Following a busy winter of buy-to-let purchases, the growth of UK house prices is set to slow, according to new research from the Royal Institute of Chartered Surveyors (RICS).
The new, higher stamp duty rates for buy-to-let properties and second homes and the uncertainty caused by the upcoming EU referendum are key reasons for the expected slowdown in property purchases over the next few months.
This comes after an intensely busy period for landlord investments, with the Council of Mortgage Lenders reporting that £3.7bn worth of buy-to-let loans were taken out during February, up 61% compared with the same period last year.
Investors rushed to beat the new stamp duty rules, which came in at the beginning of April, and also took advantage of low interest rates to remortgage.
The RICS UK Residential Market Survey, released today, shows that this rush has now subsided and there’s a ‘climate of uncertainty in the country’s housing market’, with effects felt most acutely in London.
In central London, almost 40% more respondents expect house prices to fall compared to the number who think they will rise over the next three months. In other parts of the country the response is more mixed, with the number of people expecting prices to rise similar to the number expecting them to fall.
RICS Chief Economist Simon Rubinsohn says ‘the buy-to-let rush has now run its course, and as a natural result, the market is starting to slow’. He also pointed to the effect of upcoming elections and the EU referendum, but reassured investors that property values will continue to increase:
‘In the long-term, the imbalance between demand and supply will still exert a strong influence on the market, with house prices expected to rise by close to 25 per cent over the next five years.’
The RICS survey also shows that while rent is expected to keep increasing, it probably won’t rise any faster than in previous months. There is currently no indication that landlords will pass the cost of the stamp duty rise on to their tenants, so rents are expected to continue increasing at an average of 4.5% a year.
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