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UK dip in housing demand doesn't stop relentless price gains

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UK housing demand plunged last month after a surge in the first quarter fueled by landlords looking to get ahead of a punitive tax change, though the slowdown wasn't enough to cool upward pressure on prices.

[LONDON] UK housing demand plunged last month after a surge in the first quarter fueled by landlords looking to get ahead of a punitive tax change, though the slowdown wasn't enough to cool upward pressure on prices.

Two reports on Thursday provided further evidence of how Chancellor of the Exchequer George Osborne's surcharge on buy-to-let properties and second homes, introduced in April, has skewed the market in recent months.

The Royal Institution of Chartered Surveyors said new-buyer enquiries dropped by the most since the financial crisis in 2008, and LSL Property Services said transactions fell by more than half.

For potential homebuyers, there was little sign of relief on prices, largely due to the ongoing shortage of properties for sale. While RICS said concern about the so-called Brexit vote may be contributing to the weaker demand picture, price momentum "remains firm" and supply conditions are "tight." Its price index was at 41 in April, little changed from 42 the previous month.

"Uncertainty is a word that features heavily in the feedback we are receiving," said RICS chief economist Simon Rubinsohn.

"More ominous is the expectation that both prices and rents will head materially higher over medium term despite existing affordability concerns with the supply pipeline continuing to fall short."

LSL estimated in its report that housing transactions totaled about 47,500 last month. That compares with about 97,500 in March, the most since 2007.

"After an exceptional March, there is now a severe shortage of properties on the market, with fierce competition between buyers," it said.

BLOOMBERG