UK property market receives boost from buy-to-let rush

House prices in the UK increased by 9% in the year to March 2016, up from 7.6% in the year to February 2016.

House price annual inflation was 10.1% in England, 2.1% in Wales, 6.4% in Northern Ireland but fell by 6.1% in Scotland. The average house price now sits at £292,000, according to the data from the Office of National Statistics.

The data also shows that on a seasonally adjusted basis, average house prices increased by 2.5% between February 2016 and March 2016. Additionally, prices paid by first time buyers were 9.7% higher on average than in March 2015. Yet for owner-occupiers prices only increased by 8.7% for the same period.

There has been plenty of talk surrounding the potential impact the 3% stamp duty surcharge would have on the UK property market. With some experts stating that it would only increase the burden on first time buyers, as traditionally, buy-to-let investors and first time buyers seek the same type of properties. Looking at the price increases for first time buyers, it is evident that it has had an impact.

This goes against Osborne’s objective of reining in the buy to let market to help ease the burden on first time buyers and take the heat out of the market. Some investors may have looked to rebalance their portfolios and purchase cheaper properties that have a lower tax band in order to minimise their outgoings – directly competing with first time buyers.

Richard Snook, senior economist at PwC, explained that due to the rush of buy to let investors trying to complete purchases before the 3% stamp duty surcharge at the beginning of April it has affected the figures.

‘This move undoubtedly drove up demand and prices in March and we would expect demand to soften over the next few months as a result. There are no signs of any Brexit related slowdown in this month’s figures, although the underlying trends are masked by the effects of the stamp duty change,’ he said.

Randeesh Sandhu, Chief Executive Officer of Urban Exposure, the residential development finance provider, believes that activity within the market is likely to slow down in the coming months. Mainly in part because of the run up to the EU referendum with consumers remaining cautious against the possibility of Brexit.

He remarked; ‘However, it is clear that demand for housing remains strong and any impact of a Brexit is likely to be a short term trend with activity returning to normal soon after any decision. Therefore a real focus needs to be given to the housing shortages the UK faces,’

‘Where there is a real opportunity, in London and across the UK, is the use of brownfield sites. Unlocking this land could lead to an estimated 365,731 new homes in London alone. To capitalise on this opportunity, the new Mayor must review the planning process, the costs associated with developing on brownfield sites and look at how to accelerate brownfield site development in order to deliver the homes that the UK needs,’ he added.

Until the government tackles the housing crisis that is currently gripping the country, house prices will continue to rise, first time buyers will continue to struggle to get onto the property ladder and buy to let investors will continue to be seen as easy scapegoats. We understand the unfair position landlords are being put in and believe that not only do landlords offer a much needed service but one that is vital to the health of the UK property market.

If you have any queries about how these changes could affect you, please don’t hesitate to contact Orchard & Shipman today. As a company with 28 years’ of experience dealing with landlords, our team of experts understand the impact a change in government policy can have. We’re readily available to guide and advise you through these sometimes confusing changes in legislation.