Spooky

On Wednesday 28 October, John Healey will deliver his first Budget as Chancellor, bringing in the first fiscal event of Andy Burnham's premiership. Expect the usual fog beforehand, briefings, kite-flying and think-tank wish lists. Most of it will be noise, but what do we really expect to happen? For the SME developers we lend to, the backdrop is not noise. House prices have stopped moving. Lloyds' September index put annual growth at exactly zero, and Nationwide's figure halved to 0.8%. Mortgage approvals for house purchase slipped to 54,918 in August. Meanwhile, the OBR forecast in March that housing delivery would bottom out at around 220,000 homes in 2026-27. That is a long way short of the 1.5 million homes the government still says it will deliver this Parliament. A flat market is not a crisis. But it is a market where margins are thin, exits take longer, and small builders feel every policy wobble first. So here is what the SME end of the industry needs from Healey, and what it doesn't.

Let's start with the good news: it’s not all doom and gloom. The Prime Minister has ruled out property tax changes in this Budget. After a year in which talk of stamp duty reform, mansion taxes and CGT kept buyers sitting on their hands, that matters. Uncertainty is a tax in its own right, and removing it costs the Treasury nothing. Healey has also tied himself firmly to the fiscal rules. The OBR left just £9.9bn of headroom at the spring forecast, and borrowing was already running above forecast by July. There is no money for grand gestures.

The details of the government's new first-time buyer support (income limits, local price caps and how it will actually operate) are due on Budget day. We see this as the biggest demand-side lever on the table, especially since Help to Buy closed and SME developers have lacked a mechanism that reliably underpins new-build sales to first-time buyers. Whatever comes next needs locally set price caps that reflect real new-build values rather than broad regional averages. It also needs to go live quickly. A scheme announced in October but not operational until late 2027 freezes demand in the meantime, as buyers wait.

From 31 October, three days after the Budget, officers will decide most planning applications rather than committees. Add local government reorganisation, folding 134 councils into 38 unitary authorities, and this is the biggest change to planning decisions in years. This sort of delegation should mean faster, more predictable decisions, but only if there are planners to make them. The ask is a funded, multi-year boost to planning capacity, with application fees ring-fenced for it. A lighter-touch biodiversity net gain regime for small sites would help too: the HBF found 84% of members still find the rules challenging two years in. For a developer carrying land on finance, every month of planning delay is real interest cost. Faster consents are one of the cheapest ways to improve scheme viability.

One of the major things we don’t want to see is building costs rising; the HBF estimates that around £76,000 has been added to the cost of building a home since 2020. Some is materials and labour; some is regulation, from the Future Homes Standard and building safety to BNG and Section 106. Each rule may be justified on its own; together, however, they squeeze small builders hardest, because SMEs cannot spread fixed costs across thousands of plots the way their PLC counterparts do. Our sector's ask is simple: no new levies or regulatory costs on residential development in this Budget, and a commitment to test the cumulative cost of any new rules before they land. Proper funding for the government's technical education push would also ease the labour shortage that keeps build costs high.

Perhaps, and maybe not the best for an interesting piece to read, the most valuable thing Healey can deliver may be the most boring of all: just no surprises. A Budget that does what was trailed, meets the fiscal rules and doesn't spook the gilt market is worth more to developers than any headline giveaway. Timing really matters here, with the Bank of England holding Bank Rate at 3.75% in September and making its next decision on 5 November, a week after the Budget. A credible Budget gives the MPC room to ease; a loose one risks pushing swap rates and mortgage pricing the wrong way just as buyers need confidence. A really boring budget that doesn’t spook the market is what’s needed.

Halloween may be fast approaching, but this needs to be all treat and no tricks to avoid a spike in swaps.

On 28 October, we will be looking for four things: the fine print of the first-time buyer scheme, any SME carve-out in public housing finance, money for planning departments, and the absence of new costs on development. For our investors, we will also be watching whether the ISA reforms due in April 2027 survive unchanged. None of these asks is expensive. Together, they would do more for the 1.5 million homes target than another round of headline numbers.

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