LONDON – A rush by home-buyers to beat an end-of-June deadline for a tax break and a shortage of properties on the market helped to push a measure of British house prices to its highest level since 1988 in May, a survey showed on Thursday.
In the latest sign of the heat in the housing market, the Royal Institution of Chartered Surveyors’ price index – which reflects the proportion of surveyors reporting price increases – rose for a fourth month to +83 from +76 in April.
“With the economy performing better than could have been expected even a short while ago and the cost of money still at rock bottom levels, the principal drivers supporting demand will remain in place even after the expiry of the stamp duty holiday,” RICS chief economist Simon Rubinsohn said.
“More challenging is the question of supply, a theme coming back strongly from respondents to the survey.”
As in many other countries, demand for housing in Britain has soared since the coronavirus pandemic led to an increase in working from home and a jump in demand for bigger properties.
RICS said the mismatch between rising new buyer enquires and falling new instructions by sellers was the widest since November 2013.
However, there were signs that more properties would be coming onto the market as appraisals increased and 12-month sales expectations were flat.
British finance minister Rishi Sunak, seeking to soften the COVID-19 hit to the economy, last year exempted the first 500,000 pounds ($707,500) of property purchases in England or Northern Ireland from the stamp duty tax. In March he extended the incentive until the end of June after which there will be a 250,000 pound tax-free allowance until the end of September.
Bank of England Chief Economist Andy Haldane said on Tuesday that Britain’s housing market was “on fire” which would probably aggravate wealth inequalities in the country.
Deputy Governor Dave Ramsden has said there was a “risk that demand gets ahead of supply and that will lead to a more generalised pick-up in inflationary pressure.”
Rubinsohn at RICS said government measures to speed up home-building had not convinced the industry that the shortage of properties available for sale would ease any time soon.
Expectations for prices and rents in five years’ time hit their highest levels since the middle of the last decade.
($1 = 0.7067 pounds)