Demand for homes surged to a 12-year high in February as buy-to-let investors rushed to beat a stamp duty hike, estate agents have reported.
More than eight in 10 (85%) estate agents reported an increase in the number of investors flooding the market ahead of a three percentage point stamp duty increase on the purchase of second homes, which starts on April 1.
The National Association of Estate Agents (NAEA), which released the report, said the added pressure from the buy-to-let market meant demand for housing was at the highest level for 12 years in February.
There were signs that the extra competition from buy-to-let investors has squeezed some first-time buyers out of the market. House sellers may see buy-to-let investors as a more attractive proposition than people trying to get on the property ladder as they often have more ready cash and are less reliant on raising finance from a mortgage.
An average of 463 house hunters were registered per member branch across the UK - marking the highest figure since August 2004 when 582 were registered per branch typically. In January when estate agents had reported 453 house hunters were registered per branch on average.
The number of properties available per branch increased from 33 in January to 35 in February, as the number of sales agreed per branch in February increased too. There were an average nine sales completed in February, back to the level seen in October 2015 and a rise from eight sales agreed per branch in January.
But only one in four (24%) sales made in February were made to first time buyers - a decrease of five percentage points from January.
Mark Hayward, managing director of the NAEA, said: "The mounting pressure and increased demand for housing has meant that first-time buyers have had to compete with landlords for property and as a result they have lost out.
"We would like to say that come April things will look better for first time buyers. Schemes like the Help to Buy Isa, Help to Buy scheme and the new Lifetime Isa all sound great on paper, and there's no doubt that some young people will definitely benefit from them.
"The crux of the problem though is that there is still a huge issue with supply and until we build more homes, and crucially the right sort of homes, we cannot fool ourselves into thinking we are doing enough to help people buy their own home."
The new rates of stamp duty land tax (SDLT) will apply to purchases of additional residential properties in England, Wales and Northern Ireland.
In the recent Budget, the Government confirmed that big investors will not escape the stamp duty hike, despite their contribution to the housing supply.
A consultation had considered whether it may be appropriate to have an exemption for investors buying at least 15 residential properties, but it was decided that there will be no exemption for significant property investors.
However, people who temporarily end up with two properties due to difficult circumstances, such as retirees downsizing into a smaller property but struggling to sell their original home, will be given some extra breathing space from the new stamp duty rate.
The Government decided that purchasers will have 36 months rather than the originally proposed 18 months to claim a stamp duty refund, in the event that there is a period of overlap or a gap in ownership of a main residence.
In Scotland, SDLT has been replaced by the land and buildings transaction tax (LBTT).
A hike in this tax is also coming into force in Scotland on the purchase of additional homes such as second homes or buy-to-let properties from April 1, with the aim of avoiding any potential distortions to the housing market in Scotland that could have come from the stamp duty hike for investors in the rest of the UK.