Buy-to-let investors flood market, pushing house prices up says RICS

A shortage of homes is pushing prices up as buy-to-let investors flood the market, according to the latest Royal Institution of Chartered Surveyors (RICS) UK Residential Market Survey.

The results from January’s survey, released on Thursday, showed that 74% of respondents expect there to be an increase in buy-to-let purchases, mainly due to the 3% Stamp Duty surcharge which comes into effect in April.

Around 49% more surveyors also reported prices have risen in January, and house prices are projected to rise further over the next twelve months, with 72% more contributors expecting prices to increase rather than fall.

The survey also showed that while the UK housing market has seen a pick-up in supply for only the third time in 18 months, it is not enough to meet the surge in demand.

While supply has gathered pace in the last two months, stock remains low with 46 properties per branch – up from 44.5 but still down 21% compared to a year ago.

Meanwhile supply in London increased significantly in January, with 58% more respondents noting an increase, but sales instructions elsewhere across the UK were much flatter.

In the lettings market, tenant demand increased again with all areas of the UK seeing a rise in interest from prospective tenants during the three months to January while landlord instructions were broadly flat.

It extends an uninterrupted run since 2009 where supply has failed to keep pace with demand.

“The rise in new instructions in January, although modest, is very welcome,” said RICS chief economist Simon Rubinsohn.

“However with buy to let investors rushing to get into the market ahead of the stamp duty hike, the near term pressure on prices is if anything intensifying despite a higher level of supply.”

Rubinsohn said the way the tax changes planned for the buy-to-let sector over the next few years play out remains to be seen.

“But there are concerns raised in the survey that some 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.

“Against this backdrop, it is perhaps not surprising that the key RICS indicators points to further rent (as well as house price) increases.”