A prominent agent who advises many landlord clients says the Capital Gains Tax cuts announced in the Budget are too small to incentivise people to sell
Jo Eccles, who runs the London-focused buying and selling agency Eccord, says: “The Capital Gains Tax reduction announced in the Budget is unlikely to have a major impact on landlords’ decision making. The value of most landlords’ properties who bought within the past 10 years, since the peak of 2014, is actually less than what they paid.
“In a recent property tour for an apartment buyer, 80% of the properties we showed them were pied a terres or buy to let investments which owners wanted to dispose of.
“And in nearly all cases, the owners were prepared to accept the same price they had purchased it for – or less. Therefore, there are no capital gains on the property and Jeremy Hunt’s tax break will be unlikely to impact them.
“The bigger driver for landlords to sell remains higher mortgage interest rates and the inability to offset them against their rental income. Those who don’t have the cash resources to pay down their mortgages are seeking a sale ahead of a higher rate mortgage renewal, as the rental yield often isn’t high enough to cover the higher mortgage and other outgoings.”
In the Budget, Chancellor Hunt announced a drop in the higher rate of. got from 28 to 24 per cent.
Eccles says that far from reducing in size, London’s core rental market of flats is increasing. This is because of the relatively subdued sales market
“Low transaction volumes and underwhelming sales values are leading more sellers to explore the rental market as ‘unintended landlords’” she says.
“Landlords … are facing a disjointed market, with certain properties letting quickly and others gaining little traction. Rents are stable, but landlords are having to be responsive to price changes if needed, to reduce the risk of void periods.
“We continue to see a general consolidation of personal affairs across the property sector, with owners keen to sell properties which are surplus to requirements.
“The timely disposal of rental properties is a recurring conversation with our landlords as tenancies conclude and they take the opportunity to test the sales market.
“However, many haven’t achieved the capital growth they were hoping to achieve, as values remain largely below the 2014 peak, and so are returning to the rental market for the time being.”
This article is taken from Landlord Today