The proportion of former rental properties entering the sales market has reached a record high, driven by landlords’ concerns over a potential rise in capital gains tax (CGT) in the forthcoming budget, according to property website Rightmove. Currently, 18% of properties for sale were previously rented out, compared to just 8% in 2010.
London has emerged as a key hotspot, with 29% of homes on the market previously listed as rental properties. Scotland and the northeast of England follow closely behind, with 19% of homes for sale having been rental properties. The trend has been building over the past months, with the average proportion of rental properties moving to the sales market at 14% over the past five years.
Tim Bannister, a property expert at Rightmove, noted that while the shift represents a growing trend, it does not yet indicate a “mass exodus of landlords.” The overall number of new properties entering the sales market has increased by 14% compared to a year ago, when the market was subdued due to high inflation and peak mortgage rates. Compared with 2019, the last pre-pandemic year, there has been 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 to continue investing in it, due to rising costs, taxes, and increasing legislation,” Bannister said. “We’ve seen how the supply and demand imbalance can drive up rents, so there is concern that without incentives for landlords to remain in the rental sector, tenants could ultimately bear the brunt.”
Prime Minister Sir Keir Starmer has warned that the upcoming budget, scheduled for October 30, will be “painful,” indicating that those with “the broadest shoulders should bear the heaviest burden.” Chancellor Rachel Reeves has not ruled out an increase in CGT, which is currently levied at rates between 10% and 28% on assets including second homes and businesses.
Marc von Grundherr, Director of estate agent Benham & Reeves, expressed concern over the impact a CGT hike could have on landlords: “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 buy-to-let remains a strong investment with generally good long-term returns despite the ups and downs.”
The latest data reflects a growing apprehension among landlords as they weigh the potential financial implications of a CGT increase. However, the trend has broader implications for the rental market, as reduced availability of rental properties could exacerbate the ongoing supply and demand imbalance, further driving up rents for tenants. As the government prepares its budget, industry experts and landlords alike are calling for careful consideration of the potential consequences on the rental market and the wider housing sector.
