Landlord exodus expected in London
As rents in London sees its most extreme increases, a landlord exodus in the capital may be likely as some seem to be in a rush to sell ahead of tax and compliance changes. The number of former rental homes being listed for sale in London has seen a spike, TwentyCi reports.
Around a fifth of homes newly listed for sale in inner London had been available to rent in the last decade, the property data analytics firm has found. Over 8,000 ex-rental properties were listed for sale in London in July 2024 compared to 4,055 during the same period last year. In July 2019, only 2,664 homes on the market had previously been rental properties.
“Aside from mortgage increases, landlords have growing fears around a possible rise in Capital Gains Tax and compliance demands for energy efficiencies,” said Colin Bradshaw, chief executive officer of TwentyCi. “Overall, the rental sector has become much more expensive and unpredictable for landlords over the last decade.”
Rumours had been circulating before the Autumn Budget that the new government would impose a higher rate of Capital Gains Tax (CGT), which is levied on the profits when an asset is disposed of. This includes ween a second residential property is sold.
At the moment, there is a £3,000 tax-free allowance on capital gains before an 18% rate of tax if they are a basic rate taxpayer or 24% for higher rate taxpayers. Landlords had a tax-free allowance in the 2020/21 tax year which was cut to £6,000 this year. The higher rate was also cut from 28% to 24% in March 2024.
There is speculation that Chancellor Rachel Reeves could return these rates to being in line with income tax levels. It would mean that a landlord in higher tax brackets would be taxed on a greater percentage of their profits if they were to sell up.
