RICS’ latest UK Residential Market Survey has reported a rise in new instructions in January.
However, it warned that 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.
Simon Robinson, RICS’ chief economist, said: “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.
“New buyer enquiries rose for the tenth successive month in January, with the pace of growth in enquiries accelerating for a second consecutive report. Feedback to the survey continues to suggest that the recent increase in demand is due to a rush of buy-to-let investors looking to buy before the 3% stamp duty surcharge comes into effect in April. Critically, 74% of respondents expect there to be an increase of purchases by buy-to-let investors prior to the changes.
“As activity in the housing market gathers pace overall, agreed sales have risen over the month at the fastest pace since April 2014. The picture across the UK is mixed but most areas have seen a rise in sales since the start of the year and further increases are expected.”
RICS said supply has also gathered pace in the past two months but stock remains low with 46 properties per branch from 44.5, which is still 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. Looking ahead, house prices are projected to rise further over the next 12 months, with 72% more contributors expecting prices to increase rather than fall.
Brian Murphy, head of lending at Mortgage Advice Bureau (MAB), said: “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 12 months. This is troubling for first-time buyers, although recent Government policies have helped to improve the number of affordable housing options.”