Number of former rental properties for sale rises as CGT changes loom

The number of properties for sale at the moment which were previously rented homes has increased significantly, suggesting that more landlords are exiting the market, it has been claimed.

Rightmove, which has issued the data, says it reckons the rush to sell is in part due to a likely increase in capital gains tax within the Chancellor’s budget next month.

The portal says 18% of properties now for sale were previously on the rental market, compared with 8% in 2010 although this figure rises to a jaw-dropping 29% in London although Scotland and the North East are also hotspots.

But it has been careful to highlight that this is not an exodus but instead an increase. The long-term average number of former rental homes for sale across the UK is 14% so the new figures is a 4% rise.

Nevertheless, Rightmove says that there need to be incentives for landlords to stay and continue to invest in private rented sector properties to provide a healthy market for tenants.

Taxes

Tim Bannister, the portal’s property expert, says: “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.”

Industry reaction

Marc von Grundherr, Director of big lettings firm Benham and Reeves says: “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 in general the returns are consistently good.”

Chris Norris, Policy Director for the National Residential Landlords Association, says: “Today’s data will be a serious concern for all those renters struggling to find somewhere to call home.  With demand already massively outstripping supply, Rightmove suggests the situation is set to get worse.

“Every rental home that is sold simply exacerbates the imbalance between supply and demand. Whilst some of these properties will inevitably end up on the owner-occupied market, that will be of little comfort to those households struggling to access quality housing.

“What we need is a housing strategy that recognises the need for more of every type of property, including high quality homes for private rent. That’s why the Budget needs to announce pro-growth tax plans to meet the needs of renters across the country.”