The stamp-duty stampede to buy second homes led to £17 billion of house sales across the UK over the last two weeks – £5.4 billion of which were in London.
Around £3.4 billion of properties were exchanged yesterday alone, a 141 per cent increase on the same day last year, as solicitors cancelled holidays and worked until midnight to rush through completions before the April 1 deadline.
Estate agents, sellers and buyers delivered documents by hand across London to avoid postal delays.
“In one case, we even rushed down to the Eurostar departure lounge to catch a vendor who had moved out of his property and still not signed his completion statement. Luckily, we caught him 10 minutes before the train departed for Paris,” says Jonathan Hudson, London executive of the National Association of Estate Agents.
Countrywide estimates that second home and buy-to-let purchasers saved £275 million on stamp duty by exchanging before the changes come into effect.
“Second home buyers of all types, particularly investors, developers and holiday home buyers rushed to beat the additional three per cent stamp duty levy, meaning second home buyers made up over half of the market (55 per cent) in March, compared to 20 per cent the same time last year,” says Johnny Morris, research director at Countrywide.
The most dramatic increase in transactions took place in traditional London buy-to-let markets such as the City, Fulham, Clapham and Islington, according to Marc Goldberg, head of sales at Hamptons International. While commuter-belt areas such as Caterham, Harpenden and Windsor were “alive” with extra activity, second-home markets, such as Bath and Cheltenham, also had big rises in sales.
Goldberg says: “There was a perfect storm created, whereby purchasers raced to the line to avoid the extra tax and vendors were hugely motivated to get their sales completed to avoid the possibility of price chipping or pull-outs from purchasers, were they to miss the deadline.”
From today, buy-to-let landlords will have to pay an additional three per cent stamp duty tax on existing rates for all property purchases.
This means that buying an additional London property worth £350,000 will now cost £18,000 in tax, more than double the £7,500 charge for a first-time buyer.

Why the stamp duty increase?

The aim of the tax is to give Generation Rent a better chance of getting on the ladder, by decreasing competition in the starter home market from buy-to-let landlords.
The Government has also promised to use some of the additional tax collected to invest £60 million into ommunities where the impact of second homes is particularly acute.
“Doing away with the exemption for investors with larger property portfolios is fairer and should raise more money which can be ploughed back into housing to help struggling families and the next generation,” says Paula Higgins, co-founder of HomeOwners Alliance.
The stampede of buy-to-let investors to purchase properties in the capital before the stamp duty changes kicked in has led to fierce competition and rising prices in the starter-home market over the past few months.
“It is no surprise that the biggest annual price increases have been in London and the South-East where the supply of homes is under most pressure. Prices in the South-East grew by almost 12 per cent in 12 months, while in London they were up almost 11 per cent,” says Paul Smith, CEO of Haart estate agents.
The good news for first-time buyers is that inflated prices caused by this rush are now expected to settle down.
“First-time buyers will have a little more elbow room to get into the market,” Martyn Baum, president of the National Association of Estate Agents, told the Independent. “But until we’re building more houses to meet demand the problem won’t be solved.”

How will this effect the rental market?

There is a risk that the changes will have a negative effect on people still struggling to get their deposits together because some letting agents believe landlords will increase rents to pass on the extra charges to their tenants.
“A minority of short-term investors – perhaps those thinking of buying a second home both for rental and personal use – may be deterred by the changes – just like a few were warded off when the Chancellor reformed landlord tax relief and the wear-and-tear allowance,” says Charles Holland, head of residential development and investment at Marsh & Parsons.
“However, longer-term, repeat investors, who understand the London market and the rewards it can offer with a bit of patience, will view this as a blip, rather than a bombshell, on an otherwise positive buy-to-let radar.”