The proportion of rental properties entering the sale market has reached a record high, driven by landlords’ concerns about a potential rise in capital gains tax in the upcoming Budget, according to property website Rightmove. Currently, 18% of properties previously listed for sale have been rented, compared with just 8% in 2010.
London has emerged as a major draw, with 29% of homes for sale previously listed as rental properties. Scotland and the North East of England are closely followed, with 19% of homes for sale being rental properties. This trend has increased over recent months, with the average proportion of rental properties moving to the sales market being 14% over the past five years.
While this is a growing trend, it does not yet indicate a “mass exodus of landlords,” said Tim Bannister, a property expert at Rightmove. The total number of new properties entering the market for sale was up 14% compared to last year, when the market was subdued due to high inflation and peak mortgage rates. Compared to 2019, the last year before the pandemic, there was a 3% increase in homes available for sale.
“In recent years, it has become more attractive for some landlords to leave the rental sector rather than continue to invest in it, due to rising costs, taxes and increased regulation,” said Bannister. “We have seen how an imbalance between supply and demand can lead to higher rents, so there are concerns that without incentives for landlords to stay in the rental sector, tenants may ultimately bear the brunt.”
Prime Minister Sir Keir Starmer has warned that the next Budget, due on October 30, will be “painful”, saying those who “bear the brunt will bear the brunt”. Chancellor Rachel Reeves has not ruled out increasing capital gains tax, which is currently levied at rates of between 10% and 28% on assets including second homes and businesses.
Mark von Grundherr, director of estate agency Benham & Reeves, expressed concern about the impact that the capital gains tax increase could have on landlords: “This will be another blow to those who provide a vital housing stock that is much needed in the rental sector, following a series of legislative changes already introduced in recent years to reduce profitability. Despite this, we are simply not seeing landlords fleeing as often suggested, with buy-to-let remaining a strong investment with generally good long-term returns despite the ups and downs.”
The latest data reflects growing concerns among landlords as they weigh the potential financial consequences of a capital gains tax increase. However, the trend has broader implications for the rental market, as reduced availability of rental properties could exacerbate the ongoing imbalance in supply and demand, leading to higher rents for tenants. As the government prepares its budget, industry experts and landlords alike are calling for careful consideration of the potential consequences for the rental market and the wider housing sector.
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