The latest data from RICS has revealed that new buyer enquiries rose again in January for the tenth month in a row.
Respondents to the survey attributed the recent increase in demand to a rush of buy-to-let investors looking to buy before the 3% stamp duty surcharge comes into effect in April. 74% expect there to be an increase of purchases by buy-to-let investors prior to the changes.
Agreed sales have also risen over the month at the fastest pace since April 2014. Most areas have seen a rise in sales since the start of the year, with RICS expecting further increases.
Supply has also gathered pace in the past two months, but stock remains 21% down compared to a year ago. The increase was largely concentrated in London where a significant lift in properties coming to the market was recorded in January (a net balance of +58% more respondents noted an increase). Elsewhere, sales instructions across the UK were much flatter.
Even with an improvement in supply, the rush to acquire buy-to-let property is pushing prices up, with 49% more surveyors reporting prices to have risen in January.
Simon Rubinsohn, RICS Chief Economist, said: "Our latest UK Residential Market Survey has seen a rise in new instructions in January, which, although modest, is very welcome. However, with buy-to-let investors rushing to get into the market ahead of the stamp duty hike, the near-term pressure on prices is intensifying despite a higher level of supply.
How the tax changes planned for the buy-to-let sector over the next few years plays out remains to be seen, but there are concerns raised in the survey that existing landlords will look to either gradually scale back on their portfolios or exit the market altogether as the more penal regime begins to bite. Against this backdrop, it is perhaps not surprising that our key indicators point to further rent - as well as house price - increases."
Brian Murphy, Head of Lending at Mortgage Advice Bureau (MAB), had this to say: “An increase in new property listings is a step in the right direction, but after more than a year of falling supply will do little to quell rising house prices. A radical step change is needed to boost construction of new homes and even out the current imbalance between supply and demand. Such changes cannot be achieved overnight, so for now rising property prices seem inevitable.
Demand is being further stoked by a rush of activity in the buy-to-let and second home market, as buyers rush to get in ahead of the April stamp duty surcharge. Given that stamp duty is paid upon completion, time is fast running out for those that are not yet well on the way to finalising a sale. New builds may seem a good option given there is no onward chain – but many of these are sold well in advance, and any delay in property construction could tip completion beyond the deadline.
The market should settle into a more regular rhythm once the stamp duty deadline has been and gone. However, the RICS survey indicates house prices will have a notable upward momentum over the next twelve months. This is troubling for first-time buyers, although recent Government policies have helped to improve the number of affordable housing options.”
Andy Sommerville, Director of Search Acumen, comments: “Housing supply has risen – a drop in the ocean, but a much-needed one given the strain this early-2016 rise in house prices will place on homebuyers looking to move in the first quarter, in the middle of the buy to let fever. The housing problem is a national issue, but with London’s population reaching a peak all-time high of 8.6m, the concentration of new housing developments in the city is welcome and will provide some respite to city dwellers.
As expected, buy to let reforms have the market in thrall, and surveyors, estate agents and conveyancers are going to be kept very busy in the first quarter; however, this spike is merely a redistribution of annual volumes as BTL landlords look to complete their transactions before the April deadline. The market is going to stabilise, or even slow down slightly, once these transactions that would have otherwise happened later in the year, are complete.
The lack of landlord instructions in spite of a growing need for rental properties, however, is a foreboding sign of rent becoming even more unaffordable for younger people, and this problem may get worse if landlords decide to simply pass on the extra stamp duty costs to their tenants in the year ahead. The only solution to ever-rising rents is to increase the number of rental properties in the market.”
Robert Grigg, Managing Director of Property Finance at Hampshire Trust Bank, added: “Only through a concerted effort to increase housing stock can we fill the housing gap and begin to moderate prices. SME housebuilders are key and they need to look at different options for accessing financing and increasing Britain’s housing stock. This is exactly where challenger banks can step in, with a more personal and tailored approach to business banking we’re able to help them access finance that’s not available to them at the big banks. Britain’s SME house builders have an important role in helping solve Britain’s housing crisis and it’s important we give them the best possible chance to do this.”