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BTL stamp duty triggers price rise chain reaction

BTL stamp duty triggers price rise chain reaction

Category: Mortgages

Updated: 19/04/2016
First Published: 19/04/2016

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

It's official – according to the latest House Price Index from Rightmove, the average price of a property coming onto the market now stands at a new all-time high of £307,033, a hefty £3,843 (1.3%) rise from March. But what has propelled this growth? Well, it seems to be the result of a chain reaction stemming from the Chancellor's Autumn Statement…

Chain reaction

According to the analysis in the report, George Osborne's announcement in November that buy-to-let properties and second homes would become subject to a 3% stamp duty surcharge from April initially kick-started activity in the lower end of the market (two bedrooms or fewer) as landlords rushed to buy suitable properties before the April deadline. This activity then created a chain reaction, stimulating growth at the higher end of the market, as the increased demand for homes of two or fewer bedrooms gave second-steppers the impetus they needed to take the next step up the housing ladder.

"[Second-time buyers] used the heightened demand from investors competing fiercely with first-time buyers to springboard themselves onto the next rung of the housing ladder," explained Miles Shipside of Rightmove. He went on to add that they also took advantage of historically low interest rates, which when joined to the increased demand, created a "heady combination". April's month-on-month rise in house prices is therefore due to increases at the higher end of the market – prices in the second-stepper market in April are up by 0.6% this month (+£1,512), while top-rung properties (four bedroom detached or five or more bedrooms) saw the largest monthly increase of 1.9% (+£9,970).

Meanwhile, prices at the lower end of the market actually fell from March, dropping by 1.4% - something that could spell good news for beleaguered first-time buyers, particularly as landlords' appetite for investment is likely to stabilise now that the new charge is in place. "There's a whole army of aspiring first-time buyers keen to get on the ladder, and they now have a 3% price advantage of the formerly more agile legion of landlords," points out Miles. So, could it be time to take that first step onto the ladder?

Get in on the action and buy your first home!

Now that demand appears to be settling at the bottom of the market, the time could indeed be ripe for you to take the plunge and buy your first home. If you've already got a deposit saved and are ready and raring to go, you can go straight to our mortgage best buys to see if you can find a deal for you. We've selected some mortgages as being ideal for first-time buyers, so make sure you check these out, too.

If your dreams of buying are still a little way off, it's time to get things moving! Saving a decent deposit is crucial but it can also be a big ask. For this reason, make sure you take a look at all the schemes designed for first-time buyers to make your money work as hard as possible: check out our guide on the Help to Buy scheme, and take a look at the new Help to Buy: ISAs, too. These ISAs are specifically for those saving to buy their first home, and they include a free Government top-up of 25% - what's not to like? By saving as much as you can you can give yourself an excellent footing to take that vital first step onto the property ladder, and you could soon be collecting the keys to your first home!

Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.