UK home prices surge as investors rush to beat tax changes
UK home prices increased for the ninth straight month in March as investors rushed to purchase property before a tax increase, according to Nationwide Building Society
Agents said the price growth would slow and predicted that the pain will be felt much more in the regions than in central London.
UK Chancellor of the Exchequer George Osborne is raising the transaction tax by three percentage points for landlords and buyers of additional homes. The new tax became effective April 1.
As a result, buyers rushed into the market before the tax kicked in. The average price of a home rose 0.8 per cent from February to £200,251, ) Nationwide Building Society said in a statement on Friday. The annual rate of growth surged to 5.7 per cent, the strongest in more than a year. With demand also being boosted by low borrowing costs, the Bank of England has warned that risks in the property market are rising.
“The pace of house price growth may moderate again once the stamp duty changes take effect in April,” Nationwide chief economist Robert Gardner said in a statement. “However, it is possible that the recent pattern of strong employment growth, rising real earnings, low borrowing costs and constrained supply will keep the demand/supply balance tilted in favour of sellers and maintain pressure on price growth.”
Osborne’s rationale for boosting the transaction tax for landlords and purchasers of additional homes in the recent Budget was that they may be pricing first-time buyers out of the market.
“Overall, the Budget was not bad news for individual property investors,” said Naomi Heaton, chief executive of residential funds and assets manager London Central Portfolio. “ It will only be a matter of time before investors assimilate it into the buying equation, particularly in London.
“The pain will be felt much more in the regions [than in Prime Central London] where the three per cent additional stamp duty rise represents a far more significant increase on the existing Stamp Duty Land Tax rate.
For corporate investors, the application of the 3 per cent additional stamp duty was unexpected although there will be some sympathy that the playing field was levelled , she said, adding that many companies will be unaffected if they are simultaneously purchasing multiple properties