Average UK house price pushes past £200k as investors work to beat tax changes

UK house prices rose sharply in March, likely due in part to a glut of investors making property purchases ahead of the new stamp duty tax rules that came into force this month.

According to the latest Nationwide house price index, at an average purchase price of £200,251 U.K. house prices were 0.8% higher in March than in February and up 5.7% from March 2015. That’s the first time the average price to buy a property in the U.K. has breached the 200k mark, according to Nationwide’s database.

“There has been a pickup in housing market activity in recent months, with the number of housing transactions and mortgage approvals rising strongly,” said Nationwide’s chief economist Robert Gardner in a press release. “This is likely to have been driven, at least in part, by upcoming changes to stamp duty on second homes, where buyers have brought forward purchases in order to avoid the additional tax liabilities.”

Now that the new tax rules are in place whereby owners of more than one property are subject to higher stamp duty tax payments as well as exempt from tax breaks afforded investors into stocks and shares, you could be excused for thinking that the rate of house price increase may begin to slow. However, according to another well-known lender, that’s unlikely to be the case.

Halifax who also published its own house price index for March early in April said house prices – according to the mortgages it has approved – were 2.6% higher in March than in February and a whopping 10.1% higher than a year earlier.

And, while Halifax housing economist Martin Ellis concedes there may be a little “softening” in the pace of house price growth in the coming months due to the economic uncertainty surrounding the European Referendum, a combination of additional developments should serve to keep prices on the up for some time.

“Current market conditions, however, remain very tight with an acute supply/demand imbalance continuing despite an improvement in the number of properties coming on to the market for sale in recent months,” Martin Ellis said in the Halifax press release. “This, together with continuing low interest rates and a healthy labour market, indicate that house price growth is set to remain robust.”

In the meantime, however, for investors with interest in prime London property, now could be a good time to step into or return to the market. Research by Knight Frank suggests that a 10 – 15% drop in city bankers’ bonuses has led to a drop in prices across prime property hot spots in London.

“There are no indications bonuses will start to materially drive property demand,” the Knight Frank press release reads. “This is due to a pervading mood of market uncertainty as well as fundamental changes in the banking sector.”

So, provided you’re happy to pay the extra 3 percentage points in stamp duty that is now required, prime London property might just be the perfect investment.

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