The distortion to the housing market caused by the new Stamp Duty charge was larger than anything seen before associated with a tax change.

The Council of Mortgage Lenders has become the latest body to warn of a likely slowdown in the housing market because of the Stamp Duty ‘stampede’ in the weeks leading up to April 1.

In an article under the title ‘So, that worked well…’, economist Mohammad Jamei discusses the scale of the market distortion caused by the Government’s introduction of a 3% surcharge for buyers of second homes.

He says of the 162,000 transactions in March, that based on recent data, a total of just over 100,000 sales might have been expected – implying that a large chunk of the increase in transactions was down to the Stamp Duty change.

Many of the transactions were in cash – indeed, the rise in the number of cash transactions were nearly as much as the rise in mortgage transactions.

The CML estimates that an extra 32,000 mortgaged transactions took place in March, compared with 28,000 cash transactions.

Buy-to-let purchases rose sharply, up 180% from February. Cash transactions were up by over 80%, while transactions by home movers rose 80%, and first-time buyer purchases were up 28% compared with February.

The CML said that that buying deadlines were brought forward, and that “as a result it is very likely that we will see lower activity levels in the next few months, which ties in with early data we have collected to April, showing a marked drop-off in lending.

“We estimate that there will be an average of 10,000 fewer mortgage transactions in April, May and June, which would largely offset the increase in mortgaged transactions that came through in March.

The article ends: “And just as the dust begins to settle on this stamp duty change, we’re likely to see further distortion caused by June’s EU referendum, which is already weighing on sentiment and affecting commercial property transactions and the wider economy.

“It is likely to feed into the residential property market, too. It may be that we have a housing market of two halves in 2016 – but we’ll just have to wait and see.”