The housing market, both prices and the number of sales, is expected to cool when the new 3% Stamp Duty surcharge kicks in this April, says RICS.

What’s the latest?

The housing market looks set to slow down when the higher Stamp Duty rate for investors comes into force in April.

House price increases are expected to ease off as the rush among investors to purchase additional properties dies away, according to the Royal Institution of Chartered Surveyors (RICS).

A balance of just 21% of surveyors think property values will rise in the next three months.

And property sales growth also looks set to slow down as the heat comes out of the market.

Why is this happening?

The Government’s decision to impose a higher rate of Stamp Duty on people buying additional homes led to a stampede among investors to purchase property before the new rate kicks in.

Three quarters of surveyors reported a last-minute rush among buy-to-let investors to purchase a property, leading to increased competition in the market, pushing prices higher.

But investor demand is expected to fall away in April, with only 17% of those questioned expecting the increase in sales to continue in the coming three months.

As a result, house price growth should fall back to a lower level.
Who does it affect?

"...long-term price indications for the housing market remain strong, with respondents still expecting them to rise by a further 25% over the next five years.”

Expectations that there will be fewer investors purchasing property after April are good news for first-time buyers.

Both groups typically purchase properties on the lower rungs of the housing ladder, meaning first-time buyers were suffering from the increase in competition.

But even if house price growth slows, it is likely that prices will continue to rise and affordability remain stretched due to the ongoing property shortage.

Sounds interesting. What’s the background?

Recent strong house price growth has been driven by a chronic mismatch between supply and demand.

At the root of the problem is the fact that the UK is building around 100,000 too few homes a year to keep pace with demand.

Until building levels increase significantly, there will continue to be more buyers than there are sellers, putting further upward pressure on prices.

Simon Rubinsohn, RICS chief economist, said: “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% over the next five years.”

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