The latest residential market survey from the Royal Institution of Chartered Surveyors also says that this means that the near term pressure on prices is intensifying despite a higher level of supply.
Feedback to the survey continues to suggest that the recent increase in demand is due to a rush of buy to let investors looking to buy before the 3% stamp duty surcharge comes into effect in April.
Some 74% of respondents expect there will be an increase in buy to let purchase as supply picked up across UK, most notably in London where the increase has been significant with a net balance of +58% more noting an increase. Elsewhere, sales instructions across the UK were much flatter.
New buyer enquiries rose for the tenth successive month in January, with the pace of growth in enquiries accelerating for a second consecutive report.
As activity in the housing market gathers pace overall, agreed sales have risen over the month at the fastest pace since April 2014. The picture across the UK is mixed but most areas have seen a rise in sales since the start of the year and further increases are expected.
Supply has also gathered pace in the past two months but stock remains low with 46 properties per branch from 44.5, which is still 21% down compared to a year ago.
Even with an improvement in supply, the rush to acquire buy to let property is pushing prices up, with 49% more surveyors reporting prices to have risen in January.
Looking ahead, house prices are projected to rise further over the next 12 months, with 72% more contributors expecting prices to increase rather than fall.
In the lettings market, tenant demand increased once more, with all areas of the UK seeing a rise in interest from prospective tenants during the three months to January and at the same time, landlord instructions were broadly flat.
This extends an uninterrupted run in which supply has failed to keep pace with demand stretching back to 2009. As a result, expectations point to continued rental growth in all parts of the UK both at 12 month and five year time horizons, the report says.
‘How the tax changes planned for the buy to let sector over the next few years plays out remains to be seen, but there are concerns raised in the survey that existing landlords will look to either gradually scale back on their portfolios or exit the market altogether as the more penal regime begins to bite,’ said Simon Rubinsohn, RICS chief economist.
‘Against this backdrop, it is perhaps not surprising that our key indicators point to further rent, as well as house price increases.
Steve Bolton, founder of Platinum Property Partners, pointed out that those investors who succeed in buying ahead of the changes will save a significant amount but as stamp duty is paid upon completion, the clock is ticking for landlords who haven’t yet pinned down an investment property.
‘This short-term boost in activity won’t do anything to alleviate rising property prices. Despite being introduced to help first time buyers, the change is likely to do the opposite as house prices rise in response to strengthened demand,’ he said.
‘Thanks to punitive tax measures planned by the Government, long term buy to let activity is set to fall. Half of surveyors believe the changes to mortgage tax relief will result in an outflow of landlords from the buy to let market, as many will struggle to maintain a profit. Yet not all landlords will suffer: despite insisting the changes will level the playing field for all buyers, the Government has decided to exclude corporate wealthy landlords,’ he explained.
‘This is undemocratic, unfair and we believe unlawful. It is for this reason that I am currently co-leading a legal challenge to overturn the tax changes. We have received considerable support from both individual landlords and industry bodies, making it clear that many landlords agree the tax changes pose a serious threat to the future of the buy to let market,’ he added.
Robert Grigg, managing director of Property Finance at Hampshire Trust Bank, believes that only a concerted effort to increase housing stock can fill the housing gap and begin to moderate prices.
‘SME house builders are key and they need to look at different options for accessing financing and increasing Britain’s housing stock. They have an important role in helping solve Britain’s housing crisis and it’s important we give them the best possible chance to do this,’ he said.
