The latest report from the CML has highlighted the major impact of the increased stamp duty surcharge on buy-to-let transactions.
Analysis of Bank of England and HM Revenue and Customs data indicates that on a non-seasonally adjusted basis, transactions totalled 162,000 in March. The CML said it normally expects this figure to be around 100,000, implying 60% of the increase was down to the alterations.
A 60,000 rise in property transactions in comparison to the typical baseline was, ‘larger than expected,’ according to the firm. In fact, the CML went as far as to say the increase in transactions, ‘appears to have been larger than anything we’ve seen before that’s associated with a tax change.’
Further analysis shows that cash-funded transactions rose almost as much as those with a mortgage. This is despite cash transactions typically making up just 35% of the market.
Estimates from the CML suggest that an extra 32,000 mortgaged transactions took place during March, meaning that cash transactions rose by roughly 28,000.
Of the four categories assessed by the CML, the largest proportionate increase was found in buy-to-let purchases, which increased by 180% from February. Next came cash transactions, showing a rise of more than 80%. Home-mover transactions rose by 60% and first-time buyers purchases increased by 28% in comparison to February.
Stamp Duty increase lead to 180% hike in transactions
CML analyst Mohammed Jamel noted, ‘alongside the growth in transactions, there was a corresponding jump in lending. Our initial estimate was of extra lending of between £4 and £5 billion, with the data from the Bank of England showing the actual figure was at the higher end of this figure.’
‘We’ve now revised our initial estimate of lending in March to £26.2 billion, which was 46% higher than February. This implies just over £5bn extra lending than would otherwise have been the case, which roughly tallies with the 32,000 or so extra mortgaged transactions, given an average loan of about £150,000 per mortgaged transaction,’ Jamel continued.
Concluding, he stated that, ‘our understanding is that approved applications that were in the pipeline were squeezed to complete before the stamp duty deadline, as opposed to seeing a big increase in new applications being approved in March. As a result, it is very likely that we will see lower activity levels in the next few months, which ties in with early data we have collected for April, showing a marked drop-off in lending.’