Buy-to-let landlords rush to sell before capital gains tax rise

Published 20th May 2010

Estate agents report deluge of inquiries from landlords about possibility of selling before proposed tax rise introduced


Estate agents are being deluged with inquiries from panicked buy-to-let landlords hoping to offload properties before proposed increases in capital gains tax (CGT).

The new government has indicated it will raise CGT from 18% to 40% or even 50% in its first budget, on 22 June, potentially slashing the profit that investors can make on property sales.

"There has been a noticeable level of increase in the number of landlords coming to us to ask about selling their buy-to-let properties, with some choosing to actually put them on the market to try to avoid the potential CGT liability," said James Hyman, a partner at the south-east England estate agents Cluttons. "However, most of them want to know whether they have enough time to get the sale through to the point of exchange and whether they would get full price for the property."

The picture is reflected at the upmarket estate agent Savills, which said its offices – especially those in London – had seen an increase in calls from buy-to-let investors.

"We have had someone who bought their house 18 months ago for £575,000 and has just sold for £790,000. He definitely got it away before the election because of the impending rise in tax," said Robin Chatwin, at the Wandsworth branch. "I have another landlord who is dropping their price tomorrow as they too want to make sure it is away in the next two weeks."

Savills in Truro, in Cornwall, and Winkworth in Notting Hill, London, said they had received a significant number of calls from landlords about the issue in recent days.

The proposed tax changes would hit buy-to-let landlords selling any property other than their own home. Under the changes, the sale of a £200,000 property originally bought for £100,000, with a 40% tax bill, would net its owner £160,000, for example. If the owner were to sell now, he or she would net £182,000.

Buying to let expanded rapidly during the housing boom and there are now hundreds of thousands such investors in the UK. It is estimated that 647,300 homes have been bought by landlords in the last six years.

However, not all would be rushing to sell. Stephen Ludlow, director of Ludlow Thompson, said that although his agents had fielded a number of enquiries from landlords: "Most investors are interested in long-term, high-yielding properties, not short-term capital appreciation, so they are unlikely to be deterred by a hike to CGT."

John Hards, co-managing director of Countrywide's residential lettings division, said: "So far we have not seen a knee-jerk reaction from private or investor landlords. Most investors are taking the wait-and-see approach to see if the chancellor introduces other measures in the coming weeks."

Estate agents further north, particularly in Leeds and Manchester, where there was a boom in buy-to-let properties at the height of the housing market, said they had received very few enquiries from landlords, and that generally there appeared to be less panic over CGT than in the south.

"Capital gains tax is more of an issue for mid- to high-value properties that have been held for some time," said Andrew Fallows, a partner at Carter Jonas, in York. "For example, we had a landlord come to us this week who could potentially make an £11,000 saving by selling now rather than waiting until after the budget, so he is seriously considering trying to get a quick sale. However, other landlords up here will have much lower-value properties and may not have made much of a capital gain over the last two or three years."

Savills said there was a lot of confusion among landlords over the timing of the change. It is not clear yet whether it would become effective from April 2011 or from midnight on budget day. It could even be made effective from the beginning of the current tax year, although this appears unlikely.

There may be other ways to avoid the tax. At the Knightsbridge branch of Savills, agent Charlie Bubear said: "I know of at least two clients who have postponed their sales, either to switch the ownership to a primary residence status or to sell in the name of a child, in order to avoid this change. We also have clients looking to force a quick sale having been advised that the change will be effective from the budget so June 22 is now their deadline for a sale."

Source: ' Guardian '

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