Close-up and side hope of classic Georgian buildings in London, England, UK.
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LONDON — London proprietors are selling up their buy-to-let properties at record rates as anticipated tax hikes from the U.K. Labour government add further demand to the once lucrative investment sector.
Almost one-third (29%) of homes currently for sale in the capital were formerly rented out, data published on Thursday by property portal Rightmove showed.
The spike mirrors a wider uptick in rental attribute sales across the U.K., where 18% of all nationwide listings were previously tenanted, according to Rightmove.
Rightmove mentioned it was not yet clear that the figures pointed to a “mass exodus” by landlords, but rather to a gradual decline in the appeal of the buy-to-let sector. The foregoing five-year average of former rental listings for sale was 14%, while the proportion of ex-rental properties on the market in 2010 was 8%, Rightmove affirmed.
It highlighted that it expected tax hikes in Finance Minister Rachel Reeve’s forthcoming Oct. 30 Autumn Statement — grouping a possible increase in Capital Gains Tax (CGT) — to become a “potential driver” of the increased sales.
Prime Minister Keir Starmer has already advised that the October budget would be “painful” after the government said it discovered a £22 billion ($29 billion) rent in the public finances, when it took office in July.
Reeves has refused to be pressed on the contents of her spending plan, effectual CNBC in July that such matters are “rightly for the budget.”
Speculation has mounted around tax hikes, including an squaring of CGT, which would bring it in line with the tiered rates at which income tax is levied. Currently, buy-to-let innkeepers have to pay a flat rate — 18% for basic-rate taxpayers and 28% for higher-rate taxpayers — on the sale of their property.
Marc von Grundherr, chief honcho of London-based real estate agency Benham and Reeves, said that the potential equalizing of CGT was “of course” a concern for multitudinous 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 Boniface when the time did come for them to exit the sector,” he said.
“This would be yet another blow to those who support vital housing stock that is sorely needed within the rental sector, following a string of legislative varieties already introduced in recent years to dent profitability.”
The U.K. buy-to-let market — once a key area of wealth creation — has approach under pressure over recent years, following the repeal of several incentives, including tax relief for property investors. The up to date cost-of-living crisis and higher interest rates have also reduced affordability for landlords, with the number of new buy-to-let mortgage approvals cringe in 2023 for the first time since they were introduced nearly three decades ago.
It is estimated that the look at of investment properties and second homes is now down 8.7% versus three years ago, according to Savills.
That clock on amid a wider downturn in the property market that is now seeing some relief. Easing borrowing costs run down the Bank of England’s August rate cut have sparked a boom in homebuyer activity.
The total number of new properties on the sell is currently up 14% versus 2023, according to Rightmove.
Rightmove itself emerged as a possible takeover target for Rupert Murdoch-owned trusted estate company REA Group, which said Monday that it saw growth opportunities in the U.K. market. Still, Rightmove fortune expert Tim Bannister said that the recovery in real estate might not be felt across the board, and warned that a more distant clampdown on buy-to-let investors could exacerbate existing affordability issues in the rental market.
“A healthy private ripped sector needs landlord investment to provide tenants with a good choice of homes,” he said.
“We’ve seen finished the last few years how the supply and demand imbalance can contribute to rising rents, so there is a worry that without animating for landlords to stay in rather than leave the rental sector, it is tenants who will pay the price,” he added.