March saw a sharp drop in buy-to-let valuations activity as landlords ran out of time to beat the stamp duty surcharge on 1 April.
Valuation activity dropped 27% compared to February and 36% on March last year, according to new figures from Connells Survey & Valuation.
Yet March still saw healthy year-on-year growth of 8% as first-time buyers picked up the slack, Connells said.
Corporate services director John Bagshaw said: “The buy-to-let market has endured a turbulent month but we expect this to be a short-term tumble, with investors adopting the standard-kneejerk reaction to legislative changes by proceeding cautiously.
“Many aspiring buy-to-let landlords may have realised that if they initiated a buy-to-let mortgage application in March, they would be unable to get it processed in time to beat the 1 April deadline.
“Instead, they may be taking their time in order to factor the changes into their financial planning.”
Bagshaw said the fundamentals of buy-to-let remain unaffected by the new 3% levy.
“Home values continue to increase while high-LTV lending remains accessible, meaning investors can more easily take advantage of the capital returns on offer from the property market.
“Equally, demand for rental property remains strong and potential yields remain appealingly high.
“As the year progresses, these benefits will be the silver lining that outshines the short-term cloud in the buy-to-let sector created by the stamp duty hike.”
Total valuations in March rose 21% compared to February and 8% year-on-year, primarily due to strong first-time buyer activity.
The number of valuations carried out for those taking their first step onto the property ladder increased 41% compared to February and 15% compared to March 2015, counteracting the dip in buy-to-let activity.