UK house prices rose 0.3% on the month in January, a slower pace of increase than the 0.8% month-on-month price rise reported in December 2015, according to data from lender Nationwide.
That further, albeit, slower rise in house prices is in line with other leading indicators of activity reported in the round of December data. This activity also supports expectations that buy-to-let investors are choosing to make property purchases ahead of April when the latest changes to Stamp Duty will be introduced.
Chancellor of the Exchequer George Osborne announced in his 2015 autumn statement that those who purchased a property as an investment would be subject to an additional 3% stamp duty tax compared with other purchasers buying the same property to live in as their main dwelling.
The December survey from the Royal Institution of Chartered surveyors published a few weeks ago concurs with this view. It showed that not only were house prices rising, but demand continued to outpace availability for the tenth month out of 12 over the course of 2015.
“The housing market has experienced an unusually buoyant December,” said the RICS chief economist Simon Rubinsohn. “Those in the industry have been speculating that this is the result of the Chancellor’s announcement last November. Potential buy-to-let investors are looking to pick up properties before the increased stamp duty levy comes into force next April. If that is the case, then we can expect to see the housing market heating up further over the next few months,” Mr. Rubinsohn said in the RICS press release.
When demand and competition for property begins to rise, prices tend to follow. This means that UK house prices will likely continue to increase over the next few months. It also suggests that property price growth and activity could begin to slow as we move into the summer.
Or maybe not.
Because, although Buy-To-Let investors may collectively choose to become less active in the market, an ongoing lack of residential property being built and advertised for sale at a time when demand remains strong is likely to underpin house prices and activity for much of the year, according to economists.
The latest UK Markit Construction Purchasing Managers Index for January showed residential house building grew at the slowest rate for two-and-a-half years. At the same time property transactions have been rising, lifted not only by BTL investors, but also first-time buyers and other property movers. The Council of Mortgage Lenders says this is evidence to suggest property prices and activity will remain buoyant for the course of the year.
All the recent data, then, suggest that even if BTL investor activity does slowdown from April onwards, the lack of property for sale, ongoing low mortgage interest rates and a still improving labour market will combine to keep the UK housing market active and prices moving upwards.