The surge is pushing house prices higher ahead of Stamp Duty changes in April, according to RICS.

What’s the latest?

House prices are being driven higher by a surge in buy-to-let investors rushing to purchase property ahead of the hike in Stamp Duty.

According to the Royal Institution of Chartered Surveyors (RICS), 49% more estate agents reported that house prices rose in January.

And the number of agreed sales also rose at the fastest pace since April 2014, with most areas across the UK seeing a jump last month. 

Meanwhile, mortgage lending at the start of the year soared to a nine-year high, due to a 20.6% jump in buy-to-let mortgage approvals, according to chartered surveyor e.serv.

Why is this happening?

The new 3% Stamp Duty surcharge for investors buying additional properties comes into force on 1 April, giving them just a small window in which to complete deals.

And while it may not sound like much, the additional tax will actually add £7,500 to the cost of purchasing a £250,000 property.

Flat for sale.

Who does it affect?

The current situation is good news for existing homeowners, particularly those who are looking to sell their first home to trade up the property ladder, as demand is currently very strong.

But it is bad news for potential first-time buyers as they will face high competition for starter homes from investors, who typically also buy properties on the lower rungs of the ladder.

However, e.serv said the rise in buy-to-let investors had not been at the expense of first-time buyers in January, with lending also increasing to people purchasing their first home.

Sounds interesting. What’s the background?

"...with buy-to-let investors rushing to get into the market ahead of the Stamp Duty hike, the near-term pressure on prices is, if anything intensifying despite a higher level of supply.”

RICS said it was just the third time in 18 months that the housing market had seen a pick-up in the supply of homes for sale.

But it warned that the rise was not enough to meet the surge in demand from buy-to-let investors.

Critically, three-quarters of estate agents expect there to be a further increase in buy-to-let purchases in the run up to April – which could push property prices up even more.

Simon Rubinsohn, RICS chief economist, said: “The rise in new instructions in January, 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, if anything intensifying despite a higher level of supply.”

Top 3 takeaways

  • Sales in January rose at the fastest pace since April 2014 as buy-to-let investors flooded the market ahead of April's tax hike - and the rush is pushing prices higher.
  • Three-quarters of estate agents think there will be a further rise in investment landlords buying properties in the run up to April.
  • Mortgage lending in January soared to a nine-year high, due to a 20.6% jump in buy-to-let mortgage approvals.

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