MARKET REACTION
At the time of writing, gilts and sterling were steady. The 10-year yield was down 2bp at around 5.32% and the 30-year down 3bp at 5.71%, well below the 6.05% peak earlier this month. Sterling was 0.1% lower at around $1.33. Bank shares rose as the surcharge came in below the 8% feared. Housebuilders, however, gave up their early gains and were down around 6% after an initial rally. Listed property stocks were broadly flat.
For capital markets, the more consequential announcement came in the small print. From January 2029, sovereign wealth funds lose their exemption from UK tax on property income and gains, but they get bespoke access to REITs at a 15% rate. This will be out for consultation until January 2027.
Separately, LGPS pooling gets stamp duty relief, which supports the Mansion House push to channel pension capital into UK assets.
HERE'S WHAT THE BUDGET MEANS FOR…
HOUSING
The Budget added £1.5bn for around 10,000 social and affordable homes, prioritising Social Rent and council homes, and taking the 10-year programme past £40bn. Councils keep a preferential PWLB rate, 40bp below normal, for another year. Land sold to housing associations will be zero-rated for VAT from April 2027.
Full Your First Home details were announced. The £4.7bn scheme offers 20% equity loans, interest-free for five years, with a 2.5% deposit, for around 70,000 first-time buyers and an estimated 20,000 new homes. Income caps are £110,000 outside London and £140,000 in London. Price caps are set by local authority median prices, at £650,000 in inner London and £500,000 in outer London. The OBR noted that the scheme may put upward pressure on house prices. A new First Time Buyer ISA will replace the LISA from April 2029, with a 25% bonus on homes up to £450,000.
On supply, there are no major changes to building regulations for the rest of this Parliament, other than for building safety. Residential brownfield sites of up to 1.5ha are exempt from biodiversity net gain, and AI planning tools will be rolled out by the end of 2027. Next steps on cutting development costs and releasing public land are deferred to the 10 Year Plan.
Stamp duty was unchanged, as the Prime Minister had promised, though stamp duty on rent under assured tenancies is removed. The mansion tax goes ahead from April 2028 with a deferral scheme, discounts and exemptions, and a 100% premium on homes empty for 12 months or more. Landlords face a second 2pt rise in property income tax, to 24%, 44% and 49% from April 2027, with the same rise applying to savings income. Together they raise about £1.1bn a year.
In short, housebuilders and first-time buyers are being supported by Your First Home, while private landlords continue to be squeezed.
THE CONSUMER
There was focus here on energy pricing, with Healey calling for "deep reform". He promised no new policy costs on bills until a new cost-control framework is in place at the Spending Review. The headline, and the only measure not trailed in advance, was a £2.6bn Household Energy Payment. Gas standing charges will be abolished, and electricity standing charges will be reformed next year. Overall, this is modest support, easing pressure at the margins, but does not change the outlook for real incomes, which fall this year while inflation heads towards 3.5%.
RETAIL AND HOSPITALITY
This was the most targeted support for physical retail and hospitality in some years, although it is aimed squarely at smaller occupiers. From April 2027, the 100% Small Business Rates Relief threshold for retail, hospitality and leisure rises from £12k to £18k RV, with the taper extended to £21k. That takes around 70,000 more businesses (including pubs, restaurants, cafés and hairdressers) out of rates altogether.
Relief for pubs, social clubs and live music venues rises from 15% to 35%, worth over £3,000 per pub on average.
Increases of rate bills for qualifying RHL properties are capped at CPI in 2027/28 and 2028/29. Half of RHL properties will now pay no rates, and around 110,000 will see bills fall. Vape shops and adult gaming centres lose their RHL relief.
This relief is funded by making online marketplaces liable for VAT on UK sellers with sales above £90,000 per platform from October 2027, which aims to level the playing field for physical retail, and by raising Machine Games Duty on higher-stakes machines from 20% to 25%.
A new High Streets Strategy introduces a 'High Streets First' principle for the public estate and reforms to BIDs. It also includes a £210m package for derelict buildings, among them a £125m Derelict Buildings Fund, with Stafford and Bury singled out. The new overnight visitor levy for mayors is a cost for hotels, but could be recycled into local infrastructure.
Higher rates thresholds for small retailers, a tougher stance on vaping and gambling, devolved business rates proceeds and overnight visitor levies should together help to support occupier demand across secondary and tertiary retail locations.
BUSINESS RATES
For larger ratepayers, this was a Budget of two halves. Business rates raise £35bn in 2026/27, and the headline reliefs are aimed at small and RHL properties, so few large occupiers will benefit from them. The better news came with the 2027/28 multipliers, published alongside the Budget. There had been widespread fears that the high-value multiplier, which applies to properties with an RV of £500k and above, would rise faster than inflation to pay for support for smaller businesses. Instead it rises by 3.3%, from 50.8p to 52.5p, slightly below September CPI of 3.5%, as its premium over the standard multiplier is held at 2.8p. The standard multiplier rises by 3.5% (48.0p to 49.7p) and the small business multiplier by 3.5% (43.2p to 44.7p).
The sting is in the detail. The 1p Transitional Relief Supplement was due to apply for one year only, in 2026/27. It will now also apply in 2027/28 and 2028/29, to help fund the small business relief threshold increase for qualifying RHL properties. It is paid by properties who do not qualify for transitional relief. On a 49.7p or 52.5p multiplier, that adds around 2% to those ratepayers' bills. The Supporting Small Business scheme is extended for a year.
The government is also cracking down on mitigation. From April 2027 it will fund councils' legal costs for unsuccessful cases challenging business rates avoidance, and it will introduce a General Anti-Avoidance Rule for business rates for the first time. Elsewhere, Valuation Tribunal appeal fees are abolished.
Longer term, the bigger change is devolution of business rates to mayors and councils (see REGIONS AND DEVOLUTION).
OFFICES
The most consequential rumour for commercial real estate was a business rates rise on properties with RV above £500k, worth about £1bn. It did not materialise, which is a notable reprieve for the London office market at a time when development viability in central London is already marginal.
That said, London occupiers are not off the hook. The Transitional Relief Supplement now runs to 2029, and the Mayor will be able to create a successor to the Elizabeth Line Business Rates Supplement, which falls on larger properties. Euston and Stratford become Business Rates Retention Zones, which should support investment around both stations. The new sovereign investor tax regime is the main watch point for prime capital values.
LOGISTICS AND INDUSTRIAL
The absence of a further warehouse tax removes a material near-term downside risk for the sector. But the government said it will "continue to explore how the business rates system could better target online retailers".
On the demand side, the drivers are reindustrialisation and defence. The £2.5bn, 10-year Rolls-Royce partnership on a short-haul engine and gas turbines will create 3,300 high-value manufacturing jobs by 2029 across Derby, the Midlands and Bristol, alongside £140m of Rolls-Royce investment in Derby. Life sciences investment includes Convatec in Manchester, Vertex in Oxford and Kindeva in Loughborough. A fully funded Defence Investment Plan, with up to £5bn of National Wealth Fund and British Business Bank capital into defence and dual-use, supports demand for defence-related production and storage space.
AI AND DATA CENTRES
Healey framed AI as a question of sovereignty as well as growth. A £140m Sovereign AI Unit is joined by £120m more for the AI Security Institute, with safety a clear focus, and a new AI Fund for civil service transformation is expected to save a further £600m of back-office costs. Compute for the NHS and defence will be kept onshore, including MoD sovereign compute on its own secure estate.
The main real estate announcement is a British Data Centre Covenant. Operators that sign up must pay a fair share of energy costs, invest in host communities, and meet environmental and security standards. In return, a new Ministerial Control Centre aims to speed up time to power for strategic projects. It can reserve and reallocate grid connections, and permit on-site generation.
Power has been the main constraint on UK data centre development, so faster grid connections matter. The Covenant is also about winning local consent. The Ofgem consultation on data centre energy pricing will also shape the market.
REGIONS AND DEVOLUTION
The Fiscal Devolution Roadmap means that mayors take a 20% share of business rates from April 2027 and a share of income tax from 2028/29, and local and regional government will retain 100% of business rates before the end of the decade. Retaining income tax as well as business rates is a significant step. Nine Business Rates Retention Zones will keep 100% of growth above baseline for 25 years, covering projects from Euston and Stratford to Derby and Selby. All Strategic Authorities gain the power to introduce an overnight visitor levy to fund local infrastructure. A Mass Transit Taskforce will consider new powers for mayors.
On funding, new Good Growth Funds provide £285m in 2027/28: £165m for mayoral areas and £120m of incubator capital for areas without mayors. A £1.5bn borrowing facility with concessional lending follows from April 2028. The aim is to align public financial institutions, pension funds and private capital.
Good Growth Funds in Mayoral Combined Authorities are a major opportunity for funding property-led development in regional cities. Combined with the Retention Zones and the Green Book changes, they build on earlier announcements to make tax increment financing a more typical funding mechanism for regeneration and infrastructure. Local projects named included Liverpool's Littlewoods building, a 260,000 sq ft creative campus; Bristol Temple Quarter and Leeds Station.
