-change in planning reform, doing little to accelerate housing supply or incentivise major resi-led regeneration. The increase of the minimum living wage will put extra cost pressure onto contractors and inevitably raise construction costs, further dampening development activity.

Talent drain? Perhaps one of the larger impacts coming from the budget was the freezing of tax thresholds; effective tax rises despite manifesto promises. The impact will be felt by millions of working people over the coming years, but compounded by increase in dividend tax rates, property income tax (as mentioned above) and the so called ‘Mansion tax’; the Chancellor isn’t creating an environment that higher-income Real Estate investors would look to operate in. Will the increased tax pressures have a meaningful impact on the investment talent in the country? Perhaps.

The sentiment at many conferences over the past month has been ‘maybe next year’. This budget, whilst not shocking in its content, has done little to accelerate the deployment of capital in UK Real Estate. Interest rate cuts would be welcome, but tax hikes for individuals and businesses could offset those impacts. It will be fascinating to see how 2026 plays out, that is certain.