Our latest survey has indicated that the UK housing market is set to slow down over the next three months following a short-term rush on buy-to-let properties.

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House price inflation set to slow following buy-to-let surge

  • House price inflation peaked last December ahead of an anticipated rush to beat buy-to-let tax rises.
  • Rate of house price inflation now predicted to slow as April’s Stamp Duty changes are introduced.
  • More modest growth in property sales projected following buy-to-let rush.

The national picture

While 74% of respondents expected there to be a rush on buy-to-let purchases ahead of Stamp Duty increases coming into effect this April, our UK Residential Market Survey for February 2016 showed that only 17% (net balance) expected to see an increase in sales over the coming three months.

In addition, while house price inflation expectations peaked following the Chancellor’s Autumn Statement, with prices driven by speculation regarding an increase in investor demand, this trend is set to soften from March as investor interest dampens. Only 21% of respondents expect prices to increase over the coming months.

The survey showed that house prices continued to creep up throughout February. Across the UK, East Anglia continues to show the sharpest price increases, with 91% of respondents reporting that prices had risen over the past month.

London and the North East by way of contrast saw very modest gains.

South West enjoys a surge in sales outstripping all other regions

  • The South West has seen the highest rise in sales across the UK for the last three months - 49% of respondents experienced a rise in sales rather than a fall and further increases are expected over the year ahead.
  • New instructions to sell also increased more sharply in the South West than anywhere else in the UK as 34% of surveyors saw an increase in new listings rather than a decrease. 
  • New buyer enquiries in the South West rose for the twelfth month in succession with 49% more respondents seeing an increase in demand rather than a fall.The highest in the UK.

Uncertainty weighs on London housing market

  • Price expectations turn negative in prime central parts of the capital.
  • After sharp periods of inflation, London house prices look set to stabilize.
  • Outer London boroughs remain firmly positive.
  • Zone one properties showing signs of downturn.

Comments (8)

  1. The view from RICS

    Anecdotal evidence has suggested that a combination of exogenous factors is contributing to the overall picture in prime London, with tax changes, foreign market slow-downs and uncertainty over Brexit all being mooted as potential reasons behind the changes in demand. This is not necessarily indicative of the long-term market and the depreciation of the pound could encourage overseas investors back in to the market as could the outcome of the European referendum.

    The challenges facing the top end of the capital’s property market are clearly visible in our latest results. However, it is evident that the broader London market remains firm in the face of the on-going shortage of stock and pent up demand. Although agreed sales in February were strong, the dip in new buyer enquiries suggests that it might be reasonable to assume a slower market in the spring as a result of this change.

    Over the past three months, we have witnessed a surge in buy-to-let activity. Since the Chancellor made his Autumn Statement announcement last November, investors have rushed to purchase homes before the Stamp Duty surcharge comes into effect. 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.

    While there remain significant doubts as to whether the Government’s plans to encourage a more robust development and construction pipeline will be sufficient to address the housing crisis, long-term price indications for the housing market remain strong, with respondents still expecting them to rise by a further 25 per cent over the next five years.

    Simon Rubinsohn

    Simon Rubinsohn, RICS Chief Economist 9 March at 16:11PM

  1. Why should the headline to this bulletin be "Surveyors FEAR housing market slowdown"? Surely the RICS should be taking a neutral stance, and the fact is that ever-increasing housing prices help no-one except the housebuilders who have to recoup the costs of development. It is exactly this attitude to the market that has contributed to the disastrous perception of a house being seen as an investment asset class, which has culminated in today's young people having almost no chance of being able to buy their own place, despite the government's idiotic measures to supposedly make it easier to do so, which have only increasing demand and prices even further. What we need is a sustained and massive programme of housebuilding, with the clear intention of reducing prices, if necessary by direct intervention in the market. However, I cannot imagine any of the current crop of politicians having the guts to do this.

    Peter Falding Peter Falding, 14 March at 14:37PM

  2. Peter, I have some sympathy for your comments. However I would stress that the 'fear' or expectation that is highlighted in the title has more to do with a drop in the level of turnover following a Q1 rush linked to the stamp duty increase. On top of that, the starter home initiative which is still working its way through parliament could have material ramifications for some parts of the second hand market if the initial spec whereby the 20% discount is assumed by the purchaser in just a five year period is not amended, as many in industry would like to see. And for the record, I would like to see a substantial programme of housebuilding. The direct commissioning that the government has announced initially at five sites is a step in the right direction. They do however need to be much bolder in my opinion. Simon

    Simon Rubinsohn Simon Rubinsohn, 14 March at 17:01PM

  3. Bubbles in the history later or earlier burst, and this is no exception. Mario Draghi last week puts the rates at 0% and start the basement for a recovery in the eurozone, which means that many European-young people (those who are living in small rooms sharing house), they will come back to home. And remember the business cycles has between 5-8 years, and it is time to change.

    Francisco José Mellado Garcñia Francisco José Mellado Garcñia, 14 March at 19:42PM

  4. Noted Simon. I hope RICS are making representations to government about the efficacy, (or lack of it), of current policies as it seems all too easy for MPs to bury their heads in the sand unless they can find a "popular" issue which will give them electoral success. Unfortunately the "haves", sitting pretty in their homes of steadily increasing value, (though this is only in relative terms), are regarded as more important than the "have nots", who are barely able to scrape together their rent, and may never be able to buy a house of their own. Of course, another option is to create a decent rented sector as there is no real need to buy a home, though this would have to be accompanied by improved security of tenure which will go down in Parliament like a lead balloon.

    Peter Falding Peter Falding, 14 March at 19:54PM

  5. I don't believe the RICS should necessarily be taking a neutral stance - they should be taking a stance that reflects and supports the best interests of its members. And I would guess that most of its members would see declining values as a negative rather than a positive. You raise important issues of affordability but property prices in decline are usually accompanied by or a result of a downturn in other parts of the economy, including the wages of those hoping to buy a house.

    Andrew Weeks Andrew Weeks, 15 March at 12:52PM

  6. Excellent news. A moderation in the rate of growth, preferably to 0%pa for about ten years, would be great news for the UK economy.

    Far too much disposable income is eaten up by housing costs, preventing other more productive spending and in particular, diverting investment spend from productive industry and other business investment into housing.

    John Moss John Moss, 15 March at 14:02PM

  7. There is often lessons from history. In the 1980's my wife and I were keen to buy our first home and it was MIRAS that made the difference. I appreciate we are in times of austerity however tax relief on mortgage interest to first time buyers would be focused and help affordability.

    I am aware of the rise of PRS in all its forms. Renting may be a life style choice however it does give rise to longer term issues particularly an individuals loss of an asset in old age. With people living longer and potentially falling back on the state in old age the long term consequences of PRS growth must be worrying politicians assuming they are able to think that far ahead.

    Gerald Hall Gerald Hall, 23 March at 12:11PM

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