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Flood of buy-to-let investors in the market pushing up house prices

A shortage of homes for sale is pushing prices up, as buy-to-let investors flood the market ahead of the 3% Stamp Duty surcharge coming into effect on April 1.

The RICS reported this morning that while supply has picked up, it is not enough to meet the surge of demand from buy-to-let investors.

Stock levels rose over January from 44.5 properties in December per branch to 46 but this was still 21% down compared with January a year ago.

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

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.

How 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 point to further rent as well as house price increases.

There was a flurry other market news today, including from the LSL Acadata index, which said average prices across England and Wales have broken through the 290,000 barrier and now stand at 290,642, with a 0.2% rise in January equating to a 700 increase.

National valuations firm e.surv is predicting that there will have been 85,432 house purchase mortgage approvals in January, up over 20% from the 70,837 in December. Using its own data, the firm is forecasting that Januarys approvals will turn out to be the highest for almost nine years, since October 2007. E.surv attributes the rise to a rush on buy-to-let mortgages.

Homelet said that new tenancies agreed have average rents outside London of 740 per month an annual rise of 5.5%. Rents in London are now 104% higher than those outside the capital, at 1,510.
SpareRoom which specialises in bedrooms in flat shares, said rent rises are snowballing, with rents going up four times faster in commuter towns Swindon and Luton than in London. The most expensive room rents are in Reading, averaging 548.

Yet another new index launched today, a buy-to-let survey from Property Partners which marries rental income with capital growth. It says the best total returns for investors are in the east of England, at 13.2%; the lowest are in the north-east, at 4.1%.

London firm Marsh & Parsons reported a 24% rise in applicants in January compared with January a year ago, and an influx of first-time buyers. CEO Peter Rollings said first-time buyers now account for 66% of sales, up from 49% a year ago.

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