The number of property transactions jumped dramatically between February and March 2016 before the 3% stamp duty on additional homes came into effect on 1 April, according to new data.
HMRC reports that the number of residential transactions was 74.8% higher in March 2016 compared with February 2016.
Property completions in the UK with a value of £40,000 or more – when stamp duty kicks in – went up from 92,690 in February 2016 to 161,990 in March 2016. A year earlier in March 2015, transactions were just 91,490.
HMRC says this large increase in transactions in March 2016 “is likely to be associated with the introduction of the higher rates on additional properties in April 2016”.
It adds: “Additional non-tax factors may have played a role as well – for example, the Bank of England's plans to curb Buy-to-Let mortgages resulting in a rush to purchase.”
A Treasury spokesperson adds: “House purchases vary widely across the seasons and we always expected some buyers to bring forward their purchases - indeed this was factored into our costing when the [higher stamp duty on additional properties] policy was announced. We expect this to level out in the coming months."
Spike in March mortgage lending
Meanwhile, newly released data from the Council for Mortgage Lenders shows a similar picture. Mortgage lending was 43% higher in March compared to February, and 59% higher than in March 2015.
Commenting on the data, Lucian Cook, Savills head of residential research says: “House sales were 77% higher than the same month last year and 75% higher than February of this year.
“Alongside this, newly released CML data suggests that while borrowing to support this uplift in sales volumes has been significant, there has also been a notable weighting towards cash buyers.
“These figures confirm a frenzy of buying activity before the 1 April introduction of the 3% stamp duty surcharge for additional homes purchases, and underscore the significant distorting effect that stamp duty changes can have on the housing market. This is clearly a one-off event and such volumes are unsustainable against a backdrop of economic uncertainty and the prospect of an increased regulatory environment for buy to let borrowing.
“We’d expect a significant fall in transaction levels in the second quarter of the year to offset the March activity and the stamp duty surcharge to act as a longer-term drag on housing transactions.”
Andrew Bridges, managing director of London estate agent Stirling Ackroyd, adds: “Movement is back on track in the property market – and it’s encouraging to see more selling and buying. But the flurry of the last month could only be a short-term feature – April showers lie ahead….
“After the distraction of stamp duty changes, it’s back to the same challenges for the property market. A lack of supply isn’t helping the situation – pushing many Londoners out of the capital in search of affordable homes.”