CGT rise drives landlords from BTL market
Just 42 per cent of landlords think now is a good time to invest, dropping from 48 per cent three months ago, data from the quarterly landlord sentiment survey by LSL Property Services has shown.
The introduction of a higher capital gains tax (CGT) is a driving factor behind this, LSL claimed.
The survey found that the average property investor owns three properties, and has seen capital gains of £152,219 since they bought them. If they sold their properties today, they would face a capital gains tax bill of £39,793, an increase of £11,369 from the previous tax regime.
David Brown, managing director of LSL corporate client department said the increased CGT hit many property investors’ confidence and this trend will continue over the next few years.
He said: "But the hike was not as steep as first feared, and we’re already seeing landlords adapt their disposal strategies for their portfolios, planning to spread sales over several tax years to mitigate their exposure to the higher rate."
One third of landlords polled are likely to expand their portfolio in the next 12 months. But the number of landlords considering leaving the sector has risen by six per cent in the past three months to 19 per cent.
Mr Brown said that rising rents and house prices offered landlords bumper annual returns at the start of the year, and this was reflected in the surge in confidence in the first three months of this year.
He said: "This has fallen slightly following the slowdown in house prices and the capital gains tax hike. But the vast majority of landlords remain committed to buy-to-let.
"Attractive rents – just £12 per month shy of their peak - and increasing yields underpin their confidence in property investment."
