Investors selling a buy to let so far in 2023 made gains which were 10.1 per cent lower than those who sold last year, says lettings agency Hamptons.
Overall, six per cent of landlords in England and Wales sold their BTL this year for less than they bought it for, up from five per cent last year. Some 19 per cent of investors selling a flat sold for less than they paid.
In detail Hamptons says that far this year the average landlord in England and Wales sold their BTL for £94,800 more than they initially paid , having owned it for an average of 11 years. This gain Is down 10.1 per cent from a record £105,300 last year.
In comparison to 2016, investor profits have risen fastest and furthest in the north of the country says Hamptons.
Investors in the North East recorded a 176 per cent increase in the average capital gain on the sale of a BTL between 2016 and 2023, with all three northern regions boasting a 50 per cent-plus increase in gains since 2016.
House prices in Northern England have risen the most over the last seven years, while in parts of London and the South East prices have remained static.
Even so, higher average prices mean that in cash terms London landlords who sold up still saw the largest gross capital gains.
So far this year this figure stood at £308,500. However, this number is down 3.4 per cent from £319,300 last year and 15 per cent down from a peak of £365,000 in 2016 due to slower price growth.
There are just three regions where the average investor profit is still at six figures - London, South East and East.
The South West fell off that list this year when the average capital gain shrank from £105,000 in 2022 to £95,700 today.
And Hamptons warns that it is likely that the amount made by landlords selling up will fall further on the back of both lower prices being achieved and a rising proportion of sellers having bought later in the house price cycle.
Aneisha Beveridge, head of research at Hamptons, says: “As house prices start to slip back, there are signs that the landlords looking to sell today may have missed the top of the market. Rather, some investors are consoling themselves with record-breaking rental growth which is slowly ironing out the arithmetic for landlords.
“Lower house prices and higher rents will combine to shore up the rental market as more landlords hold off on the decision to sell. On the flip side, this will also weigh down on the government’s capital gains receipts handed over by landlords selling up over the next few years.”
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One has to bear in mind that there are interested parties when it comes to the issue of selling or continuing to let after the enactment of the Renters Reform legislation.
Interested parties include letting agents. In various webinars since the introduction of the Renters Reform white paper, agents have tended to downplay the monumental consequences for landlords of the enactment of that legislation. Agents have a vested interest in continuing to receive a very large commission from landlords letting their properties.
We also have people from the Government saying good landlords have nothing to fear. Good landlords have a great deal to fear; they are losing control of their properties. They can only get them back if they want to sell etc. That is a ridiculous state of affairs.
The proposed legislation means good tenants also have a great deal to fear whereas currently good tenants have nothing to fear.
Only rogue tenants will benefit from Gove 's lunacy but since they are the ones that keep Shelter etc in business, Shelter etc want the new legislation and decent tenants will suffer.
Agree Ellie, particularly the last paragraph. I am truly scared. Ones' property is longer their own. The state have sold off their properties and have decided to control ours' without the hassle of management and ownership!
Polly and Gove have of course said 'good landlords have nothing to fear'. Whilst there will be some truth in that with a good landlord and good tenant relationship this will all go catastrophically wrong in a bad relationship.
I have noticed the letting agents downplaying it etc too. For me the RRB is one massive disaster.
Spot on Nick!
Capital growth will continue over time and many landlords selling up will rue the day they sold in time to come. There is a reason institutions such Lloyds Bank and John Lewis are moving in to the sector... and it is not for moral virtue!
It really depends on a landlords age and what they want from their remaining life, small landlords with 2 properties will never think the same as Lloyds and others, of course they won’t. My properties will be used as a large capital amount to help my children, the rents I receive simply pay off my mortgages, I don’t need the monthly income, many are like me. They were an investment, not a salary.
Capital growth will not continue if you have sitting tenants. It seems possible that the Section 8 grounds including the right to receive your property back empty if you wish to sell, may become discretionary, rather than mandatory, in the future.
Banks will always ensure vacant possession is easily achieved if mortgages are in arrears so selling up will always lead to eviction.
Even the Scottish government hasn't dared to make this a discretionary condition.
The lefties are taking over. Property prices in general may increase, but to get a market price you need VP. Getting tenants' out is going to be far harder. Not sure when a landlord is selling if counter-claims can be made? Like the tenant has nowhere else to go, has autism/Asperger's/ADHD/is having years of gender reassignment treatment/Asthma. Even the invaders on the Bibby Stockholm have been "retraumatised" due to legionella being present and being moved off off the barge.
Common sense and fairness is increasingly less likely to prevail. I am a big fan of property, but better put it into your own home and have it CGT free and less hassle.
It may be a good idea to invest a lot more money in your own home; of course, there would then not be an income from the money. The other issue, is that Labour has apparently considered, in the past, charging capital gains tax on the sale of your main residence. Capital gains tax is levied on main homes in France and Germany.
In the past landlords had to sell their properties with sitting tenants whether or not they had a mortgage on them.
I think they have considered it. But it would be fatal at election time I believe. I do think about moving myself with my BTL money just to lock in the gains!!!
Could Labour just introduce capital gains tax on main homes in a budget after they have taken power?
Ellie CGT is not payable on a main residence in France. A quick look on Google shows:
Your principal home is exempt from capital gains tax in France. This is regardless of what you do with the proceeds, but it must be your main home at the time of sale.
On second homes, holiday homes, rental properties, etc the French system is vastly superior to ours:
If you have owned your second home: Up to five years: there is no allowance, and you will be subject to the full 19% capital gains tax rate. Between six and 21 years: there is a progressive allowance increased by 6% each year up to a maximum of 96%.
I found the information about capital gains tax being levied on main homes in France and Germany from an old Evening Standard article entitled "Labour '40% house profits tax'"
Perhaps the situation has changed or perhaps the Evening Standard information was incorrect.
In Germany you have to have lived in a property for two years as your main residence for it to be exempt from capital gains tax.
And Jo, don't forget that second homes are also subject to social charges in France. Take a look at French Entree "Understanding French Capital Gains Tax: What You Need to Know" so I wouldn't say that their system was vastly superior at all.
Sweden have CGT on main residences. I believe it's 22%.
I suppose the more left wing an administration, the more likely they are to consider imposing capital gains tax on main residences - although it seems an odd idea because growing families would need to buy a more expensive house, and should not be penalised by tax at the same time as having to find more money to pay for the main residence. As it is, there is stamp duty to pay on the purchase price above the £250,000 allowance.
Ellie - the system in France is different. Some bits are better, some worse. CGT tapers to nothing after 22 years, Social charges are a relatively new component. It didn't exist as a separate charge when I bought my house nearly 20 years ago but does now and disappears after 30 years of ownership. Either way it's a much lower rate of CGT than in the UK.
Jo- I thought the French taxation system seemed worse. The combined cost of capital gains tax and social charges is 36.2% for French people - PLUS a supplementary charge on large capital gains. Admittedly there is a reduction with time, but who wants to be locked in to property ownership for years and years!
In addition, there is a yearly real estate wealth tax in France.
In Spain there appears to be no capital gains tax payable if you are over 65. I say "appears to be" because internet sources are not always reliable.
Nevertheless that seems like a great idea to me.
@Ellie Edwards - I think I read somewhere that the Spanish have a nasty habit of hanging on to a % of your house sale if you are an ex pat for a while to ensure you do not run off without paying outstanding bills and it can be a bit difficult to get them to release it- have not dug too deeply into the details so sorry if I have got this wrong - but I like the idea of no CGT over 65 and I like a lot of Spain, the food, the people, the weather.......
Hello Catherine,
That is an important point about actually receiving the sales proceeds for ages in Spain.
It is not easy owning property abroad. You probably have to have a solicitor to deal with everything and that means that the simplest transaction can take ages. I like to deal with everything myself, if possible.
Ellie - it largely depends which country you're living in.
If you're living in France you would obviously pay their Social charges because you are living there and receiving whatever it is Social Charges provide. If you're living in the UK you might pay French Social charges when you sell a house that isn't your main residence if you haven't owned it over 30 years.
On the other hand if you're living in France you no longer pay taxe d'habitation, whereas if it's a second home you do. Basically that's about half of their equivalent to Council Tax. Taxe fonciere is the other half and paid by everyone.
I wouldn't currently live in France because of their wealth tax, whereas my sister does live in France because she wanted a big old house with land. However, she only has 2 BTLs (one in the UK and one in France) and pays very little tax in either country.
I agree the optimum time has passed, but for those of us with capital and repayment mortgages the balance is still dropping every month, so in the end the property will be mortgage free due to the tenants staying where they are, then you can evict and sell when needs be. 💰💰. The drop in CGT allowance and properties dropping in value needs to be balanced with the outstanding mortgage being paid off.
House price maybe down 15% from last year but they're still up 25% from precovid! All depends when you bought & what you are planning in the future. I am happy to take the hit compared to last year as I want rid of one property & I have an extra years rent in the bag to help offset the drop.
From the Yougov website, property sale prices increased in England from May 2022 to May 2023:
Property type May 2023 May 2022 Difference %
Detached £478,030 £468,773 2
Semi-detached £289,575 £285,968 1.3
Terraced £247,907 £244,456 1.4
Flat/maisonette £249,976 £245,322 1.9
All £303,557 £298,596 1.7
There was a 1.3% to 2% increase on average
A statement of the blindingly obvious. Unless a property happens to become vacant just before the peak of the market (which only becomes obvious after the event) then inevitably the property will be sold before or after the peak.
The article fails to take into account the Early Repayment Charges landlords would have faced if they had randomly sold a property while it was on a fixed mortgage. Picking the optimum moment to sell doesn't just come down to having a fully functioning crystal ball.
I'm with John on this one and think some landlords will regret selling. If it's time to retire that's a different matter.
Repayment charges of a couple of grand are peanuts when you are talking about £90k gains. We are slowly switching to trackers now anyway with only 1% repayment charges.
I don't care... I'll take the hit... I'm getting out... Meanwhile, luckily I have pretty good tenants (apart from one who I've been trying to evict since last year without success so I can sell) who are paying their rents.. It could be worse, they could all be non payers and I'd be stuck with them.... Scotland is a landlords nightmare at the moment... The councils are advising tenants to stay put as they have nowhere to house them and the first tier tribunal crowd in Glasgow are making it as awkward as possible for landlords to evict tenants even those on the old SATs. I'm mortgage free on all my rentals now but I'm still going to make an exit... I don't see things improving in the future... It seems that ridiculous legislation can be pulled out of a hat any time the government feels like it and landlords have to just suck it up.... That's not a business I want to be involved in any more... Apologies in advance tenants.... And best of luck in finding another home.
A sensible approach, they will do what they need to do, and we will suffer…. No thanks 💰💰 it’s not worth the hassle given my age.
For the reasons Shane above says I think it's time to get out. People with good tenants now will be free to turn bad and make your life a misery. Like now - increase the rent a lot due to rates and they don't understand. Its' all 'I can't afford it'. Better invest somewhere else. As Shane says "ridiculous legislation pulled out of a hat". I am shocked there have been rent freezes and eviction bans. Covid - MAYBE - Ok some sort of case for it. But as others have said similarly in the past I didn't see Tesco's banned from charging for food, or Shell giving away petrol all to be paid back later as some sort of date.....
Agree entirely, however I have a house on the market which I have reduced and still am unable to sell.
I have no choice either to reduce it again or rent it out again.
If I do, I will be making sure that I have rental guarantee insurance this time, after it took me over 6 mths to get the last tenant out.
I fear the same thing. I am taking my time doing it up as not keen to rent but neither give one house away. The man next door bought last year. He was thinking of moving to somewhere bigger. Now he's interested in buying my house now and keeping next door. He paid well then so hopefully it will be okay.
Even the £94 k increase if stuck in a 5% account would give £391 per month (ignoring all taxes though). Most our properties have gone up enough for us to take the equity, stick it into a 4% account and it will match our rental income.
Good. House prices need to go down, the economy is stagnating
So house price falls are bad then. People can borrow less against their properties and generally spend less if they know they are poorer.
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