(This May 12th story corrects to show index at highest since 1988, not 1970s, in headline, paragraphs 1-2)
LONDON (Reuters) – A measure of British house price inflation hit its highest level since the late 1980s in April as buyers raced to take advantage of an extended tax break just as sellers retreated from the market, a survey showed on Thursday.
The Royal Institution of Chartered Surveyors’ gauge of house prices – which reflects the proportion of surveyors reporting price increases – jumped in April to +75, its highest level since 1988, from +62 in March.
Other indicators have also shown that a surge in the housing market was given fresh momentum by finance minister Rishi Sunak’s announcement on March 3 that he was extending temporarily a cut to a tax on property purchases.
Sunak also announced a new mortgage guarantee scheme for first-time buyers who cannot afford large deposits.
RICS said new buyer demand was positive across every region for the first time this year. But new instructions from owners looking to sell slumped to -4 from +21 in March.
“Housing supply, or more pertinently, the shortfall in supply relative to demand is the key theme coming through loud and clear,” Simon Rubinsohn, RICS’s chief economist, said.
“While it may be simplistic to assume that higher numbers alone can redress the affordability issue, particularly in a low interest rate environment, an uplift in delivery does have a role to play.”
Prime Minister Boris Johnson’s government said on Tuesday it would create a simpler and faster planning system to speed up the construction of new homes, a frequent promise of British governments.
Sunak cut the stamp duty purchase tax last year as part of his emergency measures to help the economy through its coronavirus slump.
Demand for bigger homes after the experience of lockdown has also driven a surge in demand since last spring, a phenomenon seen in other countries too.
RICS said there were signs that the renewed rush to buy homes would ease off when the tax break is scaled back in June and ends completely in September.
Only a net 12% of respondents in its survey thought the sales volumes would rise over the next year.
(Reporting by William Schomberg; Editing by David Milliken)