Buy-to-let investors rushing to beat deadline, but will it last?
Buy-to-let investors are rushing to complete deals before the stamp duty changes on April 1st, according to new data from the Nationwide.
The firm’s house price index reveals that there has been a large rise in mortgage approvals, which reached a two-year high in January. Data also shows that prices increased on average by 0.3% in February. Growth for the year also increased by 4.8%.
Up and Up
Robert Gardner, Nationwide’s Chief Economist, noted, ‘the number of mortgages approved for house purchase increased sharply in January to almost 75,000, up from around 71,000 approvals in December and the highest number since January 2014.’[1]
‘However, much of the increase is likely to be related to the impending increase in Stamp Duty on second homes which is due to take effect in April 2016. This is likely to have brought forward a significant number of purchases, which in turn will probably result in a fall back in approvals during the spring/summer,’ he continued.[1]
Race
Jonathan Hopper, managing director of Garrington Property Finders, observes, ‘the race is on for second home and buy-to-let buyers to complete before April’s stamp duty hike. The resulting spike in demand sent the number of mortgage approvals surging in January and has sparked high levels of competition for typical buy-to-let properties-flats and terraced houses in popular rental areas.’[1]
Looking to the future, Hopper asked, ‘what will happen once the stamp duty scramble is over?’ He believes that, ‘the chronic shortage of supply is likely to continue nudging up prices, even after the pre-April stimulus fades.’[1]
Buy-to-let investors rushing to beat deadline, but will it last?
Speed bump?
‘It’s hard to know if the April stamp duty deadline will be a speed bump for the market or a speed boost,’ states Mark Posniak, managing director at Dragonfly Property Finance. ‘Demand from buy-to-let investors will fall away during March but first-time buyers could arrive in numbers.’[1]
Posniak feels that, ‘the age-old opponent of first-time buyers, the landlord, has effectively been red-carded and the playing field is now theirs.’ He went on to note, ‘as the buy-to let purge starts in earnest, the appallingly low home ownership rate for younger people may well pick up. With the Bank rate seemingly set in stone for 2016 and people confident about their jobs, demand is unlikely to wane.’[1]
‘The ebb and flow of the property market is difficult to predict at the best of times but with the possibility of Brexit and the April stamp duty change impacting landlords, its bordering on the impossible,’ he concluded.[1]
A storm brewing
However, Alex Gosling, CEO of online estate agents HouseSimple.com feels, ‘this could be the storm before the calm. February house price growth is being driven by the buy-to-let gold rush-investors trying to get in before the stamp duty hike. March is likely to be more of the same, as time is running out. It will be interesting to see what happens in April, which is historically a buoyant time for the housing market. We are walking into the unknown and there’s a chance that demand will drop like a stone.’[1]
‘With less buy-to-let investors snapping up properties from beneath the noses of traditional home buyers, we could well see a surge in first time buyers coming to the market. Home buyer demand has always been there, but they have often struggled to compete against committed investors, many of whom can buy for cash. Now they’re fighting on a more level playing field, we could well see the drop off in investor numbers replaced by a surge in first time buyer numbers,’ Mr Gosling added.
[1] http://www.propertyreporter.co.uk/finance/the-race-is-on-for-btl-investors.html
