London’s beleaguered first-time buyers are facing a fresh challenge: an onslaught of investors swooping on property in a rush to beat an increase in stamp duty for buy-to-let homes scheduled for April 1. Sealed bids are back and cash is king if you want to close the deal.
According to Connells estate agents, the number of buy-to-let valuations carried out in December leapt 86 per cent year-on-year after Chancellor George Osborne announced the tax hike in his Autumn Statement.
Buying agent Garrington reports registering 38 per cent more buy-to-let clients so far this month compared with January last year.
The unforeseen impact has been what buying agent Sara Ransom, director of Stacks Property Search, described as a “mini bubble” as investors rush to buy property before the deadline, hiking prices and increasing competition for first-time buyers already struggling with tough mortgage conditions and high deposit demands.
“Most popular are flats and small houses priced between £300,000 and £450,000, which appeal to first-time buyers and investors alike,” says Jeremy Leaf, principal at Jeremy Leaf & Co estate agents. “Consequently, prices for this type of property are hardening.”
Some less-reputable estate agents are said to be ignoring best practice. First-time buyers are telling Homes & Property that agents are finding it so easy to sell property, they fail to attend booked viewings and will only accept sealed bids with no negotiation. Even when prospective buyers do make the highest bid, it is claimed they are often thwarted by investors making last-minute cash offers.
One first-timer told us she put in a “final offer” having been advised by the agent how much to bid to be successful, only to discover the agent had organised more viewings for the next day. She was outbid by someone in the second wave of viewings.
In Surbiton, Amy Claydon, branch manager of Leaders estate agents, said investors are on the hunt for one- and two-bedroom flats priced between £250,000 and £450,000. One recent contest over a flat was won by an investor because, said Claydon, her vendor was impressed by their “urgency to purchase in the next eight weeks, compared to a first-time buyer having no deadline to work to”.
Buying agent Caspar Harvard-Walls, partner at Black Brick, agrees investors’ ability to move quickly is putting them in the driving seat when it comes to sealing a sale — particularly if they can pay cash. “The other issue from the first-time buyer’s perspective is that the agent might prefer to sell to a buy-to-let investor as they could benefit from letting and managing the property on an ongoing basis,” he added.
Another issue is the “greenness” of first-time buyers. Barclay Macfarlane, head of Strutt & Parker’s Fulham branch, said nervy novice buyers sometimes let sales slip through their fingers. “I handled a sale where a cautious first-time buyer was put off a purchase because of some damp that was picked up in a structural survey — an experienced investor was offered the contract and completed the purchase in just 10 days,” he said.
The good news for first-timers is that experts agree the current situation is a temporary one. “The balance of power should shift toward first-time buyers after April, as demand from buy-to-let investors recedes,” said Paul Smith, chief executive of Haart estate agents.
Jonathan Hopper, managing director of Garrington property finders, agrees that buy-to-let demand will “fall away”. “With many existing landlords likely to start selling up in the run-up to next year’s reduction in mortgage tax relief, much more stock will come on to the market,” he added.
And Sam McArdle, investment property buyer at The Buying Solution, believes there might be particular bargains to be had in the new-build sector, where about 60 per cent of homes have historically gone to investors.
“It is most likely that this market will be hit hardest,” he said.
But while this could mean widespread discounting on new homes in the short to medium term, he believes period homes — “where first-time buyers and owner-occupiers living and working in the city are and always will be transacting on” — could be a safer investment for buyers.