specialReal estate – Britain
UK landlords appear to be selling their properties in record numbers, according to property website Rightmove, potentially driven by fears of a rise in capital gains tax (CGT) in this month’s Budget.
Figures issued by the real estate listings website showed that 18 percent of homes for sale in September were previously available for rent, which is the highest percentage recorded since data collection began in 2010.
In the same month 14 years ago, only 8 percent of homes listed for sale had been previously rented. The percentage rose to 15 percent by 2021 before declining slightly before this year.
According to the report, a series of tax changes have already made owning investment property less profitable, and the prospect of a capital gains tax increase may have prompted owners to sell their properties sooner rather than wait.
Profits from property are taxed at up to 24 per cent, but there is speculation this could rise to 39 per cent in the budget statement on 30 October.
These concerns, coupled with stricter rules on energy efficiency certificates for rental homes, may spur increased sales, Rightmove said.
As for landlords who do not sell their properties, they receive record rents. Rightmove data showed that average rents in Great Britain, excluding London, reached a new high of £1,344 per month for existing contracts, while in London this figure stood at £2,694.
Average private rents in the UK rose by 8.4 per cent in the 12 months to September, Office for National Statistics data showed. This data put the average monthly rent at £1,336 in England, £760 in Wales, and £973 in Scotland. While no figure was given for Northern Ireland, the office said rents there had increased by 9.5 per cent.
The report quoted Hargreaves Lansdown’s head of personal finance, Sarah Coles, as saying that “budget threats” were pushing up rental prices.
She added: “As landlords continue to leave the market, tenants face the double suffering of competing for available options and paying exorbitant amounts for them.”
She continued: “Fears about possible changes to capital gains tax in the Budget are prompting many owners to sell. There is concern that the rate may rise or the rule may be changed that means the tax resets upon death. Indeed, investing in property is considered one of the least efficient ways.” From a tax perspective, any change may increase penalties for those who own investment properties.”
The most prominent reasons
For his part, British real estate expert Jonathan Rowland said, in exclusive statements to “Iqtisad Sky News Arabia” website from London, that there are several reasons that prompt owners to sell in large numbers in the British real estate market.
- One of the most prominent reasons is that prices have reached all-time highs, prompting many owners to “liquidate their properties.”
- New regulations giving tenants more rights have also sparked widespread concern among landlords, accelerating the pace of sales.
Rowland pointed out that despite expectations of lower interest rates on mortgages, they are still high relative to what landlords aspire to, making profits from renting properties, especially if they are mortgaged, minimal or non-existent.
He stressed that the current tax system weakens any additional income from real estate, as mortgage interest can no longer be deducted as a business expense. He explained that the government will announce its budget on October 30, and there are widespread expectations of an increase in taxes on employers, in addition to an increase in the capital gains tax on those who sell investment properties not designated for private housing.
Expected budget
Also from London, economic expert Anwar Al-Qasim said, in exclusive statements to the “Eqtisad Sky News Arabia” website, that the expected news from the upcoming budget represents a major factor in the tendency of many real estate owners to sell.
He explained that the British real estate market is witnessing a historic transformation, as the new laws include increases in taxes on sales, profits and services, which puts more pressure on landlords, while these changes are in the interest of tenants.
He pointed out that this transformation comes after a period of prosperity that was in favor of the owners.
He added that the increasing cases of bankruptcies of real estate agents in the country reflect the difficult challenges facing the real estate market, as the lowest level of home sales was recorded in more than ten years, which negatively affected the incomes of these agents.
He pointed out that the rise in borrowing costs to their highest level in 15 years has greatly affected both rental and sales activity. Investors are concerned that Labour’s policies to address the housing shortage could harm their investments in the near term.
Al-Qassim explained that the rise in capital gains tax constitutes an additional motivation to sell, noting that house prices in Britain witnessed a general increase for the first time in two years, and this upward trend is expected to continue, prompting some to take advantage of this opportunity to liquidate and sell.
Two main categories
Mustafa Rajab, a member of the British Labor Party, said in exclusive statements to “Iqtisad Sky News Arabia” website, that the population of the United Kingdom is divided into two categories with regard to real estate. The first category represents citizens who buy real estate for the purpose of living there.
He added that the second category consists of people who buy real estate for the purpose of investment, by renting it out and making profits. This group in particular is concerned about the tax policies recently proposed by the Labor Party, whether progressive taxes or on profits.
Rajab pointed out that this category was making large profits from renting real estate, but it is expected to witness a decline in the next stage, despite encouraging banks to provide loans to finance the purchase and rental of real estate.
However, the new government trend, led by the Labor Party, towards imposing tax policies on this category, has prompted many property owners to consider selling their properties before these policies take effect.
Increase taxes
In exclusive statements to the “Eqtisad Sky News Arabia” website, Tariq Al-Rifai, CEO of the Corum Center for Strategic Studies, confirmed that the current trend among real estate owners in the United Kingdom to sell large quantities of real estate is directly related to the increase in taxes imposed on investors.
Al-Rifai added that this factor is the main reason behind the increase in the volume of real estate deals, especially in London, in addition to a group of other factors that contribute to this trend, including investors’ desire to achieve profits as a result of the record rises witnessed in real estate in Britain since the Corona crisis. This is one of the prominent reasons behind the increase in selling deals at the present time, especially in light of the period of relative stability that prices are witnessing after this wave of rises.
