False economy and what now for house prices? – Katar Investments


False economy and what now for house prices?

Have we seen peak buy-to-let? The great rush to beat the stamp duty hike was laid bare by mortgage statistics this week.

Buy-to-let mortgages rocketed 142 per cent in March compared to a year earlier, the CML revealed, as landlords staged a last-minute dash to snap up properties before tax bills tripled in many cases.

Yet, this doesn’t tell the real story, as that figure covered all buy-to-let mortgages.

Drill down and restrict the figures to just buy-to-let mortgages for home purchases and more than three times as many were taken out in March this year than last.

Buy-to-let purchase mortgages were up an astonishing 226 per cent, from 8,800 in March 2015 to 28,700 in March 2016.

And the monthly amount dished out for these rose by an astonishing 290 per cent from £1.1billion in March 2015 to £4.3billion in March 2016.

Quarterly figures show that the landlord stampede in the first three months of 2016 pushed buy-to-let purchase mortgages back up to their 2007 pre-financial crisis levels

The question, of course, is what next?

From the numbers it would seem abundantly clear to me that a big chunk of people who wanted to either get into buy-to-let, or snap up another one, pulled forward purchases.

In fact, just under twice as many bought a buy-to-let between January and March this year as last.

Arguably this might have proved something of a false economy. You can’t definitely prove it from the CML stats but they indicate that all that extra demand pushed up prices.

In the first three months of 2016 there were 48,800 buy-to-let purchase mortgages worth £7.2billion – that works out at an average of £147,540.

For the same period in 2015 there were 26,800 buy-to-let purchase mortgages worth £3.3billion – an average of £123,134.

So between January and March this year buy-to-let property investors borrowed an extra £24,406 on average. That’s up 20 per cent on a year earlier, while house prices are up 9 per cent over the same period, according to the ONS.

Run the numbers with an average deposit level of 25 per cent and the rise also outstrips the extra £6,000 stamp duty bill on such property costing an average of £197,000.