A record number of former rental homes are being put up for sale as landlords rush to avoid a feared increase in Capital Gains Tax (CGT) on property profits in the October budget.
Almost one in five – 18 percent – of properties listed on the Rightmove estate agent portal were previously rented out, which compares to 8 percent in 2010, according to new research.
Rightmove said the race by landlords to sell is greatest in London where nearly a nearly a third – 29 percent – of homes for sale were previously for rent, followed by both Scotland and the North East of England at 19 percent.
Thousands of Britons have rushed to buy, renovate, and rent out properties, encouraged by programmes such as the BBC’s Homes Under the Hammer, on the basis it would provide a new career or financial security in old age.
However, the sector has been hit by rising mortgage rates, higher stamp duty charges and the increased costs required to ensure properties meet energy efficiency standards.
Now Labour is expected to raise Capital Gains Tax (CGT) on the profits made through any property price growth, which could see landlords suffering a tax raid that means there is little or no money to be made in the sector.
Separately, the new government is also proposing to axe no fault evictions, which will make it more difficult for landlords to end tenancies.
Rightmove said: “The Autumn Statement on October 30 is one potential driver of the increase, as it is mooted to include an increase to Capital Gains Tax, which could affect landlords.
“Nearly a fifth (18 percent) of homes currently for sale were previously available on the rental market, compared with 8 percent at this time in 2010.
“However, the trend has been slowly increasing for many months, and the previous five-year average for homes switching from the rental market into the sales market is 14 percent, suggesting that despite the recent spike, we’re seeing an increasing trend rather than a sudden mass exodus of landlords.”
Rightmove argued there needs to be more incentives for landlords to stay in, rather than exit the private rented sector, and continue to invest in more homes for tenants.
Its property expert, Tim Bannister, said: “In recent years it has become more attractive for some landlords to leave the rental sector rather than to continue to invest in it, due to rising costs, taxes, and legislation.
“A healthy private rented sector needs landlord investment to provide tenants with a good choice of homes. We’ve seen over the last few years how the supply and demand imbalance can contribute to rising rents, so there is a worry that without encouragement for landlords to stay in rather than leave the rental sector, it is tenants who will pay the price.
“However, despite the trend of more landlords choosing to sell up, it doesn’t appear to be a mass exodus, and we will need to monitor the longer-term impacts of what happens to the rental supply that is put up for sale.”
Mr Bannister said the arrival of the former rental homes onto the market could have some positive side effects in providing first-time buyers with more choice.
Angharad Trueman, of the estate agency body ARLA Propertymark, said: “The private rented sector plays a crucial role in providing safe and secure housing across the UK. However, current government policy continues to risk squeezing good landlords out of the sector with ever-increasing demands from new and amended legislation, taxes and other financial hurdles, ultimately making finding and affording a home increasingly difficult.
“With the social rented sector at full capacity and the prospect of buying a home out of reach for many, the private rented sector needs to be better sustained and nurtured.
“The UK Government must support investment to make this an attractive option for prospective and current landlords to kickstart the nation’s housing crisis recovery and provide people with much-needed homes.”
Marc von Grundherr, Director of Benham and Reeves in London, said: “The potential equalising of CGT is, of course, a concern for many landlords. If the Labour government was to follow through with it, it could make for a significant increase in the tax paid by the average landlord when the time did come for them to exit the sector. This would be yet another blow to those who provide vital housing stock that is sorely needed within the rental sector, following a string of legislative changes already introduced in recent years to dent profitability.
“Despite this, we’re simply not seeing the exodus of landlords that is so often reported, as despite such changes, buy-to-let remains a strong investment. It’s certainly one that most take with a very long-term view and they expect ups and downs, but generally speaking, the returns are consistently good.”
