London house prices soar and rest of UK follows suit

UK house-price growth accelerated to the fastest pace in a year as stamp-duty changes prompted a surge in demand from landlords in the first quarter.

Values rose an annual 9 per cent in March, up from 7.6 per cent the previous month, the office for national statistics said on Tuesday. That is the biggest increase since March 2015. In London, prices jumped 13 per cent, the most since December 2014.

The upward momentum adds to evidence that investors rushed to buy properties before a tax increase took effect in April. The chancellor of the exchequer, or finance minister, George Osborne introduced a surcharge on second homes and buy-to-let properties amid fears landlords were exacerbating a lack of supply. The measures have skewed the housing market, while the United Kingdom's upcoming referendum on EU membership is clouding the outlook further.

“Prices were clearly supported by buy-to-let investors and second home buyers,” said Howard Archer, an economist at IHS in London. While prices may take a downward turn in the next few months, “high employment, decent purchasing power and low interest rates should underpin house-buyer interest once the referendum fog has disappeared”. he said.

Separate figures from the Council of Mortgage Lenders showed that mortgage loans gained 28 per cent from a year earlier in March, while the number of buy-to-let mortgages more than tripled.

Recent surveys have shown that house prices continued to rise at the start of this quarter. The property website operator Rightmove said that the demand surge in the first quarter has left a shortage of properties for sale, pushing out first-time buyers. Asking prices increased 0.4 per cent in May from April and grew 7.8 per cent on the year, it said on Monday.

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