The average cost of a house for first-time buyers rose 6.2% in a month following the rush of buy-to-let property investments trying to beat the rising stamp duty deadline, according to property finder Rightmove.
The month of May saw average starter home prices jump by £11,298 to £194,224 ($279,055).
Meanwhile, average “top of ladder” house prices increased to £556,604.
Hotspots for first-time buyers included Croydon, Dartford and Luton, which all had annual price surges of over 18%.
Stamp duty is a tax placed on buyers when they purchase a property in the UK. In November’s Autumn Statement Chancellor George Osborne said second properties would have a 3% stamp duty.
In November’s Autumn Statement, Chancellor George Osborne said starting in April second properties would have a 3% stamp duty. It was seen by many as an attempt to quell the buy-to-let culture that has been partly responsible for exploding house prices in cities like London.
But in its report, Rightmove said the “intense investor activity” reaction to the new stamp duty has in fact “exacerbated the property drought in this sector.”
Here’s a look at how much average starter home prices have risen over the years in the UK:
Miles Shipside, Rightmove director and housing market analyst, said that although there were plenty of first-time buyers eager to get on the property ladder, the market was surprised the price momentum carried on this long after the stamp duty changes:
“Estate agents have perhaps been focused on getting investor sales through to completion before the tax hike, and some may have been surprised by the continuing momentum and scarcity of stock to meet ongoing demand. The net effect is eye-watering increases in asking prices in some towns, and is further stretching first-time buyers’ affordability even though they are competing against fewer buy-to-let investors in the market.”
Business Insider previously reported on how the higher stamp duty was already distorting the property market, with research from estate agent Knight Frank suggesting that buyers had become far more price-sensitive and sellers more willing to lower asking prices.
If Rightmove’s figures are anything to go by, though, that distortion hasn’t materialised for first-time buyers just yet.