LONDON (Reuters) - Investors are looking more urgently for buy-to-let properties in Britain ahead of the introduction of a tax hike aimed at cooling one engine of the country’s housing market, a survey showed on Thursday.
The Royal Institution of Chartered Surveyors (RICS) said demand for new properties hit a three-month high last month after finance minister George Osborne announced a higher rate of tax on the purchase of properties for rental purposes that is due to take effect in April.
RICS said the increase in demand helped nudge its monthly house price balance up to +50 from +49 in November, in line with a Reuters poll of economists, although it remained below a 15-month high reached in August.
The survey’s measure of house price expectations reached its highest level since April 2014 and Simon Rubinsohn, RICS’s chief economist, said a further heating up of the housing market was likely before April.
“The deadline for the increase has prompted many investors to bring forward buying decisions this month and contributed to a general increase in buying activity,” Jeremy Leaf, a London-based property valuer, said in a statement issued by RICS.
British housing prices have risen sharply over the past two years, helped by record-low interest rates, a big increase in employment and a shortage of properties on the market.
Those increases have added to the appeal of buy-to-let for investors who are often individuals who hold at most a handful of homes. Buy-to-let accounted for almost one in four house purchases funded by a mortgage last year, a chunk of the market unseen in other big economies.
Overall there are nearly 2 million private landlords in Britain, owning almost 20 percent of homes.
But the government is now trying to put a dampener on the sector as it tries to help get more people on the property ladder, one of its main messages to voters.
Osborne announced in a budget statement in November that buy-to-let investors will have to pay a 3 percentage-point higher rate of stamp duty than residential buyers from April.
Separate figures released on Thursday showed gross mortgage lending for 2015 reached its highest level since 2008 at 220 billion pounds ($311 billion), but there were signs of a slowdown in borrowing by house-buyers going into this year.
Britain’s Council of Mortgage Lenders said its figures, which are not seasonally adjusted, showed gross lending fell slightly in December.
“Upside potential looks limited over the near-term, as the supply of existing and new properties on the market remains weak, and affordability pressures weigh on activity,” CML economist Mohammed Jamei said.
But he said the buy-to-let tax changes were “an added element of uncertainty”, and some RICS members reported that first-time buyers were holding off in the hope of price falls after April.
As well as the planned tax increase, the Bank of England is seeking power to curb lending to the buy-to-let sector.
($1 = 0.7067 pounds)
Editing by Hugh Lawson
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