Housing market will cool this year when rush to purchase buy-to-let properties subsides, forecast estate agents

  • Investors rush to beat April 1 deadline
  • Extra 3% stamp duty charge on buy-to-let purchases will be applied
  • 'Inevitable' that the stamp duty changes will take 'heat out of' the housing market, warns RICS
  • The sharpest house price increases have been in East Anglia, with 91% of estate agents reporting rises

By Myra Butterworth For MailOnline

Updated:

The housing market is predicted to cool this summer following the current rush to snap up buy-to-let properties, it has been revealed.

Landlord investors are keen to beat the April 1 deadline, after which they will pay an extra 3 percentage points above current stamp duty rates on buying a buy-to-let property.

The Royal Institution of Chartered Surveyors said house prices continued to rise in February, but are now expected to drop off as investors no longer have time to complete on sales before the April 1 deadline.

The housing market is predicted to cool this summer following a rush to snap up buy-to-let properties.

The housing market is predicted to cool this summer following a rush to snap up buy-to-let properties.

Simon Rubinsohn, chief economist at RICS, said: 'It is inevitable that over the coming months, April's stamp duty changes will take a little of the heat out of the investor market.'

However, he added that despite the expected slowdown in the coming months, long-term expectations for house prices remained 'strong', with property values expected to increase by 25 per cent during the next five years.

RICS said the sharpest price increases have been in East Anglia, with 91 per cent of estate agents reporting rises.

London and the North East were the only two UK regions where prices failed to rise, holding broadly stable over the month.

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Landlords' mortgage borrowing jumped 42 per cent year on year in January ahead of the stamp duty changes, figures from the Council of Mortgage Lenders revealed.

Buy-to-let loans worth £3.7billion were handed out in January, it said. 

Most of the borrowing was made up of remortgage loans, although £1.4billion was for house purchase.

Adrian Anderson, director of mortgage brokers Anderson Harris, said: 'Remortgaging and buy-to-let lending goes from strength to strength.

'More landlords are taking out mortgages and remortgaging as they try to buy before the stamp duty hike comes in from April, and are also looking at the costs associated with their investments, minimising their mortgage payments as much as possible.'

The report said: 'Anecdotal evidence suggests tax changes, concerns over Brexit and global economic uncertainty are all taking their toll on buyer sentiment in the capital.'

In London, estate agents' house price expectations for the coming three months turned negative for the first time in a year.

But in the longer term, estate agents still expect property values in London to increase by around 4.5 per cent a year over the next five years - which is broadly in line with house price expectations for the UK generally.

Across the country, the supply of new homes coming on the market had started to rise 'modestly', the report said.

The South West of England continued to see the sharpest growth in sales volumes, it added.

Jeremy Leaf, a former RICS chairman and north London estate agent, said: 'There is every chance that we will see property prices levelling off over the next few months, particularly one or two-bedroom properties that would normally attract first-time buyers. Prices may even reduce a little until the market has a chance to find a new level in a few months' time.

'The stamp duty hike is not the only cause of any uncertainty but concerns over the EU referendum will also play a part in the next few months.'